The Federal Reserve
One of the reasons why interest rates are still so low is solely due to the Federal Reserve. Even if the Fed doesn’t control market interest rates, it still sets the federal funds rate, and many other rates are based on that.
The federal funds rate was closer to zero from April 2020 until March 2022, when the Fed started increasing rates to curb inflation. Longer periods with low rates spell bad news for the Social Security program, which might need higher interest rates to help it meet its payout requirements.
Can’t grow its way out
As higher economic growth can also translate to higher net revenues, the Treasury Department concluded that the United States cannot grow its way out of the whole Social Security problem.
Even if there was a mutual understanding that the increased economic growth might positively impact the program, the Treasury Department declared that taking any kind of action now to reform the entire program might result in a gradual transition to something better.
If not, drastic actions must be taken into consideration, especially since the Social Security fund reached its anticipated exhaustion date in 2035, after which ongoing tax income might cover only 80% of scheduled benefits, as a December 2022 report from the SSA has shown.
