The Congressional Budget Office now estimates Social Security’s 75-year shortfall at 4.55% of taxable payroll, down from 4.71% last year and identical to the Social Security Administration’s latest estimate.

But new analysis from the Cato Institute’s Krit Chanwong and Romina Boccia finds that the apparent improvement largely reflects higher projected interest rates, not an improvement in Social Security’s underlying finances.

  • CBO raised its long-term forecast for 10-year Treasury rates by roughly 0.6 percentage points, to about 4.4%. Higher discount rates reduce the present value assigned to future Social Security shortfalls, making the 75-year actuarial gap appear smaller today even though the underlying gap between program income and scheduled benefits has not narrowed.
  • Using CBO’s 2025 interest-rate assumptions with its new 2026 Social Security projections, Chanwong and Boccia calculate a shortfall of 4.82% of taxable payroll, larger than both CBO’s 2025 estimate and SSA’s current projection.
  • A 4.55% shortfall would still require raising the payroll tax rate from 12.4% to 16.95% if Congress relied entirely on tax increases to close the gap. For a worker earning $60,000 a year, that would mean roughly $2,730 more in annual payroll taxes.

Chanwong and Boccia argue that the smaller headline number should not be interpreted as evidence that Social Security’s financing problem has become less urgent. Instead, it highlights how much long-term estimates depend on their underlying assumptions and why independent models are useful as lawmakers confront Social Security’s approaching insolvency.

If you’d like to speak with Krit or Romina about CBO’s new Social Security projections, what higher interest rates are doing to the headline shortfall, or what the numbers mean for workers and policymakers, I’m happy to connect you.