On Jan. 19, the U.S. officially hit its debt ceiling, having spent all of the $31.4 trillion available for expenditures as allocated by the Treasury. In the days since, conversations have become heated about how the country will move forward to avoid a total spending freeze and a financial catastrophe.
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Unless Congress acts before the impending June deadline, there could be grave effects. A report from Moody’s estimated that 6 million jobs may be on the line, bumping the unemployment rate up to 7% and pushing the country into a full-blown recession, as GOBankingRates reported.
Currently, Congress remains at an impasse. Democrats are for pushing the debt ceiling limit for more borrowing power, while Republicans want spending cuts before conceding their position.
One politician has come forward with a partial fix, though not all of Congress may agree with him. Democratic Sen. Joe Manchin wants to change the way in which Social Security is funded, notably raising the cap on payroll taxes in order to make the highest earners contribute more to the program’s reserves.
As Manchin told CNN during a recent appearance on the network’s “State of the Union” program, he believes that providing more money for the program in this manner will ensure beneficiaries continue to get payments. This new revenue would also ease government overspending on this major line item, thus — at least partially — alleviating the debt ceiling crisis.
Manchin Proposes Raising FICA Income Cap
Per the Social Security Administration, every American worker and their employer offers 6.2% of their pay towards the program, up to $160,200 in 2023, while self-employed workers pay a more substantial 12.4% of their wages (since no employer co-pays). However, if you’re a millionaire, you will have met the $160,200 cap around February of every year, per The Hill. When considering the combined Federal Insurance Contribution Act (FICA), which combines Social Security payroll taxes and Medicare payroll taxes, regular employees pay 7.65% and self-employed persons pay 15.3%.
Manchin’s plan seems to dovetail with Biden’s own pledge to ensure the health and longevity of Social Security, which is poised to become exhausted by 2035 unless something is done to provide more funding. “The Biden Plan will put the program on a path to long-term solvency by asking Americans with especially high wages to pay the same taxes on those earnings that middle-class families pay,” a statement on the president’s official website declared, outlining his four-part Older Americans program to preserve Social Security.
By contrast, as CNBC indicated, the GOP has proposed increasing the retirement age for when benefits can be received, adjusting how cost-of-living adjustments are calculated and “changing rules for ancillary benefits.” CNBC noted that such alterations would be unlikely to receive Biden’s support.
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This article originally appeared on GOBankingRates.com: Manchin Proposes ‘Easiest’ Social Security Fix In Response to Debt Ceiling — Would Biden Agree?