On January 19, the United States officially reached its debt ceiling, spending the $31.4 trillion available for spending by the Treasury. Since then, talk has heated up about how the country will move forward to avoid a total spending freeze and financial disaster.
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If Congress doesn’t act before the looming June deadline, there could be serious consequences. The Moody’s report estimates that 6 million jobs could be on the line, pushing the unemployment rate to 7% and pushing the country into a full-blown recession, as reported by GOBankingRates.
Currently, the Congress remains deadlocked. Democrats favor raising the debt ceiling for more borrowing power, while Republicans want spending cuts before leaving office.
One politician has come up with a partial fix, though not all members of Congress may agree with him. Democratic Sen. Joe Manchin wants to change the way Social Security is funded, particularly by raising the payroll tax threshold so that 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 way will ensure that beneficiaries continue to receive payments. This new revenue would also alleviate government overspending on this key item, thus at least partially alleviating the debt ceiling crisis.
Manchin proposes raising the FICA income cap
According to the Social Security Administration, every American worker and their employer contribute 6.2% of their wages to the program, up to $160,200 in 2023, while self-employed workers pay a more substantial 12.4% of their wages (because no employer does not co-pay). . However, if you’re a millionaire, you’ll hit the $160,200 threshold in February of each year, according to The Hill. Under the Federal Combined Insurance Contributions Act (FICA), which combines Social Security payroll taxes and Medicare payroll taxes, regular workers pay 7.65% and the self-employed pay 15.3%.
Manchin’s plan appears to be in line with Biden’s own pledge to ensure the health and longevity of Social Security, which is set to run out by 2035 if nothing is done to provide more funding. “Biden’s plan would put the program on a path to long-term solvency by asking especially high-wage Americans to pay the same taxes as middle-class families,” the president said in a statement on his official website. A four-part Social Security maintenance program for Older Americans.
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In contrast, as CNBC noted, the GOP has proposed raising the retirement age when benefits can be received, tweaking how cost-of-living adjustments are calculated and “modifying the rules for ancillary benefits.” CNBC noted that such changes are unlikely to receive Biden’s support.
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This article originally appeared on GOBankingRates.com. Manchin offers ‘easiest’ Social Security fix in response to debt ceiling Will Biden agree?