On January 19, the United States officially hit its debt ceiling, having spent all of the $31.4 trillion available for Treasury-allocated spending. In the days that followed, conversations heated up about how the country will move forward to avoid a total spending freeze and financial catastrophe.
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Unless Congress acts before the looming June deadline, the effects could be severe. A Moody’s report estimated that 6 million jobs could be at stake, pushing 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.
A politician has offered a partial solution, although not all members of Congress agree with him. Democratic Senator Joe Manchin wants to change the way Social Security is financed, in particular by increasing the social security contribution ceiling in order to make the highest incomes 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 providing more money for the program this way will ensure recipients continue to receive payments. These new revenues would also alleviate the government’s overspending on this major budget item, thereby alleviating – at least partially – the debt ceiling crisis.
Manchin proposes to increase the FICA income limit
According to the Social Security Administration, each U.S. worker and their employer contributes 6.2% of their salary to the program, up to $160,200 in 2023, while the self-employed pay 12.4% of their salary (since no employer does not co-pay). However, if you’re a millionaire, you’ll hit the $160,200 cap around February each year, according to The Hill. When considering the Federal Insurance Premiums Act (FICA), which combines Social Security payroll taxes and Medicare payroll taxes, regular employees pay 7.65% and self-employed pay 15.3%.
Manchin’s plan appears to dovetail with Biden’s own pledge to ensure the health and longevity of Social Security, which is set to run out 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 particularly high salaries to pay the same taxes on those earnings as middle-class families,” a statement on the official website said. of the President, outlining his four-part program for older Americans to preserve Social Security.
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Following: Why the debt ceiling is still debated
In contrast, as CNBC reported, the GOP has proposed raising the retirement age at which benefits can be collected, adjusting the way cost-of-living adjustments are calculated, and “changing the rules 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 Solution in Response to Debt Ceiling – Would Biden Agree?