How Social Security benefits can be factored into debt ceiling talks

Now that the U.S. has reached the debt ceiling, lawmakers must revisit the federal budget and find ways to make cuts, Sen. Joe Manchin, a West Virginia Democrat, said in interviews this weekend.

But that should not include cuts to Social Security and Medicare benefits, he said.

“I have that 60 percent of my population is all they have is Medicare and Social Security,” Manchin told NBC’s “Meet the Press” on Sunday.

“You think I’m going to go down this road and put them in danger? No,” he said.

In a separate interview on CNN’s “State of the Union,” Manchin called for a key change to help shore up weak Social Security funds — raising the cap on payroll taxes that are used to fund the program.

“The easiest and fastest thing we can do is raise the ceiling,” he said, while curbing “wasteful spending.”

In 2023, wages up to $160,200 are subject to a 6.2% employee and employer tax that goes toward Social Security.

A Medicare tax of 1.45% is also paid by employees and employers, although there is no wage cap for these taxes.

Both programs face the prospect of funding shortfalls in the coming years if lawmakers don’t act. Social Security’s combined trust funds are expected to be depleted in 2035, when 80 percent of benefits will be paid out, according to an annual report released in June.

The fund that covers Medicare Part A, which pays for hospital care and other services, will be able to pay full benefits until 2028, at which point 90% of benefits will be payable.

“Social Security and Medicare are effectively running out of money because we stop at a certain level when people pay into FICA,” Manchin said. (FICA stands for the Federal Social Security Contribution Act and is the US federal payroll tax.)

Other Democrats have also proposed raising payroll taxes to help shore up Social Security. Sens. Bernie Sanders, I-Vt., and Elizabeth Warren, D-Mass., have proposed reimposing payroll taxes on those earning more than $250,000, along with a host of other changes to strengthen the program. A separate bill to reform the program by Rep. John Larson, D-Conn., calls for taxes on wages starting above $400,000.

The concern, however, is that Republicans may demand concessions from Biden in exchange for raising or eliminating the debt ceiling.

The U.S. reached the debt ceiling on Thursday, leaving just months to default, Treasury Secretary Janet Yellen wrote in a letter to Congress.

“The concern is that they are poised to destroy the global economy, to throw us into a recession or a depression, by refusing to raise the debt limit to enforce these changes,” Freese said.

The White House says the president won’t make concessions during the debt ceiling talks.

“As President Biden has made clear, Congress must deal with the debt limit, and it must do so without conditions,” White House press secretary Karin Jean-Pierre said last week.