Personal Finance

This Social Security change would be ‘easiest and quickest,’ Manchin says. What debt ceiling negotiations may mean for benefits

Key Points
  • As Democrats and Republicans negotiate over the nation's debt ceiling, some worry changes to Social Security benefits could be on the line.
  • Sen. Joe Manchin, D-W.Va., said on Sunday that increasing the payroll taxes wealthy pay may help shore up the program.
Sen. Joe Manchin, D-W. Va., speaks to the cameras about the reconciliation bill in the Hart Senate Office Building on Monday, August 1, 2022.
Bill Clark | CQ-Roll Call, Inc. | Getty Images

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

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

"I've got 60% of my population that that's 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 that path and put them in jeopardy? No," he said.

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

"The easiest and quickest thing that we can do is raise the cap," he said, while also curbing "wasteful spending."

How raising payroll tax cap could aid Social Security

In 2023, wages up to $160,200 are subject to a 6.2% tax for employees and employers that goes to Social Security.

A 1.45% Medicare tax is also paid by employees and employers, though there is no wage limit to those taxes.

Two former senators discuss the debt ceiling standoff
Two former senators discuss the debt ceiling standoff

Both programs face the prospect of a funding shortfall in the coming years if lawmakers fail to act. Social Security's combined trust funds are projected to become depleted in 2035, at which point 80% of benefits will be payable, according to an annual report released in June. However, more recent projections from the Congressional Budget Office indicate the combined funds may be depleted in 2033.

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

"Social Security and Medicare basically is running out of cash because we stop at a certain level where people pay into FICA," Manchin said. (FICA stands for the Federal Insurance Contributions Act and represents the U.S. 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 reapplying payroll taxes for those earning over $250,000 along with a host of other changes to shore up the program. A separate bill to reform the program from Rep. John Larson, D-Conn., calls for applying payroll taxes starting at over $400,000.

Republicans have proposed program changes

The problem, according to Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, is raising payroll taxes on wages of more than $400,000 alone may not bring the program to solvency.

That may prompt some lawmakers to call for benefit cuts to the program, she said.

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Republicans have proposed a host of changes to Social Security and Medicare in the 2023 Republican Study Committee budget including raising the retirement age, changing the way cost-of-living adjustments are measured and changing rules for ancillary benefits, Freese noted.

Even if those changes were included in formal legislation and passed by the chamber, it would not get the 60 votes required to pass in the Senate, Freese said. Nor would President Joe Biden support it.

Concessions may play into debt ceiling negotiations

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

On Thursday, the U.S. hit the debt ceiling, leaving just months before it may default on its obligations, Treasury Secretary Janet Yellen wrote in a letter to Congress.

"The concern is that they are willing to destroy the global economy, plunge us into a recession or a depression, with their refusal to raise the debt limit in order to force these changes," Freese said.

The White House has maintained the president will not make concessions during the debt ceiling negotiations.

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