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Trying to break fiscal deadlock

Social Security, Medicare cuts in Obama’s plan

– In the first budget of his second term, President Obama set aside the grand ambitions that marked his early days in office and sent Congress a blueprint aimed at achieving a simple goal: ending the long partisan standoff over the national debt.

The 10-year budget request Obama unveiled Wednesday calls for nearly $300 billion in new spending on jobs and public works. That includes a landmark $77 billion expansion of preschool education financed by smokers, who would have to pay an extra 94 cents a pack for cigarettes.

But barely five months after winning a decisive re-election victory, Obama proposes nothing on the scale of the $1.2 trillion initiative to extend health coverage to the uninsured that he pursued after taking office in 2009.

Instead, with sharp automatic spending cuts threatening to slow the economic recovery and another showdown over the federal debt limit looming this year, the blueprint establishes a budget deal with Republicans as Obama’s top fiscal priority.

For the first time, he is formally proposing to trim scheduled Social Security benefits – a GOP demand that is anathema to many Democrats. He is also offering to make meaningful reductions in Medicare benefits, including higher premiums for couples making more than $170,000 a year.

“With this budget, you can’t say the president isn’t leading. He’s clearly leading,” said Robert Greenstein, president of the left-leaning Center on Budget and Policy Priorities. “Whether one agrees or disagrees with the specific policies, he has definitely stepped up to the plate to try to break the gridlock.”

House Republicans and Senate Minority Leader Mitch McConnell, R-Ky., quickly dismissed the proposal, which formalizes an offer they rejected in December. McConnell called the cuts to Social Security and Medicare too “modest” to justify Obama’s bottom-line demand for nearly $700 billion in new taxes on the wealthy, primarily through new limits on itemized deductions for households in the top brackets.

“I don’t see this as fundamental entitlement reform as much as clarifying a statistic which does happen to save money,” House Budget Committee Chairman Paul Ryan, R-Wis., said of Obama’s offer to apply a less-generous measure of inflation – the chained consumer price index – to Social Security benefits.

Some rank-and-file Republicans in the Senate were more complimentary. Sen. Johnny Isakson, R-Ga., said Obama is “talking about Medicare reform, he’s talking about entitlement reform, and it will be interesting to see where the conversation goes.”

With McConnell and House Speaker John Boehner, R-Ohio, showing no interest in further talks, administration officials see Senate Republicans as their best hope for advancing a bipartisan agreement.

Obama warned during remarks in the Rose Garden on Wednesday that the budget represents his bottom-line offer. Any deal, he said, must not only replace “the foolish across-the-board spending cuts,” known as the sequester, that are “already hurting our economy” but also raise revenue from “the wealthiest individuals and biggest corporations.”

Of the entitlement cuts, Obama said, “I don’t believe that all these ideas are optimal, but I’m willing to accept them as part of a compromise.” He added: “When it comes to deficit reduction, I’ve already met Republicans more than halfway. So in the coming days and weeks, I hope that Republicans will come forward and demonstrate that they’re really as serious about the deficits and debt as they claim to be.”

Though presidents have for nearly a century launched the budget process, Obama’s request for the fiscal year that begins in October arrived on Capitol Hill 65 days late, weeks after the House and Senate had each adopted its own spending blueprint.

Neither proposal would trim Social Security benefits.

The president’s debt-reduction proposal mirrors an offer he made to Boehner in “fiscal cliff” negotiations.

At the time, Obama called for $1.2 trillion in new taxes. He won about $600 billion, with the bulk of the money coming from higher rates on households earning more than $450,000 a year.

Now Obama is proposing to pick up where he left off, replacing the sequester with $1.8 trillion in alternative policies that were left on the table. In addition to higher taxes on the wealthy – including a new minimum tax rate of 30 percent on households earning more than $1 million a year – the package calls for replacing the sequester’s indiscriminate cuts to the Pentagon and other agency budgets with the sort of long-lasting entitlement changes Republicans have long demanded.

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