Obama Dangles Social Security Cuts, Again

By Amie Parnes and Justin Sink

Obama: I’m willing to horse-trade

President Obama rejected Speaker John Boehner’s (R-Ohio) $2.2 trillion deficit-reduction proposal on Tuesday while signaling he could consider entitlement reforms if congressional Republicans agree to higher tax rates for upper-income households.

On entitlements, Obama avoided specific commitments, but said he would be “happy” to look at ways to “strengthen” Social Security and Medicare if Republicans agreed to higher rates on the wealthy.

“I can’t ask folks who are middle-class, seniors who are on Medicare, young people who are trying to get student loans to go to college to sacrifice by not getting anything from higher-income folks,” Obama told Bloomberg in his first television interview since his reelection.

“The issue right now that’s relevant is the acknowledgment that if we’re going to raise revenues that are sufficient to balance with the very tough cuts that we’ve already made and the further reforms in entitlements that I’m prepared to make, that we’re going to have to see rates on the top 2 percent go up,” he said. “And we’re not going to be able to get a deal without it.”
Although Obama and Democratic leaders have taken a hard line on entitlements since Obama’s election victory, cracks in their unity appeared Tuesday when Minority Whip Steny Hoyer (D-Md.) said entitlement benefit cuts already were on the table.

“They clearly are on the table,” Hoyer said during his weekly press briefing in the Capitol. 

Hoyer said GOP proposals to raise the Medicare eligibility age, make wealthier seniors pay higher Medicare rates and limit the cost-of-living increases for some federal programs are legitimate ones, even as he warned he might not support them.

“They were on the table in the Boehner-Obama talks. They’ve been on the table for some period of time. That does not mean that I’d be prepared to adopt them now, but they’re clearly, I think, on the table,” he said.

Hoyer said the GOP’s proposal to reduce the cost-of-living increases to certain federal programs — the so-called chained consumer price index (CPI) — should also be considered as part of the fiscal-cliff talks.

CPI, a measure of inflation that attempts to gauge cost-of-living fluctuations, is used to index a number of government programs, including food stamps and federal pensions and in determining tax brackets. But in the current deficit-reduction fight it’s most often used in reference to Social Security payments.

Obama offered to agree to substantial cuts to Social Security and Medicare — including raising the eligibility age for the health entitlement — during discussions in the summer of 2011 with Boehner over raising the debt limit. He eventually pulled away from that deal amid pressure from congressional Democrats and has not offered anything that specific in the current talks.

Obama’s comments came a day after Boehner responded to an initial White House proposal to raise taxes by $1.6 trillion with a counteroffer that included $800 billion in new tax revenues. Boehner’s proposal included no tax-rate increases and did not spell out what tax breaks would be eliminated to find $800 billion in savings.

The GOP offer included $600 billion in savings from federal health programs, $300 billion in savings from other mandatory spending and $300 billion in additional cuts to discretionary spending.

It did not include an offer to raise the debt ceiling, a demand the White House included in its initial offer and said Tuesday was non-negotiable.

“Congress has to raise the debt ceiling and do it without drama,” White House spokesman Jay Carney said at his daily briefing. “It should be part of this deal.”

Obama suggested Tuesday that Washington should agree to a deficit “down payment” in December that would leave more work on entitlement and tax reform for 2013. He said this down payment should include allowing tax rates on upper incomes to rise.

“What I’ve suggested is, let’s essentially put a down payment. On taxes, let’s let tax rates on the upper-income folks go up. … And then let’s set up a process with a time-certain, at the end of 2013 or the fall of 2013, where we work on tax reform, we look at what loopholes and deductions both Democrats and Republicans are willing to close, and it’s possible that we may be able to lower rates by broadening the base at that point,” Obama said.

Boehner has also signaled a willingness to consider a down payment. Under such a plan, Democrats would likely need to agree to some entitlement spending cuts up front.

It is unclear how far Obama would be willing to move on entitlements in the current talks with Boehner, though his initial offer of $600 billion in unspecified spending cuts could offer some clues.

That proposal was based on the president’s 2013 budget, which proposed applying Medicaid drug rebates to the Medicare Part D program, increasing Medicare premiums for high-income seniors and reducing the reimbursement rate of Medicare to nursing homes. The White House contends such moves would not amount to a benefit cut for seniors who rely on the program for their healthcare.

Obama is seen as having the upper hand in the talks because of his reelection victory and the fact that all of the Bush-era tax rates are set to expire with no action by Congress at the end of the year. Obama has called on Republicans to extend rates on income below $250,000 while allowing rates to rise above that threshold.

A Washington Post-Pew Research Center poll on Tuesday found 53 percent will hold Republicans accountable if the nation goes over the fiscal cliff, while 27 percent will blame President Obama. That survey was taken, however, before Boehner’s proposal on Monday.

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