Budgetology: Sur La Table

| April 8 2013

Budgetology: Sur La Table

President Obama’s budget is expected to make some reforms to Medicare and Social Security, but he could face considerable challenges selling the plan to his own base.  Many of these proposals were on the table during the fiscal cliff negotiations, but faced major headwinds from Congressional Democrats and outside interest groups.  Will the White House finally lead on entitlement reform, or will these changes quietly be the first to slide off the table?

 

WILL THE WHITE HOUSE FINALLY LEAD ON ENTITLEMENT REFORM?

POLITICO: “Obama Budget Included Medicare, Social Security Cuts”  (Kevin Robillard & Reid J. Epstein, “Obama Budget Included Medicare, Social Security Cuts,” POLITICO, 4/4/13)

Washington Post: “President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach that he hopes will convince Republicans to sign onto a grand bargain that would curb government borrowing and replace deep spending cuts that took effect March 1.” (Zachary Goldfarb, “Obama Budget Would Cut Entitlements In Exchange For Tax Increases,” The Washington Post, 4/4/13)

White House Budget To Include Chained CPI: “President Barack Obama fired up wonks across Washington Friday with a single phrase: chained CPI. … Obama’s been open to the idea in the past and now the White House says the president will include it in his budget proposal next week …” (David Nather, “Chained CPI Primer: Obama’s Buzzword Explained,” POLITICO, 4/5/13)

 

DEMOCRATS AND LIBERAL SPECIAL INTERESTS GROUPS ARE LINING UP IN OPPOSITION

Wall Street Journal: Changes To Social Security Could Stir Opposition Among Democrat Base. “President Barack Obama’s budget plan to alter federal cost-of-living adjustments marks a significant overture to Republicans, but risks widening a rift within his own Democratic Party. … Many moderate Democrats and even some liberals support the idea, arguing it could help stave off bigger cuts to government programs in the future. But many other Democrats, as well as some powerful interest groups, oppose the change. Rank-and-file lawmakers said it could stir opposition among the party’s base. “ (John D. McKinnon, “Plan To Rein In Social Security Draws Criticism,” The Wall Street Journal, 4/7/13)

Liberal Interest Groups Mobilize Against Chained CPI: “As news of the administration’s move emerged Friday, AARP, the big seniors’ group, pointed to results of its recent poll that showed more than two-thirds of voters 50 and older oppose changing the formula used for cost-of-living adjustments in Social Security, veterans benefits and other federal programs. Big unions and some liberal activist groups also oppose the change.” (John D. McKinnon, “Plan To Rein In Social Security Draws Criticism,” The Wall Street Journal, 4/7/13)

Harshest Criticism Coming From The Left: “Some of the harshest words about Mr. Obama’s budget came from the left wing of his own party, as groups representing the elderly and labor unions lashed out against his Social Security proposal, which would slow the growth of benefits by using a different inflation measure, called chained CPI, to calculate annual-cost-of living adjustments.” (Janet Hook and Colleen McCain Nelson, “Obama Budget Draws Fire,” The Wall Street Journal, 4/6/13)

AARP Is Sounding The Alarm: “Obama would face a big backlash from Democrats – and from key allies like AARP and veterans’ groups – if chained CPI became part of a final deal. Liberals warn that it would take too big a bite out of Social Security benefits to seniors, who have expenses they can’t cut easily, especially medical care. AARP is sounding the alarms, warning that a 92-year-old senior would lose more than 8 percent of his or her Social Security benefits.” (David Nather, “Chained CPI Primer: Obama’s Buzzword Explained,” POLITICO, 4/5/13)

MoveOn.org Warns Chained CPI Is Being “Deceptively Portrayed” As Reasonable: “Speaking on behalf of MoveOn.org, Robert Reich, former labor secretary under President Bill Clinton, said Thursday that the Obama administration should not change the way that the annual cost-of-living adjustments are calculated for Social Security beneficiaries. … ‘Social Security is not driving the deficit, therefore it should not be part of reforms aimed at cutting the deficit,’ Mr. Reich said. ‘The chained CPI, deceptively portrayed as a reasonable cost of living adjustment, is a cut to Social Security that would hurt seniors.’” (Seth McLaughlin, “Obama’s Budget Worries Social Security Defenders,” The Washington Times, 4/4/13)

The Hill: “Senate Dems Challenge Obama On Chained CPI For Social Security.”“Liberal Democrats challenged President Obama on Tuesday over his willingness to cut Social Security benefits. Sen. Tom Harkin (D-Iowa) said he and Sen. Bernie Sanders (I-Vt.), among others, challenged Obama on the so-called ‘chained CPI’ — a change in the way Social Security benefits are calculated.” (Sam Baker, “Senate Dems Challenge Obama On Chained CPI For Social Security,” The Hill, 3/12/13)

Sen. Dick Durbin (D-Ill.): ”The social security is a separate thing. It does not add a penny to the debt. We should deal with its long term survival and solvency and we can do that in a separate setting other than this last minute fiscal cliff negotiation.” (“Sen. Dick Durbin (D-IL) says entitlements should be off limits in fiscal cliff talks,” CNN 11/28/12)

Rep. Nancy Pelosi (D-Calif.): ”Pelosi argued that Medicare and Social Security reforms have no place in the current fiscal talks. She said Congress should be focusing on the most pressing issues this month — particularly preventing the Bush tax rates from expiring on the middle class — and leave broader tax and entitlement reform for 2013…. ‘That should be left to next year,’ she said. ‘That’s a longer conversation about where we go [on entitlements].’” (Mike Lillis, “Nancy Pelosi on raising Medicare eligibility age: ‘Don’t even think about’ it,” The Hill12/13/12)

Sen. Majority Leader Harry Reid (D-Nev.): “Social Security is not part of the problem, That’s one of the myths the Republicans have tried to create … Social Security is sound for the next many years. But we want to make sure that in the outer years people are protected also, but it’s not going to be part of the budget talks, as far as I’m concerned.” (Stephen Dinan, “Reid Takes Social Security Off The Table,” The Washington Times, 11/14/12)

 

BUT MOST EXPERTS AGREE THAT ENTITLEMENT REFORM IS KEY TO FIXING LONG-TERM DEBT

USA Today: “Cut Entitlements To Control Debt” (Editorial, “Cut Entitlements To Control Debt,” USA Today, 11/14/12)

According To The Congressional Budget Office, “Entitlement Programs Are The Biggest Driver Of The Long-Term Debt.” (Heidi Przybyla, “Democrats Hint at Entitlement Program Cuts in U.S. Budget,” Bloomberg, 12/7/12)

 

Entitlement Programs Are Unsustainable Without “Significant Changes”:

Social Security Will Be Insolvent In 20 Years (Affecting Everyone Under 45). (Social Security Administration, The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, 4/25/12)

The Medicare Trust Fund Will Be Exhausted In 11 Years (Affecting Everyone Under 56).  (Centers for Medicare and Medicaid Services, 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 4/25/12)

CBO Director: Debt Will Be Unsustainable Without “Significant” Changes To Entitlements. “Under questioning from Sen. Ron Johnson, who highlighted the dire state of Medicare and Social Security finances, Elmendorf stated that putting the budget on a sustainable path would require major reforms to entitlement programs or massive tax increases that would hit the middle class.” (Philip Klein, “CBO director: Debt will be unsustainable without ‘significant’ changes to entitlements or broad tax hikes,” The Washington Examiner, 2/12/13)

Future Generations Could Be Forced To Cover $35 Trillion In Unfunded Promises. “If no changes are made in entitlements such as Medicare, younger taxpayers will have to cover unfunded promises of $35 trillion.   That means future generations, unless lawmakers can break the gridlock and agree to entitlement reform soon, will see massive tax hikes, massive benefit cuts — or both.” (Jim Angle, “Cost of Entitlements: To cover $35T promise, future generations face steep tax hikes,” Fox News, 3/7/13)

 

WILL ENTITLEMENTS BE THE FIRST TO FALL OFF THE TABLE AGAIN?

 

Liberal Special Interests Campaigned Heavily Against Entitlement Reforms During Fiscal Cliff Negotiations:

Unions Wanted Washington To Disregard Entitlements In Deficit-Reduction Strategy. “Several major labor unions joined together to release an ad campaign this week pushing members of Congress to raise tax rates on the wealthiest Americans and protect entitlement programs from major cuts as a solution to the looming fiscal cliff, the groups announced Tuesday.” (Kevin Bohn & Ashley Killough, “Labor Groups Rally Against Spending Cuts In Fiscal Cliff Ads,” CNN.com, 11/20/12)

Groups Targeted Democrats With A Six-Figure Ad Buy. “The American Federation of State, County and Municipal Employees (AFSCME), the Service Employees International Union (SEIU) and the National Education Association say they’re spending $300,000 on an initial TV and radio buy for the ad campaign, according to a high ranking labor official. … In the upcoming week, the labor unions’ commercials will appear in states with Democratic senators considered by some on the left as potentially more willing to support some major spending cuts that the unions would oppose.” (Kevin Bohn & Ashley Killough, “Labor Groups Rally Against Spending Cuts In Fiscal Cliff Ads,” CNN.com, 11/20/12)

AARP Ran TV Ads With The Same Message. “The new ads come as the American Association of Retired Persons (AARP) has also run television ads, educating viewers on the fiscal cliff issue and arguing to keep ‘Medicare and Social Security strong for generations to come.’” (Kevin Bohn & Ashley Killough, “Labor Groups Rally Against Spending Cuts In Fiscal Cliff Ads,” CNN.com, 11/20/12)

 

Fiscal Cliff Deal Included All Tax Hikes, No Spending Cuts:

The Atlantic:“There Are No Spending Cuts In This Deal.” (Derek Thompson, “Fiscal Cliff Deal FAQ: What Just Happened And What It Means For You,” The Atlantic, 1/2/13)

The New York Times: “And It Includes Almost No Spending Cuts.” (David Leonhardt, “For Obama, A Victory That Also Holds Risks,” The New York Times, 1/2/13)

The Associated Press: “[The Fiscal Cliff Deal] Puts Off The Toughest Decisions About Spending Cuts…” (Charles Babington, “Analysis: Cliff Deal Is Another Pain-Free Punt,” The Associated Press, 1/3/13)

 

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