Reports: Obama Budget Will Include Social Security Reform, Medicare Cuts

Posted: Apr 05, 2013 4:18 PM

Pardon me for not leaping to my feet to cheer, but if new reports are to be believed, I'll offer a qualified golf clap to certain elements of President Obama's impending budget blueprint.  When we finally see the proposal next Wednesday -- nine weeks late -- we'll have a better sense of what it does, and does not propose, but this is intriguing:

In a significant shift in fiscal strategy, Mr. Obama on Wednesday will send a budget plan to Capitol Hill that departs from the usual presidential wish list that Republicans typically declare dead on arrival. Instead it will embody the final compromise offer that he made to Speaker John A. Boehner late last year, before Mr. Boehner abandoned negotiations in opposition to the president’s demand for higher taxes from wealthy individuals and some corporations. Congressional Republicans have dug in against any new tax revenues after higher taxes for the affluent were approved at the start of the year...Besides the tax increases that most Republicans continue to oppose, Mr. Obama’s budget will propose a new inflation formula that would have the effect of reducing cost-of-living payments for Social Security benefits, though with financial protections for low-income and very old beneficiaries, administration officials said. The idea, known as chained C.P.I., has infuriated some Democrats and advocacy groups to Mr. Obama’s left, and they have already mobilized in opposition. As Mr. Obama has before, his budget documents will emphasize that he would support the cost-of-living change, as well as other reductions that Republicans have called for in the popular programs for older Americans, only if Republicans agree to additional taxes on the wealthy and infrastructure investments that the president called for in last year’s offer to Mr. Boehner.  

For a primer on "chained CPI," read this piece in Politico, which is also running a story about why the Left is furious about Obama's modest overture to fiscal reality.  Basically, it changes the formula for determining the rate of cost of living increases within the Social Security benefit structure.  It wouldn't actually cut benefits, but it would slow the rate of increase, amounting to a major chunk of change over time.  Many Republicans have embraced the concept in the past, and the Wall Street Journal's editors endorsed the reform as "better than nothing" in a December editorial.  The president's offer is a nod to a mathematical truth that many liberals (including within his own administration) simply refuse to acknowledge: That Social Security, as currently constituted, is in crisis.  The Washington Post also reports that Obama is prepared to offer $400 billion in additional cuts to Medicare, which is on pace to become insolvent by 2024:

The budget proposal slices $200 billion from already tight defense and domestic budgets. It would cut $400 billion from Medicare and other health programs by negotiating better prescription drug prices and asking wealthy seniors to pay more, among other policies. It would also generate $200 billion in savings by scaling back farm subsidies and federal retiree programs, among other proposals.  

The price control elements are unlikely to work or be implemented as planned (see: the annual "doc fix"), but introducing a more robust program of means testing isn't a bad idea.  This acknowledges that Medicare is essentially a welfare program already, and makes it slightly more sustainable.  In the end, though, it's still just a small tweak.  The program demands root-and-branch reforms for future seniors to save it, which is why the bipartisan Wyden-Ryan compromise is much more forward-thinking.  Taken together, though, these proposals represent a significant political risk for Obama. Democrats have gotten a lot of mileage out of pretending that everything's fine and that good-faith attempts to remedy real problems amount to heartless "cuts."  The president himself has indulged in these attacks repeatedly.  But while Republicans are well within their rights to point out that Obama will now have passed or introduced more than a trillion dollars in cuts to Medicare -- the majority of which was double counted to "pay for" Obamacare -- I hope they don't go the hack route and slam him for these offers.  Sure, they could perhaps score a few short-term political points by doing so, but then they'd be no better than Democrats.  Instead, they should seize on the proposals as vindication; they can assert that the president is finally conceding the severity of these problems, then make the case for why their solutions are better.  They ought to incorporate Obama's acceptable ideas into any compromise plan they fashion and not shy away from giving him some credit.

Inevitably, Obama's overdue budget will be loaded up with stinkers, too.  We already know that he's rejected balanced budgeting (unlike House Republicans), and that he'll call for more spending.  He's also asking for an additional $600 billion tax hike in exchange for bending on entitlements, which would not be executed within the context of the sort of pro-growth tax reform structure recommended by his own fiscal commission. Oh, and he's reportedly going to ask for a universal pre-K system -- the effectiveness of which has been repeatedly debunked by studies -- funded by hyper-regressive cigarette tax increases.  This will not only disproportionately wallop the poor; it will (once again) break his oft-repeated, unambiguous campaign promise:


Nevertheless, Obama's budget is shaping up to be bolder and more realistic than Senate Democrats' atrocious offering.  Republicans should react thoughtfully.