Obama Puts Social Security, Medicare On Block to Gain Tax-Hike Support

The president plans to unveil his budget Wednesday, but a senior administration official confirmed the key details in advance. Included in the plan, which would aim to reduce the deficit by $1.8 trillion over 10 years, is a provision to lower cost-of-living adjustments to Social Security, the benefit program for retirees. This would curb the growth in benefits.

“While this is not the president’s ideal deficit reduction plan, and there are particular proposals in this plan like the (Social Security change) that were key Republican requests,” the official said. “The president felt it was important to make it clear that the offer still stands.”

The administration is clear that it is offering changes to Social Security and Medicare — the two benefit programs most important to seniors — in order to convince Republicans to accept increased revenues. The official said the plan to be unveiled next week “isn’t a menu of options for them to choose from — it’s a cohesive package.”

The proposal, though, is sure to get hit from both sides. Republicans want the Social Security change but for years have resisted new tax revenue — Obama’s plan calls for additional tax revenue, including a proposal to place limits on tax-preferred retirement accounts for top earners. Obama has also called for limits on tax deductions by top earners, a proposal that could generate about $580 billion in revenue over 10 years.

But the president could face an even tougher time selling the Social Security change to liberal members of Congress.

Sen. Bernie Sanders, I-Vt., fired off a statement Thursday responding to what was then the rumor that Obama’s budget could include the change.

“Millions of working people, seniors, disabled veterans, those who have lost a loved one in combat, and women will be extremely disappointed if President Obama caves into the long standing Republican effort to cut Social Security and benefits for disabled veterans and their survivors through a so-called chained CPI,” Sanders said. “In 2008, candidate Barack Obama told the American people that he would not cut Social Security.  Having him go back on his word will only add to the rampant political cynicism that our country is experiencing today.”

Chained CPI is the Washington term for the revised inflation adjustment that would effectively curb annual increases in a broad swath of government programs, but would have its biggest impact on Social Security.

The inflation adjustment would reduce federal spending over 10 years by about $130 billion, according to past White House estimates. Because it also affects how tax brackets are adjusted, it would also generate about $100 in higher taxes and affect even middle income taxpayers.

Obama’s budget, to be released next week, comes after the Republican-controlled House and the Democratic-run Senate passed separate and markedly different budget proposals. House Republicans achieved long-term deficit reductions by targeting safety net programs; Democrats instead protected those programs and called for $1 trillion in tax increases.

Obama’s budget proposal includes features from an offer he made to House Speaker John Boehner during fiscal negotiations last year. Those talks ultimately failed but Congress did agree to increase tax rates on top earners.

The reductions in growth of benefit programs, which would affect veterans, the poor and the older Americans, is sure to anger many Democrats.

Labor groups and liberals have long been critical of Obama’s offer to Boehner for including such a plan.

Obama’s new plan would also replace the sequester with other spending cuts. But it will steer clear of major cuts to Medicaid, including tens of billions in reductions to the health care plan for the poor that the administration had proposed only last year.