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| FILE - In this April 3, 2013 file photo, President Barack Obama speaks at the Police Academy in Denver. A senior administration official said Friday, April 5, 2013 that Obama's proposed budget will call for reductions in in the growth of federal Social Security pensions and other benefit programs in an attempt to strike a compromise with congressional Republicans. |
WASHINGTON
(AP) -- Seeking an elusive middle ground, President Barack Obama is
proposing a 2014 budget that embraces tax increases abhorred by
Republicans as well as reductions, loathed by liberals, in the growth of
Social Security and other benefit programs.
The
plan, if ever enacted, could touch almost all Americans. The rich would
see tax increases, the poor and the elderly would get smaller annual
increases in their benefits, and middle income taxpayers would slip into
higher tax brackets despite Obama's repeated vows not to add to the tax
burden of the middle class. His proposed changes, once phased in, would
mean a cut in Social Security benefits of nearly $1,000 a year for an
average 85-year-old, smaller cuts for younger retirees.
Obama
proposed much the same without success to House Speaker John Boehner in
December. The response Friday was dismissive from Republicans and
hostile from liberals, labor and advocates for the elderly.
But
the proposal aims to tackle worrisome deficits that are adding to the
national debt and placing a long-term burden on the nation, prompting
praise from independent deficit hawks. Obama's budget also proposes new
spending for public works projects, pre-school education and for job and
benefit assistance for veterans.
"It's not
the president's ideal approach to our budget challenges, but it is a
serious compromise proposition that demonstrates that he wants to get
things done," said White House press secretary Jay Carney.
The
budget, which Obama will release Wednesday to cover the budget year
beginning Oct. 1, proposes spending cuts and revenue increases that
would result in $1.8 trillion in deficit reductions over 10 years. That
figure would replace $1.2 trillion in automatic spending cuts that are
poised to take effect over the next 10 years if Congress and the
president don't come up with an alternative, thus delivering a net
increase in deficit reduction of $600 billion.
Counting
reductions and higher taxes that Congress and Obama have approved since
2011, the 2014 budget would contribute to $4.3 trillion in total
deficit reduction by 2023.
The budget wouldn't affect the $85 billion in cuts that kicked in last month for this budget year.
A
key feature of Obama's plan is a revised inflation adjustment called
"chained CPI." This new formula would effectively curb annual increases
in a broad swath of government programs but would have its biggest
impact on Social Security. By encompassing Obama's offer to Boehner,
R-Ohio, the plan would also include reductions in Medicare spending,
much of it by targeting payments to health care providers and drug
companies. The Medicare proposal also would require wealthier recipients
to pay higher premiums or co-pays.
Obama's
budget proposal also calls for additional tax revenue, primarily by
placing a 28 percent cap on deductions and other tax exclusions. That
plan would affect wealthy taxpayers as would a new administration
proposal to place limits on tax-preferred retirement accounts for
millionaires and billionaires.
Obama made the
same offer to Boehner in December when he and the speaker were
negotiating ways of avoiding a steep, so-called fiscal cliff of combined
across-the-board spending cuts and sweeping tax increases caused by the
expiration of Bush-era tax rates. Boehner rejected that plan and
ultimately Congress approved tax increases that were half of what Obama
had sought.
"If you look at where the
president's final offer and Boehner were ... they were extremely close
to each other," said Maya MacGuineas, president of the Committee for a
Responsible Federal Budget. "We do think that it's a very good sign that
the president has included real entitlement reforms in the budget."
Boehner,
in a statement Friday, said House Republicans made clear to Obama last
month that he should not make savings in entitlement programs that both
sides agree on, contingent on more tax increases.
"If
the president believes these modest entitlement savings are needed to
help shore up these programs, there's no reason they should be held
hostage for more tax hikes," Boehner said. "That's no way to lead and
move the country forward."
The inflation
adjustment would reduce federal spending on government programs over 10
years by about $130 billion, according to White House estimates. Because
it also affects how tax brackets are adjusted, it would also generate
about $100 billion in higher taxes and hit even middle income taxpayers.
Once
the change is fully phased in, Social Security benefits for a typical
middle-income 65-year-old would be about $136 less a year, according to
an analysis of Social Security data. At age 75, annual benefits under
the new index would be $560 less. At 85, the cut would be $984 a year.
The
concept behind the chained CPI is that consumers substitute
lower-priced alternatives for goods whose costs spike. So, for example,
if the price of oranges goes too high for some consumers, they could buy
alternatives like apples or strawberries if their prices were more
affordable. This flexibility isn't considered in the current system of
gauging inflation, a calculation that determines how much benefits grow
each year.
Taking it into account means such benefits won't grow by as
much.
Advocates for the elderly say seniors
pay a higher portion of their income for health care, where costs rise
more quickly than inflation.
The White House has said the cost-of-living adjustments would include protections for "vulnerable" recipients.
"The
president should drop these misguided cuts in benefits and focus
instead on building support in Congress for investing in jobs," AFL-CIO
President Richard Trumka said in a statement.
AARP's legislative policy director said Obama's budget proposal, while not a surprise, was a disappointment.
"The
message seems to be that the president wants a deal and is willing to
even sacrifice such important benefits as Social Security as part of
that deal," said David Certner. The seniors lobby argues that Social
Security doesn't belong in the budget talks because it isn't
contributing to the deficit and is separately financed with its own
dedicated taxes.
Citing the effect on
veterans, Sen. Bernie Sanders, I-Vt., chairman of the Senate Committee
on Veterans' Affairs, said he was "terribly disappointed" in the Obama
plan and would "do everything in my power to block" it.
While
Obama has proposed the slower cost of living adjustment plan during
fiscal negotiations with Republican leaders, placing it in the budget
would put the administration's official imprint on the plan and mark a
full shift from Obama's stand in 2008, when he campaigned against
Republican Party nominee John McCain.
In a
Sept. 6, 2008, speech to AARP, Obama said: "John McCain's campaign has
suggested that the best answer for the growing pressures on Social
Security might be to cut cost-of-living adjustments or raise the
retirement age. Let me be clear: I will not do either."
Obama
also proposes $305 billion in cuts to Medicare over a decade, including
$156 billion through lower Medicare payments to drug companies and
higher premiums or co-pays from wealthy recipients. That's to the right
of the conservative budget of House Budget Committee Chairman Paul Ryan,
R-Wis., which barely touches Medicare in the coming 10 years, cutting
just $129 billion from the program. The huge Medicare savings from
Ryan's proposal, which transforms the system into a program in which the
government subsidizes health insurance purchases on the private market,
wouldn't accrue until the following decade.
Obama's
budget comes after the Republican-controlled House and 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.
But Obama has
been making a concerted effort to win Republican support, especially in
the Senate. He has
even scheduled a dinner with Republican lawmakers on
the evening that his budget is released next week.
As
described by the administration officials, the budget proposal would
also end a loophole that permits people to obtain unemployment insurance
and disability benefits at the same time.
Obama's
proposal, however, includes calls for increased spending. It proposes
$50 billion for public works projects. It also would make preschool
available to more children by increasing the tax on tobacco.
