US President Barack Obama is to offer cuts to Social Security and other entitlement programs in a budget proposal aimed at swaying Republicans to compromise on a deficit-reduction deal, a senior administration official said yesterday.
Under a proposal that would cut the deficit by US$1.8 trillion over 10 years, the president would offer to apply a less generous measure of inflation to calculate cost-of-living increases, the official said on condition of anonymity.
That change would result in lower payments to a number of beneficiaries of the Social Security program for retirees and is staunchly opposed by many congressional Democrats, as well as labor and retiree groups.
Obama would agree to cuts to other so-called entitlement programs, the official said.
However, the president is to only accept these spending cuts if congressional Republicans, for their part, agree to higher taxes, the official added. The president’s budget proposal is due to be laid out in full on Wednesday.
The president’s renewed offer of fiscal negotiations with congressional Republicans follows a series of bitter battles over taxes and spending that date back to 2011.
Obama is eager to put the issue of deficit reduction behind him and move on to other priorities, which include immigration and gun control legislation.
“This isn’t about political horse trading,” the official said. “It’s about reducing the deficit in a balanced way that economists say is best for the economy and job creation.”
Still, several attempts to reach an agreement balancing spending cuts with tax increases have failed, and prospects for a deal remain doubtful. US House of Representatives Speaker John Boehner, who let taxes rise for the wealthiest Americans earlier this year, has said any further revenue increases are off the table.
The president also wants to undo at least some of the US$85 billion in across-the-board spending cuts that went into effect last month through the process known as sequestration.
Obama’s budget for the fiscal year that starts on Oct. 1 is to contain a proposal to expand access to early childhood education, the official said. That program will be paid for by increases in tobacco taxes, the official added.
In addition, the president will seek to increase revenues by placing a US$3 million upper limit on tax-preferred retirement accounts and by barring people from collecting disability benefits and unemployment insurance at the same time, the official said.
Analysts who have seen early drafts of the budget proposal say the president was considering cuts to Medicare through reducing payments to healthcare providers, but also by requiring wealthier beneficiaries to pay more out of pocket.
Reductions to social security and Medicare benefits are highly unpopular among many of the president’s strongest supporters and groups have already mobilized to oppose them.