Jilted by Republican leadership during the deficit-reduction talks that accompanied the debt ceiling debate, the Obama administration is now pulling back an offer to put Social Security reform on the negotiating table.
“The president’s recommendation for deficit reduction will not include any changes to Social Security because, as the president has consistently said, he does not believe that Social Security is a driver of our near and medium term deficits,” said White House spokeswoman Amy Brundage.
“He believes that both parties need to work together on a parallel track to strengthen Social Security for future generations rather than taking a piecemeal approach as part of a deficit reduction plan. There will be no Social Security in the recommendations,” Brundage added.
During talks with House Speaker John Boehner this past summer, President Barack Obama had discussed changing the way that Social Security benefits were paid so that a lower level of benefits were paid over time.
Boehner walked away from that deal, which was part of a much broader package, because of concern over a corresponding tax increase. Now, Obama is putting off support for that idea of changing the inflation formula of Social Security to chained consumer price index (CPI).
Obama’s decision means a significant change that critics view as a benefits cut — modifying the inflation calculator for Social Security — will not be in the package, according to the White House.
The shift away from Social Security will allow him to avoid a clash with his Democratic base over the popular retirement program at a time when he needs its support more than ever, both to push for his $447 billion jobs program and to buck up his lagging poll numbers.
Obama will challenge the 12-member deficit supercommittee to exceed its $1.5 trillion goal for budget savings. He will offer more than $1.9 trillion in cuts and tax changes — setting a higher target that would allow the additional money to pay for his jobs plan.
Financial markets and credit ratings agencies are watching those talks closely for signs Washington can move beyond his debt ceiling rancor that provoked a Standard & Poor’s downgrade and make a meaningful dent in deficits.
Fitch Ratings has said the U.S. credit outlook hinges on the super committee’s action and Moody’s Investors Service has warned it may downgrade the U.S. rating if Washington’s plan to reduce the budget deficit turned out not to be credible.
House Speaker John Boehner, the top Republican in Congress, called on Thursday for the super committee to keep Social Security, the federal pension plan, Medicare and Medicaid on their radar for reforms.
He also signaled a willingness to close some tax loopholes as part of a deficit-cutting plan, a move that was welcomed by Democratic House Leader Nancy Pelosi who said it was important not to “put too much of a burden on the cut side.”
Only a few weeks ago, the White House had signaled that the plan would include measures that, in a different fiscal environment, the president would not support, the officials said. The expectation was that Obama would endorse some controversial ideas that he had previously backed only behind closed doors, the officials said.
When he presented his jobs bill to a joint session of Congress last Thursday, Obama said his deficit-reduction plan would be “ambitious.”
“It’s a balanced plan that would reduce the deficit by making additional spending cuts, by making modest adjustments to health care programs like Medicare and Medicaid and by reforming our Tax Code in a way that asks the wealthiest Americans and biggest corporations to pay their fair share,” Obama said.
In a speech Thursday at the Economic Club of Washington, Boehner prodded the deficit supercommittee to set the groundwork for tax reform that would lower the corporate rate and close loopholes — the preferred GOP method for cleaning up the nation’s tax system. Tax increases, Boehner said, are not an option as the committee seeks to close a gaping $14 trillion budget hole.
The 12-member committee has no obligation to act on the president’s proposals, though it seems likely that its six Democratic members will hew to the administration’s line. The committee’s recommendations will be unveiled sometime around Thanksgiving, with hopes of a vote in Congress toward the end of December. [via Huff Post, Reuters and Politico]