Democrats stiffen spine against trimming benefits

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Associated Press

Posted on November 18, 2012 at 12:03 AM

Updated Sunday, Nov 18 at 6:03 AM

WASHINGTON (AP) — President Barack Obama's re-election has stiffened Democrats' spine against cutting popular benefit programs such as those providing health care coverage and retirement benefits to the elderly. Their new resolve could become as big a hurdle to a deal that would skirt crippling tax increases and spending cuts in January as Republicans' resistance to raising tax rates on the wealthy.

Just last year, Obama and top Democrats were willing during budget negotiations with Republicans to take politically risky steps such as reducing the annual inflation adjustment to Social Security retirement payments and raising the eligibility age for Medicare, which provides health care coverage to the elderly.

Now, with new leverage from Obama's big election victory and a playing field for negotiations that is more favorable in other ways, too, Senate Majority Leader Harry Reid and other Democrats are taking a harder line.

"I've made it very clear. I've told anyone that will listen, including everyone in the White House, including the president, that I am not going to be part of having Social Security as part of these talks relating to this deficit," Reid told reporters.

Reid's edict would appear to take a key proposal off the table as an ingredient for a deal on avoiding the "fiscal cliff," the year-end combination of expiring President George W. Bush-era tax cuts and harsh across-the-board spending cuts mandated by Congress if it failed to pass a long-term plan to cut the federal budget deficit. Economists fear that would hammer middle class Americans and risk plunging the fragile economy into recession.

At issue is the inflation adjustment used by the government to calculate cost-of-living adjustments for Social Security and other federal programs. A less generous inflation measure that takes into account consumers finding alternatives when prices go up could reduce deficits by more than $200 billion over the next decade.

It's a no-brainer for many budget wonks because it means gradual, less noticeable curbs to the growth of benefits.

That new inflation index, known as the chained Consumer Price Index, is a magic elixir for budget writers. But it's anathema to many liberals, who say that moving to the new cost-of-living measure could cut average retiree benefits by about $600 a year a decade after taking effect and mean a cut of about $1,000 a year after 20 years.

"Think about it this way. You're standing on the deck of a boat and you're in very deep water and they want you to swim, but they're going to put a log chain around your ankle," Democratic Sen. Tom Harkin told a group of liberal activists assembled for a rally Thursday in a Senate hearing room. "That's chained CPI."

Sixteen months ago, Obama's White House took a different view during talks with House Speaker John Boehner, the most powerful Republican in Congress, on a possible budget deal. A White House draft offer by top Obama aide Rob Nabors, made public by Washington Post author Bob Woodward, proposed several controversial changes to benefit programs, including the lower inflation adjustment, raising the eligibility age for Medicare and higher Medicare premium payments.

Those negotiations, however, were conducted on a playing field that favored Republicans. It was less than a year after Obama's self-described "shellacking" in the 2010 elections and the president was desperate to win an increase in the government's borrowing cap and avoid a government default on its debt that threatened to shatter financial markets. Also, Obama still faced re-election in 2012.

Now conditions favor Obama.

He decisively won re-election and Republicans seem fearful of being tagged with the blame if an impasse results in the government going over the fiscal cliff. Obama and Democrats already are portraying Republicans as hostage-takers willing to let tax rates rise on everyone if the lower Bush-era tax rates are not also extended for the top 2 percent to 3 percent of earners — those with incomes above $200,000 for individuals and $250,000 for joint filers.

The new balance of power means that Democrats who once would have acquiesced reluctantly to Republican demands for stiff benefit cuts are now balking at ideas such as chained CPI or an increase in the Medicare retirement age, as well as demanding Republican concessions to higher taxes.

Republicans insist that higher tax revenues be paired with cuts to rapidly growing programs such as Medicare and the Medicaid health care program for the poor and disabled. These programs are called "entitlements" because eligibility is based on meeting criteria such as age or income.

"Washington's problem isn't that it taxes too little, but that it spends too much," said Senate Minority Leader Mitch McConnell. "But in a good-faith effort to make progress on boosting the economy and government's long-term solvency, Republicans like me have said for more than a year now that we're open to new revenue in exchange for meaningful reforms to the entitlement programs that are the primary drivers of our debt."

New Hampshire Sen. Kelly Ayotte said in the Republicans' weekly radio address Saturday that "any effort to address our fiscal crisis without including entitlement reform can't be taken seriously."

No way, say many liberals.

"We're going to send a loud message to the leadership in the House, in the Senate, and President Obama: 'Do not cut Social Security, do not cut Medicare, do not cut Medicaid,'" said Vermont Sen. Bernie Sanders, a self-declared socialist who aligns with the Democrats. "Every now and then elections have consequences. We won."

Republicans and even some Obama allies worry that liberal demands will make it harder for the president to seal a bargain with the rival party.

Democratic Rep. Mike Quigley, said Obama has the same problem with his party's liberal base that Boehner has with some conservative Republicans. "Boehner has a disproportionate group of his folks skewing things too far out and the president has equally the same sort of problems with people who are horribly unreasonable," Quigley said.

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