Entitlement Cuts Loom as Obstacle to Fiscal Cliff Deal

Obama has expressed willingness to cut a deal that scales back federal entitlements, but many Democrats are loath to agree to cuts.

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SAUL LOEB / AFP / Getty Images

President Barack Obama arrives to speak to the 2012 Tribal Nations Conference at the Department of Interior in Washington, Dec. 5, 2012.

For weeks now, as Washington slouches toward a New Year’s deadline for averting a potentially calamitous combination of automatic tax increases and sharp spending cuts, Barack Obama has insisted that any agreement to avoid the so-called fiscal cliff must include an agreement to raise tax rates on top earners. House Speaker John Boehner, the Republican negotiator charged with cutting a deal with the President, has yet to publicly accede to that demand. But in recent days, Republicans have begun bowing to the reality that the GOP has a weak position in the skirmish over tax rates. Obama campaigned on higher rates for the richest Americans and won. If no pact is forged, rates will rise for all taxpayers — and polls suggest Republicans will bear the bulk of the blame. Which is why a few influential Republicans have suggested that since the party will be forced to cave to Obama’s demands on tax rates, it should do so now, and retrench for the battles to come next year, when the GOP will have more leverage.

That doesn’t mean Obama and Boehner will be able to prevent the country from toppling over the cliff. As a counterweight to a tax hike that is anathema to his members, Boehner needs to extract concessions from Democrats in the form of cuts to entitlement programs. Obama has expressed willingness to cut a deal that scales back such programs; during the misbegotten talks to craft a far-reaching deficit-reduction plan last summer, he put some $350 billion in cuts to federal health programs over the next decade on the table, so long as they accompanied sizable revenue increases achieved through rate increases or tax reform. The White House has been disciplined about keeping the substance of the President’s conversations with Boehner private, but having gone that far once, he is probably prepared to offer something similar again if the other pieces of the puzzle are in place.

(VIDEO: TIME Explains: The Fiscal Cliff)

But many Democrats are loath to agree to entitlement cuts. That’s partly because of their ideological convictions, partly because they wield the issue as a perennial political cudgel, and partly because they believe going over the cliff will lock in the tax hikes on the wealthy they sought in the first place. At which point, the thinking goes, the party could introduce a bill to cut taxes for 98% of Americans that Republicans would be hard-pressed not to go along with. “To blame the three programs that we’re talking about — Medicare, Medicaid and Social Security — as the drivers of this deficit is a mistake,” Democratic Representative Raul Grijalva said Sunday on ABC’s “This Week.”

In response to Obama’s offer, Boehner has proposed to cut $600 billion from federal health programs over the next 10 years. The substance of those cuts are shrouded. But they could involve some combination of a change to the Medicare eligibility age, means-testing benefits or changes to the way the government calculates inflation, which could result in lower payments to recipients of Social Security.

(MORE: Washington’s Lemmings Head for the Fiscal Cliff)

Obama has been tentatively receptive to some of these ideas in the past. And the framework for an agreement between and he and Boehner isn’t hard to discern. Obama has asked for $1.6 trillion in new tax revenue, while Boehner countered with $800 billion. The two are a few hundred billion apart on entitlement cuts. The two men could meet somewhere in the middle on both, call it a down payment on the $4 trillion in deficit reduction both seek over the next decade, and agree to hash out the logistics of tax reform next fall, in what would surely be an equally infuriating exercise.

But neither leader rules by fiat, and each has quarrelsome members of his own party bristling about a compromise. Some Republicans are deluded about the damage a failure to forge a deal would inflict, just as they refused to believe warnings about the debt limit last summer. Even Democrats who admit they will need to give ground on entitlements to forge a deal would prefer to cut entitlements in other ways and at lower levels. Between the faction of Democrats resistant to cut for health beneficiaries and the faction of Republicans who believe that the economic turmoil of going over the cliff is worth absorbing for a whack at the deficit, Obama and Boehner may find it tough to muster the votes to thread a deal through Congress. And negotiators are running out of time.

MORE: How to Avoid the Fiscal Cliff

351 comments
mcrogerm
mcrogerm

It is inaccurate to say that "Boehner countered with $800 billion." He said he could provide $800 billion over ten years by "closing loopholes," but has always refused to say which "loopholes" he is talking about. This is the same sort of flim-flam that Pete Peterson's front organizations awarded Paul Ryan the title of "Serious Person" for. Pure bull pucky. Obama is desperate to cut earned benefits, but the Tea Partiers absolutely refuse to agree to anything which he proposes, which is good for the rest of us. Otherwise "centrist Democrats" (Blue Dogs) would find out what the phrase, "sold down the river," really meant pre-1865.

JohnYuEsq
JohnYuEsq

End this Madness! RECALL the Obstructionist Republican BUMS OUT OF OFFICE, NOW!

MarcusTaylor
MarcusTaylor

Social Security is fully funded until 2033. Want to fund it for 75 years or more?  Take the cap off of SS deductions that are now at $110,000.00 dollars. As for Medicare etc., let the Government "bargain" for better drug prices.  That should help a lot.

Now as for Republicans threatening the President with the debt ceiling ... "..The debt limit, or ceiling, is the amount that the nation is allowed to borrow and must be raised if the United States is to pay for all the things that Congress has ALREADY BOUGHT."

YOU DON'T PAY YOUR BILLS YOUR CREDIT RATING DROPS!  LIKE LAST TIME ....

carolerae
carolerae

Bush tax cuts are at least half the debt. Every chart shows this. They just need to all expire.  Alternative, starve old people & inferior medical care.  NOT what I paid for in my payroll taxes.

macattack2142
macattack2142

Installing A New Congress......... █████████████▒▒▒ 98%complete.

macattack2142
macattack2142

BYE BYE BUSH BABY TAX CUTS! 

You had 8-10 years of partying! The party is OVER! 

Time to chip in with the rest of America you GOP $lutbags

JohnLuma
JohnLuma

So what are "the drivers of this deficit" if they are not Medicare, Medicade and Social Security?" Of course part of it is the incredibly wasteful billions devoted to the War-Defense Dept, which is driven by politics rather than necessity. But the rest goes to our entitlement programs for the middle class to support older citizens and the poor. So if the Dems -- and I am a Dem -- want  to reduce our national debt, we have to make cuts in these programs. Start with a freeze for a few years and then cut them by one or two percent, dump the 1.35 trillion that the F-35 airplane is scheduled to cost us over its useless lifetime, and let's get on with governing. We have many needs, and entitlements for the middle class and poor are all important, but everyone should have to sacrifice, starting with the fat cats who will never be hurt by a 4% boost in their taxable income.

LenSimpson
LenSimpson

Whatever the outcome, it will not benefit  us common folks.

"ain't no need aworry'n , ain't nutthin gonna turn out right anyhow"

Jrose202
Jrose202

Do you think that Congress will make the same cuts to their Special Pension Plan and their Special Medical plan that we the tax payers are paying for?

curt3rd
curt3rd

So this article is stating that the Dems do want to go over the cliff.  They would get the defense cuts they been wanting, and raise taxes on almost all U.S. citizens(not just the rich). Then they could turn around and blame it on the Republicans all awhile not carring how much my taxes rose or how my business suffered.  Then come the election in 4 years, they will try for tax cuts and claim to be the protectors of the middle class. 

MarcusTaylor
MarcusTaylor

@JohnLuma ~ SOCIAL SECURITY is fully funded by you and me! In fact SS had an excess of funds ... until congress started "borrowing" from the SS Trust Fund.  NOW THEY DON'T WANT TO PAY THE MONEY THEY OWE ... BACK!

sacredh
sacredh

Don, Scalia votes according to his personal religious and political beliefs. The law or constitutional rights are an afterthought. If they coincide, fine. If not, it makes no difference. Scalia is Limbaugh in robes.

DonQuixotic
DonQuixotic

@sacredh 

Scalia said his dissents were meant to be "a reduction to the absurd," not a comparison between homosexual acts and murder.

Huh?  So he was only pretending to make a hateful, idiotic analogy?

MrObvious
MrObvious

@Jrose202 

The statistical chance of that will be as close to zero as you can get.

mcrogerm
mcrogerm

@curt3rd If you really think most Democrats in Congress want or will even accept Defense spending cuts I don't think the taxes on your business are the reason you're failing.

MarcusTaylor
MarcusTaylor

@curt3rd ~ No, the Democrat controlled Senate has already passed a bill cutting middle-class taxes.  The Republican controlled "House" refuses to even look at it.  But after January 1st, they can pass it or suffer the consequences in 2014.

MrObvious
MrObvious

@curt3rd 

So this article is stating that the Dems do want to go over the cliff. They would get the defense cuts they been wanting, and raise taxes on almost all U.S. citizens(not just the rich).

That would be a complete lie.

I very much doubt that you're a business owner. Then again I've met a bunch of ignorant people who own businesses so it's possible.

roknsteve
roknsteve

So by your logic since you've had a tax cut of 10 years you should get it for another 90 years and double the defense budget that is already bigger than all the other countries combined. 

fitty_three
fitty_three

I wonder, curt3rd:

In September, 2008, were you one of those calling into the talk shows pleading with Bush to do something to loosen up the short term credit crisis so you wouldn't go under?

Just asking...

deconstructiva
deconstructiva

@curt3rd How much your biz suffers is not our problem. Learn to manage your finances before you come here whining for a handout. I thought we heard the last of this when those Denny's and Applebees' franchisees stopped complaining about Obamacare, Even Papa John himself backed off. JFC.

fitty_three
fitty_three

@curt3rd  

I think the GOP is already doing a great job of gathering the blame, curt3rd.

FYI, you don't care about anyone that might need medical care.

So why are we supposed to care about how much your taxes rise or how your business does?  Are you special?

mcrogerm
mcrogerm

@MarcusTaylor @JohnLuma Another way of expressing it is, when the Greenspan Commission raised the payroll tax to fund the Social Security Trust Fund (which is fully funded until at least 2033) they used th inflow of funds to put off raising income tax rates. The excess funds coming in were used to buy Treasury Bonds. When the Treasury pays interest on those bonds they do so by issuing more of those bonds. For the last three years, as expected, the benefits have been more than current tax revenue, and Social Security has been cashing in some of those bonds to make up the difference. This does not raise the deficit. The deficit is caused by spending authorized by Congress in excess of tax revenues. The Chinese, Japanese, and German governments buy a lot of Treasury Bonds. Do you think that when they cash in their bonds it adds to the deficit? Think it through. Congress has been borrowing from the Trust Fund since 1983 to avoid raising taxes. In fact Bush reduced taxes because we were reducing the debt! Greenspan urged him to do so. It's time Congress bit the bullet and raised revenue to cover the spending they demand.

mcrogerm
mcrogerm

@sacredh Well, Scalia used to write really good, clear, intelligent opinions. Since Gore vs. Bush not so much. I think that exercise of power fulfilled his dreams and he's just gotten lazy and careless since.

curt3rd
curt3rd

How is this a lie?  If we go over the cliff, sequestration kicks in which means 500 billion in defense cuts and the Clinton tax era rates( which means everyones taxes go up).

Ohiolib
Ohiolib

@MrObvious @curt3rd You should meet my boss. He makes curt look positively brilliant. He's somewhere below paulie and above rustyrod.

curt3rd
curt3rd

I never said we shouldnt lower defense budget. I just stated thats what would happen and thats what the dems want which is one reason they want the cliff. I also think the govt takes to much taxes from U.S. citizens now. They have enough money to run a govt., they just waste it. Stop trying to put words in my mouth.

curt3rd
curt3rd

Nope, I had my house in order

curt3rd
curt3rd

Since when has the govt. given me a hand out. All they do is take.

curt3rd
curt3rd

I never said anything about medical care but since you brought it up I do believe that I shouldnt be forced to either purchase medical insurance or be puniched by the federal govt for it. 

mcrogerm
mcrogerm

@curt3rd Err... That 500 billion in defense cuts is over a period of ten years and if you think we believe the Dems will allow those kinds of cuts you're insulting us. The Defense Department could save that much just by reducing the personal staffs of the 938 generals/admirals they have. Fresh pineapple before going to bed, indeed.

curt3rd
curt3rd

Just saying its a lie and calling someone stupid doesnt make it so.  Back it up with facts

mcrogerm
mcrogerm

@curt3rd No, but make clear exactly what you mean when you say "wasting your money." Do you mean sending grandma a monthly check  out of the funds her husband paid in all his working life? You mean regulating the insurance market so companies have to actually provide services instead of funneling all the money to their executives? You mean requiring all people to be insured so the premiums are lower for everybody? Be clear about what you mean.

curt3rd
curt3rd

Im complaining about the govt waisting my money.  I guess I should just hand them the money I earn and not question what they do with it.

curt3rd
curt3rd

I never ask for one or complained about not getting one.  I just was stating

fitty_three
fitty_three

@curt3rd 

You just complained that you don't get one.

And what makes you think you know what I need.  Again, are you special?

curt3rd
curt3rd

Im not asking for a hand out and what makes you think you know what I need

fitty_three
fitty_three

@curt3rd  

You don't need one.  Taxes are part of life, curt3rd.  Yours are the lowest they've been in 30 years.  Now don't start about municipal and state taxes, that's not our problem, and neither is your whining.

fitty_three
fitty_three

@curt3rd  

IN the past you've even ranted about ObamaCare.

I don't think you even know what the definition of "Life, Liberty, and Happiness" is.

fitty_three
fitty_three

@deconstructiva

You were thinking the exact thing. Must be going around.

Do you suppose it might be that the true nature of the GOP has been exposed, for everyone to see?