Benefit Cuts Loom as Tough Sell for Democrats

Saturday, 09 Jul 2011 07:31 AM

 

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July 9 (Bloomberg) -- Cutting benefits for entitlement programs such as Social Security and Medicare in a deficit- reduction deal between President Barack Obama and Republicans would jeopardize Democratic support likely needed for House approval, Democrats say.

Democratic lawmakers said House Speaker John Boehner, an Ohio Republican, needs to heed their party’s concerns about preserving Social Security and Medicare benefits to pass a package that Republicans are demanding as a condition for raising the government’s $14.3 trillion borrowing limit.

Obama plans to meet with congressional leaders from both parties tomorrow. The session will help determine whether a basis for agreement exists on a deficit-cutting plan of as much as $4 trillion.

Republicans have insisted on no tax increases in the plan, though some leaders have signaled a willingness to consider a Democratic proposal to close some tax loopholes. A division among Republicans, who control the House, would force Boehner to rely on some Democratic votes to pass a deal in the chamber.

“As we continue to proceed down the path, the more it seems the speaker is telegraphing that he doesn’t have the votes, and he’s going to need the votes of the Democrats in the minority to deliver on what he wants to do,” Representative Xavier Becerra, a California Democrat, told reporters after a House Democratic caucus yesterday in Washington. “Don’t expect that Democrats will support balancing a budget on the backs of seniors and children and the disabled.”

‘Very Strong’

House Minority Whip Steny Hoyer, a Maryland Democrat, told reporters his colleagues were “very strong that Social Security beneficiaries not be hit in order to get any Democratic votes for the results.”

The discussions among Obama and congressional leaders have included a proposal to curb the growth of entitlement programs through a change in the way the government measures inflation, which would reduce future annual benefit increases. The resistance from Democratic lawmakers to tampering with the benefits adds another complication to prospects for a deal that would lead to a debt-limit increase by Aug. 2, action the Treasury Department says is needed to avert a default on the nation’s financial obligations.

Boehner acknowledged the difficulties ahead even if a deficit-reduction deal is reached with the White House.

‘Rubik’s Cube’

“We’ve got to have a bill that can pass through the House” and the Democratic-controlled Senate, he said yesterday. “This is a Rubik’s Cube we haven’t quite worked out yet.”

Boehner also stressed that “serious disagreements” remain among the negotiators. “We are this far apart,” he said, spreading his arms wide in front of him as he spoke to reporters.

House Minority Leader Nancy Pelosi of California sought to reassure fellow Democrats that the talks won’t result in benefit cuts, even if cost savings in entitlement programs are obtained through a new method of adjusting for inflation.

“There’s concern in my caucus about what would happen” in such a case, Pelosi told reporters after the party meeting.

“Some think it would be a benefit cut, others do not,” Pelosi said. “This falls into the category of the hypothetical at the present time.”

‘Overwhelming Unhappiness’

During the private caucus, there was “overwhelming unhappiness” about the proposal to change the way the government calculates benefit increases for Social Security, said Representative Barney Frank, a Massachusetts Democrat.

With White House representatives in attendance along with 100 lawmakers, Pelosi “basically reassured the group that this was not going to happen,” Frank told reporters.

The proposal, suggested earlier in the week by the administration, would mean cutting Social Security by $112 billion over 10 years while increasing taxes by $60 billion, according to estimates by the Congressional Budget Office and the Joint Committee on Taxation.

Obama, in an interview yesterday with a television station in Seattle, said he wouldn’t accept a deal that “hurts current beneficiaries in ways that are fundamentally unfair.”

While Obama didn’t comment about possible changes in the calculation of future benefits, he said “anything that strengthens Social Security and Medicare and makes sure that it’s there for the next generation, I’m for.”

Unaffordable Programs

In an interview with a Raleigh, North Carolina, station, Obama said Democrats must agree that some domestic programs aren’t affordable, and that “ones that we can afford like Social Security and Medicare, we have to make sure are sustainable for the next generation.”

Republicans, he said, must decide that “it doesn’t make sense for us to have a tax code littered with loopholes” that benefit the wealthy.

Representative Robert Andrews, a New Jersey Democrat, said that to get the 100 House votes from his party that he estimates could be needed to pass a deal, Obama must “explain the consequences for supporting and not supporting the deal.”

Winning that much Democratic support will be “very hard,” Andrews said. Still, he said the president “transformed this situation this week” by saying “a big deal is much better than a little one,” and by being open to negotiate on entitlements.

Democratic Disenchantment

Some Democrats say they have become increasingly disillusioned with Obama as the debt negotiations have unfolded. They say he has been too willing to let Republicans dictate the terms of the discussion, thus increasing the chance a final product will skew too far toward large cuts in domestic spending and entitlement benefits.

“A lot of us are just unimpressed,” Maryland Representative Elijah Cummings said in an interview. “Maybe it’s that I see the reality of this every day and he doesn’t.”

He said his Baltimore-area district continues to suffer from joblessness, and that his constituents include many senior citizens whose only income is their Social Security checks.

Cummings said that what he sees as a “lopsidedness” in the deficit-reduction talks favoring Republican positions doesn’t put Democrats “in the mood to vote for anything.”

Representative Jim McDermott, a Washington state Democrat, told reporters that Obama “didn’t show me much” during negotiations late last with Republicans that resulted in a two- year extension of Bush-era tax cuts, including those for the wealthiest Americans.

‘Backing Up’

Now, McDermott said, “the guy is backing up, he’s throwing stuff on the table” such as Social Security cuts. “You can’t throw Social Security on the table” because “half the elderly in this country are living on nothing but Social Security,” McDermott said.

Andrews said he was optimistic about prospects for an agreement because some Republicans backed off their opposition to closing tax loopholes, which many equate with increasing taxes.

“They no longer believe that getting rid of the ethanol subsidy is a tax increase,” he said.

Representative Lynn Westmoreland, a Georgia Republican, said tax breaks should “be looked at on a case-by-case basis” to determine the economic consequences of eliminating them.

“If you look at closing some of those loopholes, sure it would raise some revenue but how many jobs would we lose,” said Westmoreland, whose district includes Savannah, where Gulfstream Aerospace, a unit of General Dynamics Corp., makes private jets.

Westmoreland said he’d oppose Obama’s plan to eliminate the tax break for corporate jets. He said he would favor eliminating the tax subsidy for ethanol production.

A lawmaker’s attitude toward tax breaks “depends on what state you’re from,” Westmoreland said in an interview.

Republican Fractures

Representative Jim Jordan, an Ohio Republican, took a tougher position, illustrating the fractures within the Republican caucus. In comments on C-SPAN’s Newsmakers, scheduled to air tomorrow, he said he wouldn’t back a deficit-reduction deal that included closing some tax loopholes in return for a deadline for Congress to overhaul the tax code and lower rates.

He also said any agreement must include a cap on future federal spending and a constitutional amendment requiring balanced budgets. “We have an ultimatum: cut, cap and balance,” he said.

Jordan heads the Republican Study Committee in the House, a group whose members stress fiscal austerity.


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