This morning’s papers all delivered big news: Obama had a bigger, bolder debt reduction plan in mind, to save $4 trillion—not a mere $2.4—over the next ten years. Tax reform and cuts to entitlement programs like Medicare and Social Security are now in the picture.
Unfortunately, beyond that basic outline, details of Obama’s debt reduction strategy were sketchy and in short supply.
The plan, which unidentified officials discussed yesterday afternoon, was apparently hatched at a widely reported, but still officially denied secret meeting between President Obama and Republican Speaker of the House John Boehner over the July 4th weekend.
From The New York Times’s morning report:
The president’s renewed efforts follow what knowledgeable officials said was an overture from Mr. Boehner, who met secretly with Mr. Obama last weekend, to consider as much as $1 trillion in unspecified new revenues as part of an overhaul of tax laws in exchange for an agreement that made substantial spending cuts, including in such social programs as Medicare and Medicaid and Social Security—programs that had been off the table.
In most of the stories unnamed aides or party officials deny the accounts of the above-mentioned “knowledgeable officials”—like in the Times on Boehner being possibly open to ending tax breaks for the oil and gas industry and corporate-jet owners.
Or as reported by Naftali Bendavid, Janet Hook and Carol E. Lee of The Wall Street Journal, the administration considering cuts to Social Security:
A senior administration official said: “Reports that we are putting Social Security on the table tomorrow are inaccurate. The president does not think it is a major driver of the deficit, but has always been open to ways to strengthen the program in a balanced fashion.”
In a sign that both sides see the opportunity for a fundamental revamp of the US budget, Messrs. Obama and Boehner have recently discussed an option that includes tying a deficit package to a broad tax overhaul, people familiar with the talks say.
All reports were heavy on speculation that this breakthrough would be resisted by rank and file members of both parties.
Lori Montgomery in The Washington Post made the most of the possible cuts to Social Security, leading her story with the detail and later noting that Obama is:
for the first time is offering to tackle the rising cost of Social Security, according to people in both parties with knowledge of the proposal. The move marks a major shift for the White House and could present a direct challenge to Democratic lawmakers who have vowed to protect health and retirement benefits from the assault on government spending.
While nobody knows exactly what the administration has in mind to get to $4 trillion, The Journal gives us detail about the possible (and denied) changes to Social Security.
One proposal under serious consideration would slow the way tax, spending and entitlement programs shift with inflation each year. The switch to using a different measure of inflation, known as a “chained” consumer-price index, is endorsed by many conservative and liberal groups who believe that inflation estimates in the government’s budget are overstated and lead the government to expand spending programs and adjust tax brackets too quickly, resulting in more spending and less revenue.
The Moment of Truth Project, a group established to help push into law last year’s White House deficit-reduction-panel proposal, projected that establishing a chained CPI measure would save roughly $300 billion over 10 years.
The biggest savings—an estimated $112 billion—would be from slowing the growth in the cost-of-living adjustments for Social Security beneficiaries. Another $33 billion would be saved by reducing cost-of-living adjustments for other federal programs. The Moment of Truth Project estimated that a chained CPI “would cause tax-bracket thresholds and other parameters to grow more slowly and raise an extra $87 billion” in revenue over 10 years.
Meanwhile Politico’s David Rogers runs through a wider range of possible savings options, particularly cuts that have been explored by Vice President Biden.
Representative Eric Cantor of Virginia, the second-ranking Republican in the House, featured prominently in all the reports saying his party was open to tax reform, but absolutely opposed to any increase in taxes. As quoted in Politico:
“We have said all along that preference in the code are not something that helps economic growth over all. But, listen, we are not for any proposal that increases taxes. Any type of discussion should be coupled with offsetting tax cuts somewhere else.”
While the Times reported Cantor’s comments fairly straight, the Post and Journal stories suggested Cantor’s comments suggested a new degree of Republican “flexibility.”