Feb. 20 (Bloomberg) — President Barack Obama plans to drop his proposal to reduce cost-of-living adjustments for Social Security and other benefit programs in his next budget.
The so-called chained-CPI formula was part of a bid by the president to engage in deficit-reduction negotiations with Republicans. It wasn’t adopted after a standoff over taxes and spending. It also was criticized by many congressional Democrats and some of Obama’s political allies.
Josh Earnest, a White House spokesman, said today that the proposal remains on the table if talks with Republicans on a long-term deficit reduction plan resume.
Obama also is proposing $56 billion in spending, evenly split between domestic programs and defense, for what it calls an “Opportunity, Growth and Security Initiative.” It is mostly a collection of proposals that Obama has made previously on research, education, manufacturing, energy efficiency and training that were never acted upon by Congress.
Earnest said the programs would be “fully paid for” through a combination of spending cuts elsewhere and closing tax loopholes. He declined to give specifics before the March 4 release of the administration’s 2015 fiscal year spending plan.
Obama previously announced he will ask Congress to approve a $1 billion Climate Resilience Fund as part of the budget to help federal, state and local governments prepare for the effects of climate change.
Imposing a revised formula on Social Security payments and other programs with cost-of-living adjustments was part of the president’s offer to Republicans in negotiations on a so-called grand bargain to control U.S. debt levels. He included it in the budget sent to Congress last year and the nonpartisan Congressional Budget Office said in November that it would save $162.5 billion over 10 years.
Obama abandoned the proposal a day after 117 House Democrats, led by Representative Allyson Schwartz of Pennsylvania, urge the president to drop the plan.
Obama’s decision shows that he “has no interest in doing anything, even modest, to address our looming debt crisis,” Brendan Buck, spokesman for House Speaker John Boehner said. “With three years left in office, it seems the president is already throwing in the towel.”
Earnest put the blame on Republicans for the breakdown of budget negotiations, saying they have refused to consider raising revenue by eliminating “loopholes that benefit only the wealthy and the well connected. So that is an unfortunate policy choice that Republicans themselves have made.”
Last year’s federal deficit of $680 billion was the lowest in five years. The deficit as a share of the economy will shrink to a seven-year low in the 12 months ending Sept. 30, according to projections earlier this month by the Congressional Budget Office. The projected gap is down from 9.8 percent of GDP in 2009, the widest in records dating back to 1974.
On the Social Security program, Obama is “willing to do some things that he doesn’t personally support in his ideal budget,” said Gene Sperling, director of the National Economic Council, a White House unit that coordinates administration policy.
The offer was an attempt to revise costly entitlement programs and show Republicans of a good faith effort to reach a “grand bargain” budget deal, which failed. “We did not see reciprocity” from Republicans, Sperling said in a Politico interview earlier today.
White House spokesman Jay Carney said Feb. 18 the budget coming early next month would achieve “additional deficit reduction that addresses our medium- and long-term challenges through a balanced approach.”
He said Obama sought Social security savings to show “a willingness to compromise” on the budget but it’s was a position “we haven’t seen demonstrated thus far by Republicans.”