Leaking out more details about President Obama's budget plan for 2014, senior officials say that plan will include a controversial effort backed by Republicans to hold down the costs of entitlement programs, but that any such change must be accompanied by GOP support for future tax increases.
"Chained CPI" is basically a way to hold down on yearly inflation adjustments for government benefit programs, so they would grow more slowly in coming years. Estimates are it would save $225 billion over the next ten years.
The news was briefed to major news organizations and then released early this morning.
One important note about "chained CPI" is that while this will be called a "cut" in benefits by many, technically - it is just limiting the growth of benefit programs like Social Security.
The headline in the New York Times included both of those views: "Social Programs Facing a Cutback in Obama Budget; Smaller Increase Seen."
While the "chained CPI" plan will be in the budget, getting Republicans to agree to tax increases as part of the bargain may not be so easy - but the White House says that must be part of the deal.
Here is more from the AP:
WASHINGTON (AP) — President Barack Obama's proposed budget will call for reductions in the growth of Social Security and other benefit programs by including a proposal to lower cost-of-living adjustments to government social safety net spending, a senior administration official says.
The proposal attempts to strike a compromise with congressional Republicans on the Fiscal 2014 budget by combining the president's demand for higher taxes with GOP insistence on reductions in entitlement programs.
The official, who spoke on a condition of anonymity to describe a budget that has yet to be released, said Obama would reduce the federal government deficit by $1.8 trillion over 10 years.
A key feature of the plan Obama is proposing for the federal budget year beginning Oct. 1 is a revised inflation adjustment called "chained CPI." This new formula would effectively curb annual annual increases in a broad swath of government programs, but would have its biggest impact on Social Security.
Obama's budget proposal also calls for additional tax revenue, including a proposal to place limits on tax-preferred retirement accounts for wealthy taxpayers. Obama has also called for limits on tax deductions by the wealthy, a proposal that could generate about $580 billion in revenue over ten years.
The inflation adjustment would reduce federal spending over 10 years by about $130 billion, according to past White House estimates. Because it also affects how tax brackets are adjusted, it would also generate about $100 in higher taxes and affect even middle income taxpayers.
Obama's budget, to be released next week, comes after the Republican-controlled House and the Democratic-run Senate passed separate and markedly different budget proposals. House Republicans achieved long-term deficit reductions by targeting safety net programs; Democrats instead protected those programs and called for $1 trillion in tax increases.
Obama's budget proposal includes features from an offer he made to House Speaker John Boehner during fiscal negotiations last year. Those talks ultimately failed but Congress did agree to increase tax rates on the wealthiest Americans.
The reductions in growth of benefit programs, which would affect veterans, the poor and the older Americans, is sure to anger many Democrats. Labor groups and liberals have long been critical of Obama's offer to Boehner for including such a plan
As for the official reaction from Republicans, Speaker John Boehner issued a statement a few hours after this report emerged, giving a thumbs down to the idea of trading "Chained CPI" for tax increases.
"The president and I were not able to reach an agreement late last year because his offers never lived up to his rhetoric. Despite talk about so-called balance, the president's last offer was significantly skewed in favor of higher taxes and included only modest entitlement savings. He said he could go no further toward the middle, and that's why his last offer was rejected. In the end, the president got his tax hikes on the wealthy with no corresponding spending cuts. At some point we need to solve our spending problem, and what the president has offered would leave us with a budget that never balances. In reality, he's moved in the wrong direction, routinely taking off the table entitlement reforms he's previously told me he could support.
"When the president visited the Capitol last month, House Republicans stated a desire to find common ground and urged him not to make savings we agree upon conditional on another round of tax increases. If reports are accurate, the president has not heeded that call. If the president believes these modest entitlement savings are needed to help shore up these programs, there's no reason they should be held hostage for more tax hikes. That's no way to lead and move the country forward."
Not only is the plan getting negative reviews from Republicans, but also from liberal groups, who see the idea of chained CPI as a complete capitulation by the President to the GOP.
Here is the text of a fund raising email sent on Friday by MoveOn.org, which argues that it's time to convince the President to change his mind:
Leaking out more details about President Obama's budget plan for 2014, senior officials say that plan will include a controversial effort backed by Republicans to hold down the costs of entitlement programs, but that any such change must be accompanied by GOP support for future tax increases. "Chained CPI" is ...
