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OBAMA DROPS SOCIAL SECURITY CUT

Justin Sink and Erik WAsson

FW: Feb. 21, 2014

Yielding to pressure from congressional Democrats, President Obama is abandoning a proposed cut to Social Security benefits in his election-year budget.

The president’s budget request for fiscal 2015, which is due out March 4, will not call for a switch to a new formula that would limit cost-of-living increases in the entitlement program, the White House said Thursday.

"This year the administration is returning to a more traditional budget presentation that is focused on achieving the president’s vision for the best path to create growth and opportunity for all Americans, and the investments needed to meet that vision," a White House official said.

Obama last year proposed the new formula for calculating benefits as an overture to Republicans toward a "grand bargain" on the debt.

The White House said the offer to Speaker John Boehner (R-Ohio) "remains on the table for whenever the Republicans decide they want to engage in a serious discussion," but that the concession would not be included in the new budget request.

A spokesman for Boehner slammed Obama for the about-face and said the president is "already throwing in the towel" on deficit reduction.

“This reaffirms what has become all too apparent: the president has no interest in doing anything, even modest, to address our looming debt crisis. The one and only idea the president has to offer is even more job-destroying tax hikes, and that non-starter won’t do anything to save the entitlement programs that are critical to so many Americans,” said Brendan Buck.

Senate Minority Leader Mitch McConnell's (R-Ky.) office also said the move showed Obama was unserious about the debt.

"If anyone was hoping for a serious budget that did more than increase Washington spending and find new ways to tax job creators, it sure sounds like they’ll be disappointed," McConnell spokesman Don Stewart said.

Democrats on Capitol Hill had pleaded with Obama to reverse course on the chained consumer price index (CPI), fearing it could become a liability for the party in the upcoming midterm elections, which typically bring high turnout among older voters.

More than 100 House Democrats wrote to Obama on Wednesday urging him to drop the chained CPI proposal, following a similar letter from 16 Senate Democrats that was led by Sen. Bernie Sanders (I-Vt.).

House Minority Leader Nancy Pelosi (D-Calif.) cheered Obama's decision.

"Democrats applaud the president for eliminating chained CPI from his budget, and we look forward to working across the aisle to adopt a responsible fiscal framework," she said.

"He put chained CPI on the table as a gesture of good faith; yet Republican leaders were unwilling to budge or close a single unfair tax loophole, and decided to walk away from opportunities to find common ground," Pelosi added.

Switching to chained CPI would affect all federal benefits, not just Social Security, and would raise taxes by slowing the increase of federal tax brackets, which are indexed to inflation. Of the $230 billion in budget savings from chained CPI, $115 billion came from increased revenue.

Liberal groups had attacked Obama for proposing chained CPI last year, arguing the change to Social Security would be devastating for seniors.

"This is a huge progressive victory — and greatly increases Democratic chances of taking back the House and keeping the Senate," said Stephanie Taylor of the Progressive Change Campaign Committee.

Deficit hawks said Obama's move to shelve chained CPI likely kills any chance of a grand bargain for the rest of his term.

“The president took an important step forward by offering this policy last year; his dramatic pull back is disappointing and bodes poorly for the fiscal health of the nation. Without his leadership, it will be virtually impossible for the country to get ahead of the long-term fiscal challenges we face," said Maya MacGuineas of The Center for a Responsible Federal Budget.

One source, however, noted that the budget text will state that Obama could support chained CPI if Republicans were willing to deal on revenue, and that Medicare premium increases in Obama's last budget are being retained. The 2014 budget included increased means testing in Medicare for some outpatient and drug benefits.

The White House sought to portray the nation's fiscal picture as brightening. Spokesman Josh Earnest said the decision to move away from chained CPI was motivated partially by the "substantial progress in reducing the deficit."

He also said that Washington has seen a "welcome return to regular order" and that the proposal would represent, as it had traditionally, "how the president, in an ideal world, believes the government should be funded."

Earnest repeatedly insisted that Obama would still consider chained CPI as part of a grand bargain on the debt, and that the move "does not reflect any reduction in the president's willingness to try to meet Republicans in the middle."

"The budget will show the tradeoffs and choices the president would make while adhering to those levels," the official said.

The White House also said that in the budget, deficits as a share of the economy will be below 2 percent by the end of the 10-year window, and debt as a share of the economy will be lower than in prior administration budgets. In Obama's 2014 blueprint, the deficit was projected at 1.7 percent of the economy by 2023.

Presidential priorities in the new spending request will include a "major expansion" of the Earned Income Tax Credit, a new stimulus initiative that would "include additional policies to grow the economy and create jobs" and the elimination of tax loopholes.

The jobs program request will include $56 billion in spending split evenly between defense and non-defense programs. That proposed spending will include Obama's proposal to create 45 new manufacturing institutes, a new "Race to the Top" plan for states implementing policies to cut energy waste and modernize the grid, and new job training programs.

The budget also includes Obama's proposal for universal pre-K education.

— This story was last updated at 3:57 p.m.

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