Bloomberg News

Democrats Hint at Entitlement Program Cuts in U.S. Budget

December 06, 2012

Democrats Hint at Cuts to Entitlement Programs in U.S. Budget

Seniors pick up information about various state organizations that can help answer questions about Medicare, senior center programs, and other retirement concerns. Photographer: Jim Weber/The Commercial Appeal/Zuma Press

Two Senate Democratic leaders signaled they may have to accept cuts to U.S. entitlement programs to secure a deficit-reduction deal, after some Republicans expressed willingness to discuss higher tax rates for top earners.

Dick Durbin of Illinois, the second-ranking Senate Democrat, said he is open to alternatives including expanded means-testing -- charging higher-income seniors more -- for Medicare. Republicans are seeking limits to spending on entitlement programs. Durbin and New York Senator Chuck Schumer, the chamber’s third-ranking Democrat, didn’t rule them out while speaking with reporters today in Washington.

More than $600 billion in tax increases and federal spending cuts will start taking effect in January unless Congress acts. President Barack Obama has made clear that no agreement is possible on the so-called fiscal cliff without raising income tax rates for the top 2 percent of earners.

Republicans need a concession on entitlement programs, Durbin said, in exchange for any agreement on higher tax rates.

“They want something to put up on the wall and say, ‘OK, we gave on taxes, they gave on’” entitlements, Durbin said. “I hope we don’t go that route and we may end up facing it as the only way out of this.”

“Means-testing to me is the easiest approach,” Durbin said.

‘All Options’

A few dozen Republicans have signed a bipartisan letter seeking to consider “all options” on taxes and entitlement programs, signaling they are ready to bargain on Obama’s call for a tax rate increase.

Republican House Speaker John Boehner, in a $2.2 trillion debt plan he offered this week, proposed using a new inflation yardstick that would reduce cost-of-living increases in Social Security, as well as raising the Medicare eligibility age. Other Republicans have also advocated means-testing.

Boehner has insisted that Republicans won’t agree to higher tax rates for anyone.

Raising the Medicare eligibility age and the different Social Security yardstick were on the table during unsuccessful budget talks between Obama and Boehner in 2011.

A Republican leader of the petition to consider all revenue options, Representative Mike Simpson of Idaho, said he could accept higher tax rates for married couples earning more than $500,000 a year, in exchange for an overhaul of spending in entitlement programs.

80 Members

About 80 members of Congress have signed the letter, half of them Republican and half Democratic, according to Simpson spokeswoman Nikki Watts.

Separately, some House Republicans have endorsed Oklahoma Republican Tom Cole’s call to extend the 2001 and 2003 tax cuts for middle-class earners while allowing the cuts for top earners to expire, as Obama has asked Congress to do by the end of the year.

Representative Kay Granger of Texas called it “just the right thing to do.”

Simpson said new entitlement limits could include changing the way seniors’ Social Security cost-of-living increases are calculated and raising the Medicare eligibility age.

Schumer, when asked about those alternatives, said, “Let them give it to us officially as an idea,” without ruling them out.

Signs of Flexibility

Amid the signs of flexibility in both parties, Obama and Boehner haven’t disclosed any progress in private talks.

Lawmakers of both parties must move from their ideological corners, and that is best done behind closed doors, Senate Budget Committee Chairman Kent Conrad of North Dakota, a Democrat, said yesterday.

In the Senate today, Majority Leader Harry Reid, a Nevada Democrat, and Minority Leader Mitch McConnell, a Kentucky Republican, sparred over the president’s proposal to give himself authority to raise the federal debt ceiling without approval by Congress.

McConnell sought a vote on the proposal, though he quickly retreated by threatening a filibuster after Democrats determined they had the 51 votes necessary to pass the bill.

Change ‘Difficult’

Regarding entitlement programs, Durbin said it would be “difficult” to change the calculation of Social Security cost- of-living increases, and raising the Medicare eligibility age could hurt poor seniors who retire early with health problems.

Higher-income senior citizens already pay more for Medicare benefits.

“The question is what other means-tests should apply,” Durbin said. “I think that is reasonable and certainly consistent with the Democratic message that those who are better off in our country should be willing to pay a little more,” said Durbin.

Republicans have “got to come through with specifics on that,” he said.

Durbin was also responsive to Republican Simpson’s suggestion to raise the annual income threshold Obama is advocating for a tax increase. The president wants to let tax rates increase for individuals’ income above $200,000 a year and married couples’ income above $250,000.

“If you’ve been around here long enough, you know there’s going to be some give on both sides,” Durbin said. “Some of the other elements, $250,000, $375,000, $500,000, you know” he said.

“As the president said, and I’ll just leave it in his words, ‘I’m open to good ideas,” Durbin said.

-- Editor: Laurie Asseo, Jodi Schneider

To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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