According to a statement from the White House, President Obama’s budget plan incorporates deficit-cutting proposals-changing the calculation for Social Security cost-of-living increases and tax brackets. The budget plan, which was released April 10, tracks the offer on spending cuts and revenue increases that Obama made to House Speaker John Boehner of Ohio as part of an end-of-the-year deal on expiring tax cuts.
Included in the plan is a new inflation gauge that would reduce cost-of-living increases for Social Security recipients. It also included a proposal to use the calculation for adjusting income tax brackets, which would ultimately mean higher payments for many taxpayers.
Obama’s Priority
This would be Obama’s 5th budget proposal which brings some opposition from Republicans. However, it makes the president’s priorities known and will set the stage for discussions on a broader debt-reduction plan. For the first time, Obama is willing to incorporate specific entitlement benefit cuts in his official budget, an attempt to let Republicans know that he still wants to reach a deal on reducing the deficit.
Republican Reactions
Republicans have stated that the president needs to step up to the plate if there’s any chance to address Medicare spending, the primary long-term cause of the debt while Democratic lawmakers have resisted trimming entitlement-program expenses.
Boehner’s spokesman states: “The president got his tax hikes already…It’s time to deal with Washington’s spending problem, so we can get our economy moving again and create more American jobs.”
“Millions of working people, seniors, disabled veterans, those who have lost a loved one in combat, and women will be extremely disappointed if President Obama caves into the long standing Republican effort to cut Social Security,” Vermont Senator Bernie Sanders, an independent who caucuses with Democrats, said in a statement.
Two Different Goals
The Debate continues with Republicans pushing to trim entitlement programs such as Social Security in cutting spending and Democrats seeking more revenue through tax-code changes.
Changing the inflation calculator potentially provides Obama and congressional Republicans with a way to accomplish both of their goals. The calculation change would make annual adjustments smaller, resulting in more income being subject to higher income tax rates. In its earlier proposal, the administration estimated that it would bring in additional tax revenue of about $100 billion over the span of 10 years. By 2020, the change would end up raising taxes for 78.3% of households by an average of $124. Taxes would increase for 98 percent of households that make between $75,000 and $100,000/year.
Concerns
A major concern for Democrats is financial protection for vulnerable groups such as the low-income, senior citizens, and disabled veterans. Obama’s 2010 debt commission recommends instituting a flat-dollar benefit “bump-up” for Social Security recipients who have been receiving benefits for 20 years, and a minimum benefit for low-income beneficiaries.
As the debate progresses, we will continue to keep you informed.