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Obama’s Deficit Plan to Include Medicare Eligibility Age Increase

I’ve been trying to remind people throughout the run-up to the Obama jobs proposal that it would also presage a deficit proposal, to “pay for” whatever spending is in the jobs proposal. We now have a topline number for the jobs plan: $300 billion, half from tax cuts and 2/3 from the extension of current law (Maybe this is why nobody thinks it will work). So will there be $300 billion in cuts in some fashion to “pay for” the spending over time? No, it’ll be much higher than that.

The Catfood Commission II already has a minimum requirement of $1.5 trillion in deficit reduction (this is on top of the $900 billion enacted through a cap on discretionary spending in the 2012-2021 budget years). But Obama wants to exceed that number, and he’s reportedly ready to commit the grand bargain to paper, the one he negotiated with John Boehner before it blew up over taxes. So we’re going to have a Democratic President write down a desire to raise the Medicare eligibility age, among other things:

Getting less attention in the media is the follow-up speech the White House is planning, which will lay out a specific deficit-reduction agenda that not only meets the $1.5 trillion goal of the “supercommittee,” but exceeds it and pays for the new jobs spending. These proposals will look quite similar to the grand bargain the White House offered Speaker John Boehner, and liberal groups are grimly preparing for the administration to call for raising the Medicare eligibility age.

This leaves a couple of questions that keep pinging into my in-box from interested and, more often, angry observers around town: Why not go bigger on jobs given that so little is likely to pass? Why not go smaller on deficit reduction given that Republicans are likely to take the administration’s concessions on policies like the Medicare eligibility age but toss out their preferences on revenues and stimulus? And what evidence is there, anyway, that trying to look like the most reasonable man in the room is actually working with independents?

The President has all the tools he needs right now to force deficit reduction far beyond what he will probably even announce. It’s called the veto pen. Doing nothing and allowing the Bush tax cuts to expire, along with other expiring tax breaks, will more than achieve primary balance in the medium term. That’s the consensus of the Congressional Budget Office from a couple weeks back. The President could simply say he will not sign any extension of these plans without offsets, leave it to Congress to figure out the details, and be done with deficit reduction, while demanding his jobs plan get enacted. He could say the same thing on jobs, saying he will veto Catfood Commission recommendations unless they contain his jobs plan, with the trigger on defense and discretionary cuts backing him up.

But that’s not this President’s agenda. He thinks the Clinton tax rates were too high. He things that raising the Medicare eligibility age, one of the worst policy ideas imaginable, is a “modest adjustment” to “strengthen” the program. So all these ideas for how to deal with an age of political hostage-taking is a wish and a hope.

By putting Medicare eligibility on the table, and I’m sure Medicaid blended rate and chained CPI aren’t too far behind, the focus becomes about cuts rather than jobs, against the explicit wishes of the public. In the end, Republicans can pick and choose, taking tax cuts and entitlement cuts and tossing out the public investment and overall tax hikes. This didn’t work out during the debt limit deal, but with the trigger supposedly forcing action in the Catfood Commission, the urgency for a Democratic capitulation will be great, especially if the party leader puts out a plan of this stripe.

Nobody told the President to pivot to deficit reduction in late 2009, and nobody’s telling him to do so now. There was no public outcry then, and even after years of pounding from the agenda-setting elites, there’s not really a public outcry now. This is a conscious choice on the part of a President endlessly searching for that “win” on deficits. A lot of Americans will lose in that exchange.

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David Dayen

David Dayen