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Obama Deficit Plan Won’t Include Social Security Changes, Reports Say

Both the Washington Post and the Wall Street Journal report that President Obama’s proposal for deficit reduction, due out Monday, will not include any changes to Social Security. The reports are less certain about increasing the Medicare eligibility age, giving a definite “maybe” about that measure.

Here’s a sample of the WaPo report:

People close to the White House say Obama’s advisers have been debating whether the plan should include the changes to the Medicare eligibility age or a reduction in Social Security benefits.

Obama is unlikely to include the Social Security proposal, the sources say, and an administration official noted that Social Security is not contributing to the nation’s immediate deficit problem. The sources were less clear about whether Obama would recommend the change in the Medicare eligibility age.

The White House plan is likely to call for at least $340 billion in savings from Medicare and Medicaid, the low-income health insurance program, as part of a detailed proposal to overhaul entitlements.

The plan is also likely to call for at least $800 billion in tax increases and, according to a person familiar with the matter, include principles for redrawing the personal and corporate tax codes. Obama may also call for scaling back farm subsidies and requiring bigger contributions to civil pensions by federal employees.

A White House official said Wednesday that the plan is still being finalized. Aides say the president’s plan will be modeled after a series of proposals he made in April amid pressure from Republicans to show he was serious about curbing the growth of the nation’s debt.

You could get $800 billion in tax increases, depending on the baseline you use, simply by letting the Bush tax cuts over $250,000 expire. So that accounts for the whole tax piece. Of course, the American Jobs Act has a series of “pay-fors” on the tax side that add up to $467 billion. Those become a “tax trigger” for the Super Committee, under the legislation.

As for the April proposal, that didn’t include Social Security either, nor did it have any increases in the eligibility age for Medicare (all of the items were on the provider side, such as allowing Medicare to bargain for prescription drugs). That April proposal did include a “blended rate” for Medicaid and SCHIP, which would lower federal participation in the program and cost-shift to states. It could be that the President wants to create a sense of relief on some of the bigger safety-net programs while still pushing a plan of medium-term austerity and perhaps sneaking in something like the blended rate. For example, there’s talk of using chained CPI but excluding it for Social Security. That would hit things like food stamps and veteran’s benefits, and raise taxes regressively. But nothing has been finalized.

The WSJ says means testing for Medicare might be on the menu. Medicare ALREADY means-tests, in the sense that wealthier recipients pay higher premiums. Apparently the plan may goose that.

This paragraph kind of encapsulates the whole problem:

The decision to exclude Social Security, and discussions inside the White House about what to propose on Medicare, come as Mr. Obama and his top aides are trying to keep attention on his plan to create jobs, the top concern in voter surveys.

But next week, Mr. Obama will insert himself into the debate over long-term deficit reduction, a battle between the parties that damaged his standing this summer and is beginning anew. A new congressional supercommittee is looking for ways to cut deficits by at least $1.2 trillion over 10 years.

If the attempt here is to be the most reasonable guy in the room, all that did in July is crash the President’s approval ratings. All this does is drag us back to a deficit discussion, when the public has a clear preference for jobs, even after years of deficit fearmongering.

If we’re in a world where the only plan put forward by Democrats on Social Security is to raise the payroll tax cap (they’re using the “donut hole” formula where the cap is lifted only for those making over $250,000, meaning that income from $106,000 to $250,000 would still be untaxed), then that’s a good thing. But there has been serious damage from this debate, as Dave Weigel explains. An advantage has turned into a liability, at least in NY-09.

The party tried, and failed, to wound (Congressman-elect Bob) Turner by telling voters he’d provide one more Republican vote to weaken entitlements. That worked in New York’s 26th district, where Democrat Kathy Hochul tore pages out of the Ryan plan and made her Republican opponent eat them. In the 9th, Turner and his surrogates tried to neutralize the entitlement issue by promising not to cut entitlements. In two robocalls, Koch promised voters that Turner wouldn’t cut Medicare or Social Security. The weekend before the election, Hikind said the same thing, and bolstered his case by saying Democrats were risking the programs.

“The president of the United States is now a member of the Tea Party!” said Hikind. “He said, in his own words, that there won’t be Medicare and Social Security for my children and your children and my grandchildren unless we address Medicare!”

That’s not really a wedge issue – it’s the slow death of a wedge issue. It’s the start of a problem for Democrats, who have gone from attacking the Ryan plans for entitlement reform to vouching support for some undefined “everything on the table” entitlement reform. There might not be any way for Democrats to dodge this, and there’s no sign that they want to. And that leaves all of them in the position of Democrats in New York’s 9th. Their traditional base, weary of the recession, not sure what Democrats have to offer any more, are ready to be wedged.

A case in point: 30 Democratic and Republican Senators have a press conference today calling on the Super Committee to “go big” on deficit reduction. This Gang of 30 could come up with their own plan. If it includes cuts to the safety net, I’m sure you’ll hear the refrain “even President Obama believes…” The difference between the parties on this is gone in the minds of the public.

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David Dayen

David Dayen