Obama offers cuts to entitlements, GOP not taking tax loopholes off the table
While House Majority Leader Eric Cantor (R-VA) signaled yesterday that closing tax loopholes wouldn’t be off the table for his caucus, President Barack Obama will offer Medicare and Social Security cuts as a way to break through the ice to reach a compromise on the budget and debt ceiling deadlock that has leaders from both parties working overtime:
As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security, according to people in both parties with knowledge of the proposal. The move marks a major shift for the White House and could present a direct challenge to Democratic lawmakers who have vowed to protect health and retirement benefits from the assault on government spending.
“Obviously, there will be some Democrats who don’t believe we need to do entitlement reform. But there seems to be some hunger to do something of some significance,” said a Democratic official familiar with the administration’s thinking. “These moments come along at most once a decade. And it would be a real mistake if we let it pass us by.”
Rather than roughly $2 trillion in savings, the White House is now seeking a plan that would slash more than $4 trillion from annual budget deficits over the next decade, stabilize borrowing and defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.
David Brooks, the Left’s favorite Republican, chastised his party earlier this week and urged them to accept tax hikes in an agreement with the White House. The piece was largely panned by conservatives and libertarians who are balking at increasing taxes, which Obama says are needed for a “balanced approach” to dealing with the budget problems. Many fear that raising tax rates will slow down the economic recovery even more than it already is. Of course, President Obama rejects this notion, though he doesn’t offer anything to set our minds at ease other than his word.
But concerning the cuts to entitlements, Michael Tanner points out that they sound good, but there needs to be something done about the way they are designed and cautioned Republicans to avoid this trap:
[T]he administration is reportedly offering another $340 billion in Medicare and Medicaid cuts as part of a budget deal. But because the administration continues to resist any changes in the structure of the program, those savings are likely to be as ephemeral as the Obamacare cuts.
And speaking of those Obamacare cuts, the health-care law “double counted” those Medicare savings by routing them through the so-called Medicare Trust Fund. This type of “trust-fund accounting” allowed the administration to “extend the life of Medicare” and reduce the program’s unfunded liabilities, even as the savings were actually spent elsewhere. Will the debt-ceiling deal include similar smoke and mirrors?
That is why Republicans should not get hung up on seeking any particular amount of spending cuts. The dollar amount matters far less than getting the structural and institutional changes that will actually bring down the size, cost, and intrusiveness of government in the future.
Good advice, but I’m afraid Republicans may be too far along not to take a deal even if it involves tax hikes. Nevertheless, the next few weeks are going to be interesting.