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Obama seeks budget deal, proposes cuts to Social Security

By Jim Kuhnhenn

Associatd Press

LAST UPDATED: 02:44 p.m. HST, Apr 05, 2013

WASHINGTON » President Barack Obama's proposed budget will call for reductions in the growth of Social Security and other benefit programs while still insisting on more taxes from the wealthy in a renewed attempt to strike a broad deficit-cutting deal with Republicans.

The proposal aims for a compromise on the fiscal 2014 budget by combining the president's demand for higher taxes with GOP insistence on reductions in entitlement programs. But the plan was already encountering negative reviews from top Republicans for its insistence on revenue and from liberals and labor for its effect on the social safety net.

Obama would reduce the federal government deficit by $1.8 trillion over 10 years, according to a summary from the Obama administration provided today. The president's budget, the first of his second term, incorporates elements from his last offer to House Speaker John Boehner in December. Congressional Republicans rejected that proposal because of its demand for more than a $1 trillion in tax revenue.

"It's not the president's ideal approach to our budget challenges, but it is a serious compromise proposition that demonstrates that he wants to get things done, that he believes we ought to do the business of the American people," said White House press secretary Jay Carney.

Congress and the administration have already secured $2.5 trillion in deficit reduction over the next 10 years through budget reductions and with the end-of-year tax increase on the rich. Obama's plan would bring that total to $4.3 trillion over 10 years.

While the budget would not affect current automatic spending cuts that took effect in March, it would replace $1.2 trillion in across-the-board reductions that would have been scheduled to kick over the next nine years.

A key feature of the plan Obama is submitting for the federal budget year beginning Oct. 1 is a revised inflation adjustment called "chained CPI." This new formula would effectively curb annual increases in a broad swath of government programs but would have its biggest impact on Social Security. By encompassing Obama's offer to Boehner, R-Ohio, the plan will also include reductions in Medicare spending, much of it by targeting payments to health care providers and drug companies. The Medicare proposal also would require wealthier recipients to pay higher premiums or co-pays.

Obama's budget proposal also calls for additional tax revenue, including a proposal to place limits on tax-preferred retirement accounts for wealthy taxpayers. Obama has called for limits on tax deductions by the wealthy, a proposal that could generate about $580 billion in revenue over 10 years.

Boehner, in a statement, said House Republicans made clear to Obama last month that he should not make savings in entitlements that both sides agree on contingent on more tax increases.

"If the president believes these modest entitlement savings are needed to help shore up these programs, there's no reason they should be held hostage for more tax hikes," Boehner said. "That's no way to lead and move the country forward."

The inflation adjustment would reduce federal spending over 10 years by about $130 billion, according to White House estimates. Because it also affects how tax brackets are adjusted, it would also generate about $100 billion in higher taxes and affect even middle income taxpayers.

The reductions in the growth of benefit programs, which would affect veterans, the poor and the older Americans, is sure to anger many Democrats. Labor groups and liberals have long been critical of Obama's offer to Boehner for including such a plan.

The White House has said the cost-of-living adjustments would include protections for "vulnerable" recipients.

"The president should drop these misguided cuts in benefits and focus instead on building support in Congress for investing in jobs." AFL-CIO President Richard Trumka said in a statement.

The National Committee to Preserve Social Security and Medicare said seniors have averaged a cost-of-living increase of 1.3 percent over four years.

"Arguing that is too generous shows how out of touch Washington is with the real-world economic realities facing average Americans," the organization's president and CEO, Max Richtman, said in a statement. "Adopting the chained CPI is nothing more than a political sleight of hand targeting our nation's middle class and poor."

Lawrence Mishel, president of the Economic Policy Institute, a liberal research organization in Washington, D.C., called the proposal "bad policy and even worse bargaining strategy."

While Obama has proposed the slower cost of living adjustment plan during fiscal negotiations with Republican leaders, placing it in the budget would put the administration's official imprint on the plan and mark a full shift from Obama's stand in 2008 when he campaigned against Republican Party nominee John McCain.

In a Sept. 6, 2008, speech to AARP, Obama said: "John McCain's campaign has suggested that the best answer for the growing pressures on Social Security might be to cut cost-of-living adjustments or raise the retirement age. Let me be clear: I will not do either."

Administration officials insist Obama would only agree to the reductions in benefit programs if they are accompanied by increases in revenue, a difficult demand given the strong anti-tax sentiment of House Republicans.

That Obama would include such a plan in his budget is hardly surprising. White House aides have said for weeks that the president's offer to Boehner in December remained on the table. Not including it in the budget would have constituted a remarkable retreat from his bargaining position.

Obama's budget, to be released next Wednesday, comes after the Republican-controlled House and the Democratic-run Senate passed separate and markedly different budget proposals. House Republicans achieved long-term deficit reductions by targeting safety net programs; Democrats instead protected those programs and called for $1 trillion in tax increases.

But Obama has been making a concerted effort to win Republican support, especially in the Senate. He has even scheduled a dinner with Republican lawmakers on the evening that his budget is released next week.

House Republicans, however, have been adamant in their opposition to increases in taxes, noting that Congress already increased taxes on the wealthy in the first days of January to avoid a so-called fiscal cliff, or automatic, across the board tax increases and spending cuts.

As described by the administration official, the budget proposal would also end a loophole that permits people to obtain unemployment insurance and disability benefits at the same time.

Obama's proposal, however, includes calls for increased spending. It calls for $50 billion in spending on public works projects. It also would make preschool available to more children by increasing the tax on tobacco.

AP writer Stephen Ohlemacher contributed to this report.

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NanakuliBoss wrote:
Social Security is a Ponzi scheme. Many retirees have doubled up on what they contributed while the fund will collapse for those currently contribute.
on April 5,2013 | 04:12AM
RetiredWorking wrote:
Nanakuli, yes Social Security IS a Ponzi-like scheme, and it's worked for over 35 years. Nothing wrong with that, huh? And please get your facts straight. How does a nonworking retiree "double up" on their contribution? Your statement is confusing. Maybe you're referring to someone like me. I'm a retiree/senior citizen collecting Social Security, but I'm also working full time and still paying into the Social Security program. You know how much more I receive on my Social Security check for still working? Maybe $5 more a month.How about that? I'm contributing to my own Social Security check, and I'm ALSO contributing to ALL the senior citizen's SS benefits. How about that? Is that what you're complaining about?
on April 5,2013 | 06:18AM
RetiredWorking wrote:
FWIW, Nanakuli, I am a working retiree/senior citizen/SS beneficiary. I contribute $99.70 a month towards Social Security. If my SS monthly benefits increases by $5, why would you complain about working retirees "doubling up"?
on April 5,2013 | 06:32AM
tiki886 wrote:
There is no money in SS. It is 'pay as you go' so whatever you "paid" to SS, was used for more government spending. And if it has worked for over 35 years, you mean since you started paying the SS tax ponzi scheme?
on April 5,2013 | 11:32AM
RetiredWorking wrote:
tiki, I meant the SS Act was created in 1935, not 35 years ago. Back then, there were SIXTEEN workers for every retiree. Now, there are SIX contributors to one SS bweneficiary.Whatever workers contribute is diverted primarily towards the Ponzi scheme, NOT government spending.tiki, what's the solution? Have you thought about solutions?
on April 5,2013 | 01:06PM
Anonymous wrote:
You're right I was distracted.

Solutions: 1) Government employees in Galveston, Brazoria and Matagorda counties have controlled their private retirement plan for 30 years. They opted out of Social Security before Congress changed the law in 1983 to prevent others from withdrawing.

2) Any system that actually has monies in it earning interest on a return. The Hawaii ERS is currently running as a ponzi scheme until both the pensions and health care portion is fully funded.

I read that Chili was another model to consider but I am not familiar with their system.

on April 5,2013 | 02:11PM
RetiredWorking wrote:
If it was strictly tax-paying workers funding for retirees,it'd be a less difficult task. However, Social Security also provides for workers' surviving families and for people with disabilities (SSI). I'm not saying we shouldn't provide for these unfortunates, though.
on April 5,2013 | 04:53PM
mikethenovice wrote:
Social Security is not a Ponzi scheme. Talk is cheap when you are repeating what the media says.
on April 5,2013 | 12:23PM
serious wrote:
Gee, I wonder why he didn't mention this during the campaign???
on April 5,2013 | 04:28AM
Bdpapa wrote:
Just like the job candidate that said he could work weekends. Once hired he said " I didn't say I would"!
on April 5,2013 | 05:44AM
NuuanuMama wrote:
The Republicans are forcing the reduction of programs such as Social Security, not the President.
on April 5,2013 | 07:33AM
Pacej001 wrote:
Mathematically speaking, these programs don't add up. SS is in the red now, drawing down an imaginary trust fund (from general tax revenues) and Medicare will be insolvent in about 10 years. The republicans did not create these problems.
on April 5,2013 | 09:42AM
lee1957 wrote:
Its the President's proposal, and the illiteracy of the headline writer notwithstanding, the reductions are not in benefits, rather they are reductions is the rate of growth of benefits. This is far some grand compromise.
on April 5,2013 | 11:25AM
serious wrote:
lee1957, I think your logic is correct, but COLA while right now, due to the unnaturally low interest rates, is about nil, I wonder if the congressional COLA for THEIR salaries would be put on hold also. But I am sure that Pelosi would say, it's an insult to work at their wages!!!!! Don't get my wrong, I love this country, its just the politicians!!!!
on April 5,2013 | 11:57AM
Pacej001 wrote:
Correct. Also, I doubt the administration will consider the continuing increase of lifespans.
on April 5,2013 | 12:24PM
dontbelieveinmyths wrote:
No. The president is CHOOSING that particular entitlement program (SS) to cut. There are others he could cut, but it wouldn't get everyone so emotional. How about foodstamps, welfare and the seemingly ongoing unemployment benefit?
on April 5,2013 | 12:34PM
Allenk wrote:
Surprise! This comes out in his second term. After legislation is passed he steps down and fades into the sunset.
on April 5,2013 | 08:47AM
serious wrote:
Allenk, it's the American political way to do it. Look at all the legislature that is passed for something to be completed in 2017 or beyond--kick the can down the road, let the next politician handle it. Read the bankruptcy news on Stockton, CA a classic for a Harvard MBA study.
on April 5,2013 | 12:00PM
Anonymous wrote:
Social security is a ponzi scheme in the sense that current taxpayers fund current beneficiaries expecting future taxpayers to fund their benefits. However the system is expected to run out of money by 2031. With the ratio of working people to retirees dropping, there will not be enough people working to fund the benefits for all retirees.
on April 5,2013 | 07:23AM
entrkn wrote:
End ALL tax breaks and tax loopholes that primarily benefit wealthier Americans and corporations. After that is done,... we can look around for other things that could also be changed.
on April 5,2013 | 08:02AM
lee1957 wrote:
Would be so kind as to be more specific as list one tax break and one loophole?
on April 5,2013 | 11:27AM
Anonymous wrote:
How much "wealthier"? Maybe just weather than, say, you? Corporations already pay an effective tax rate among the highest in the developed countries while some of our competitors are LOWERING their corporate rates. While we're "Looking around" seems like we need to look at the fact that lifespans have increased almost 20 years since SS was founded or the fact that our medical care cost about twice that of other industrialized countries.
on April 5,2013 | 11:29AM
AhiPoke wrote:
"End ALL tax breaks and..." Easier said than done. The major flaw in this approach is defining the "wealthy". We'd all agree that people making $1M/year or more are "wealthy. Unfortunately, taxing all of those guys at 100% wouldn't solve our economic problems. So the government works its way down to individuals making around $250k and call them "wealthy". Again unfortunately, many of these people are probably what most of us would call "middle class". What I think needs to be done is go to a flat tax (effectively eliminating most deductions and "loopholes" but also lower the basic tax rates). IMO, the so called "wealthy" did not create this problem. Government did. And BTW, I'm definitely not "wealthy".
on April 5,2013 | 11:30AM
Charliegrunt wrote:
This article proves that sending someone to Punahou and Harvard does not make that person smart. Either that or they become so arrogant that they think the rest of the populace is stupid. Let's look at a few things. GW left the country $6T in debt in two terms (8 yrs.). BO has left us over $16T in debt in one term (4 yrs). Now, BO's plan "would reduce the federal government by $1.8T over 10 years." "Congress and the Administration have already secured $2.5T in deficit reduction over 10 years." Some of us less advantaged have figured out that the wealthy pay millions to tax attorneys and walk away with paying little or nothing. So, why is BO turning his back on closing tax loopholes? Is it payback for those $50K dinners? Yes, let's talk about SS. LBJ was the first to tapped into that designated fund so that the deficit wouldn't look as bad. Administrations and Congress have not stopped, of paid back the principle or interests since. Why are they allowed to use "fenced" funds for other purposes. We gave a bunch of snake oil salesmen running this country. STOP ORGANIZE CRIME. VOTE OUT ALL INCUMBENTS.
on April 5,2013 | 08:09AM
IAmSane wrote:
The national debt on 12/31/2008 was $10.7 trillion, not $6 trillion as you claim.
on April 5,2013 | 10:06AM
lee1957 wrote:
I believe you are correct, but increaing the debt by 60% in four years is nothing to be proud of.
on April 5,2013 | 11:58AM
Dragonman wrote:
Two huge reasons that the national debt went from 10.7 T to 16 T is Obama had to fund two wars that GW started. Attacking the president on a personal level solves nothing. Stick to the facts and post something that has meaning and makes sense.
on April 5,2013 | 11:26AM
pakeheat wrote:
IRT Dragonman, does Congress approve funds for the war and not the President? Please enlighten me that you can blame GW only?
on April 5,2013 | 12:25PM
lee1957 wrote:
Would you like to buy a bridge?
on April 5,2013 | 05:45PM
serious wrote:
Charliegrunt, I agree,for politicians, do the same as Chicago and Detroit--two terms, on in office and one in jail!!
on April 5,2013 | 12:03PM
Maneki_Neko wrote:
...seniors have averaged a cost-of-living increase of 1.3 percent over four years....

That is a disgrace especially since the economy has destroyed fixed income investments due to printing money like crazy. Maybe seniors should get a union. The unions get much better COLA increases.

on April 5,2013 | 08:10AM
ShibaiDakine wrote:
Social security is not the problem. Often cited as an entitlement program, it was anything but that when it first came into being. But just like the State's public workers pensions and health benefit programs, where the employees paid a portion of their earnings, supposedly matched by the employer, those funds were raided and under-funded as time went by. Until you address the reason why those funds were mismanaged, you will never solve the problem. The answer is multifaceted, and includes such items as the tax code (read loopholes for the rich AND little or no tax on the lower income earners), welfare programs that have used the social security program as a conduit for funding and the electoral process where politicians give away government resources to get votes from varied constituencies. It all boils down to a broken government, where both Republicans and Democrats do not have the political backbone to cut the spending by using the most powerful word in the English language, the little word "no".
on April 5,2013 | 08:33AM
MakaniKai wrote:
GENIUS ShibaiDakine! Mahalo for summing it up with no shibai. Happy Aloha Friday.
on April 5,2013 | 11:37AM
AhiPoke wrote:
Sorry, unlike others, I don't agree with your statement. Social Security funds were not "raided". SS is a pay as you go system that relies on working people to contribute for retirees. Where the programs went wrong, was not because it was raided, but because the benefits have and will exceeded the contributions. Early beneficiaries took out way more than they put in. That worked in the early years because there were significantly more workers than retirees. Now that the baby boomer generation is starting to retire the number of beneficiaries will far exceed the contributors. Also, the program over the years greatly expanded the people who could qualify for benefits. This includes immigrants who contributed nothing. I totally agree with your comment, "It all boils down to a broken government, where both Republicans and Democrats do not have the political backbone to cut the spending by using the most powerful word in the English language, the little word "no"."
on April 5,2013 | 12:59PM
ShibaiDakine wrote:
@AhiPoke: The following is taken from Wikipedia, which I recommend you read before you come to your final conclusion. "...Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury (technically, the "Federal Old-Age and Survivors Insurance Trust Fund", as established by 42 U.S.C. § 401(a)). Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they did between 1983 and 2009,[33] the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust Fund indirectly finances the federal government's general purpose deficit spending. In 2007, the cumulative excess of Social Security taxes and interest received over benefits paid out stood at $2.2 trillion." Call it what you want, but I stand by my statement. Had the funds been held in marketable securities and professionally managed, the fund would be swimming in excesses.
on April 5,2013 | 01:18PM
environmental_lady wrote:
Absolutely no, no, no! Leave Social Security alone. I hope the GOP will reject Obama's compromise as they don't want to pay any more taxes. Obama should end the war in Afghanistan now and bring home the troops. That's how he can save more money than the sequester.
on April 5,2013 | 08:42AM
nitpikker wrote:
if they didn't initiate that damned COLA s.s. would not be in trouble!
on April 5,2013 | 08:49AM
false wrote:
I hate to rain on your parade, but more money is spent on benefits for illegal aliens, (Sorry.., "Undocumented Democrats"... see story in yesterdays paper) than on the entire War.
on April 5,2013 | 08:57AM
Publicbraddah wrote:
How about significantly reducing entitlements for our elected officials? Their retirements benefits are ridiculously out of proportion with the public's. How about starting there, Mr. President?
on April 5,2013 | 09:04AM
Waterman2 wrote:
As long as we dole out billions to non workers........those who refuse to support themselves.....we will run deficits. Social Security is at least given to those who contributed by working and paying taxes. Those who don't work and do not pay taxes are a major drain on our budget, but because even non tax payers can vote, and always vote for those perceived to give the biggest handout, don't expect our budget to ever be balanced. Just expect the worker types to pay more and more until there is no incentive to work........but you don't even have to have a lot of patience to wait on that, it is upon us. And then there is the problem of bloated government controlled by government workers unions........how can a government function when the tax revenue from non government workers is less than the payroll of government workers ? Looks like we find out the hard way that it can't.
on April 5,2013 | 09:21AM
Maneki_Neko wrote:
The real stab in the heart is that Obama wants to hit the richest of the rich with a $1 trillion tax hike but he wants to take almost twice that much ($1.8 trillion) for the seniors.
on April 5,2013 | 09:26AM
scooters wrote:
Obama is a loser no matter what he does. Socialist..
on April 5,2013 | 09:37AM
ClearHeaded wrote:
Great News progressives! The righties still don't get it!! Bwahahaha.
on April 5,2013 | 12:56PM
nitpikker wrote:
lousy COLA only goes up! never goes down to match the economy!
on April 5,2013 | 09:47AM
iwanaknow wrote:
Plan and live your life so you'll never get SS? Eat, drink and be merry for tomorrow we let our grand kids pay the bills?
on April 5,2013 | 11:05AM
mikethenovice wrote:
Social Security(SSA) is not a hand out entitlement like the Republicans claim it is. SSA is a paid for with every paycheck deduction of the FICA. Those funds should have been invested immediately instead of used to buy voted for special interest groups.
on April 5,2013 | 12:20PM
mikethenovice wrote:
I'll be dog gone if I work all my life and be left out in the pasture to die like the Republicans wish to do so they can save on taxes to buy a new yacht.
on April 5,2013 | 12:22PM
false wrote:
Everyone needs to pay their fair share, that is all there is to it. You play u pay.
on April 5,2013 | 01:17PM
dontbelieveinmyths wrote:
How is it that he is going to reduce the budget deficit by 1.8 T, when he is getting 1T in taxes? If he were to use the 1T toward the deficit, wouldn't the deficit be cut by 2.8T? You know that won't happen. Cut 1.8T, receive and spend 1T. Only cutting .8T.
on April 5,2013 | 12:39PM
false wrote:
We always talk this way at the dinner table, until the realization of bankruptcy.
on April 5,2013 | 01:15PM
Rainbowgran wrote:
The US has been eroded from within. How much of the trillions in debt have gone to war-mongering US companies and their owners??? How many fingers are in the pie of bumping up the cost of Medicare which is the biggest part of the high cost of medical care in our country??? Charity is supposed to begin at home. I don't want charity which some people seem to think Social Security and Medicare are. I worked for these "benefits" and did not have the time to look into building up my financial resources as I put in longer and longer hours at work, ie 10 to 16 hour days and a lot of times mandated to work. The work place has so changed since we went from being "personnel" to being "human resources." "Human resources." Just a category on a companies overall cost to run their business. A lot of the American people have ignored their citizenship duties for years by not voting believing "someone else will take care of it," I have no power alone as a citizen and collectively there could be more power in the right direction. Let us fix ourselves from within with true equality amongst our peoples. Those of you who have not tried to keep an Eagles eye on government at every level by not voting have brought us all down. Greedy, power-tripping selfishness from within drags us all down and has and is playing a tremendous part in where the US 's place in the world happens to be. And I feel I have lived long enough and my eyes reflect the sadness that our once great country has come to. The place to cut costs is with the government. Trim the rules by which every sector works by. Simplify. Simplify. Simplify. All levels of government, local, national and international entities are bogged down by outdated "rules" kept on the books instead of chucking what does not work and trimming where there is redundancy and overlapping of services to the point where even if government is slowly shifting to "paperless" it is not as efficient as some of the old ways were. Is there any wonder that as a people we are so obese. Our subconsciousness "protecting" ourselves with what has come about from within and affects every man, woman and child in our country. We are only "human resources." Our "BEINGNESS" has been chipped away so badly. I give it up to the powers of the Universe for good & righteousness minute by minute, hour by hour, day by day. Besides participating as a citizen by voting whom I believe is the "lesser of two evils" Ithis is the powerlessness the majority of us ordinary citizens has come to FEEL, and especially those of us who have tried to work by the rules of truth, justice and equality. So it is. It is what it is. For myself I can TRUTHFULLY say "I have done my duty, I have paid my dues." How about the rest of you???
on April 5,2013 | 12:40PM
false wrote:
Well one can see that u could have gone on forever. Are you one of the senators of the current congress, or are you one from that past, namely Dan. Dan's views do not match yours, so i am sure it is not Dan. I would like to say one thing though, the great experiment called the United States of America, by golly, is working, because we are the one and only country in this entire world that has allowed for the freedom of speech. Many including those of the so called Capitalistic countries such as Japan and Great Britain, have serious limitations in their government. Ours is the only where the freedom of everything is spelled out in Detail. Including unfortunately the right to bear arms, providing that u do not have a criminal history. The national debt that this country has famously accumulated includes all u guys going out to football games on Saturdays and Sundays (except BYU) to enjoy our so called National Pastime. Ferd Lewis, help us dear savior !!!
on April 5,2013 | 01:14PM
environmental_lady wrote:
We don't have as much freedom of speech as you think. You ought to watch Democracy Now online. There is a conference going on today in Colorado about this very topic and how corporations are ruling the media muzzling it whenever it contradicts their interests.
on April 5,2013 | 01:59PM
RetiredWorking wrote:
I have paid my taxes. I have pai my dues. I have done my duty, and then some. I also give at the Blood Bank of Hawaii 24 times a year. How about the rest of you?
on April 5,2013 | 01:18PM
environmental_lady wrote:
Sad to say but the people in high places use you as a sucker. Not just you but all of us.
on April 5,2013 | 02:00PM
RetiredWorking wrote:
Sucker, aka law-abiding, tax-paying community-minded American citizen/war veteran. In the world of high places, I am a bottom-feeder. I'll die happy, though, Note to my survivors: do NOT cash my fully-funded Social Security checks after I kick the bucket.
on April 5,2013 | 05:04PM
false wrote:
Whatever Obama proposes, do the opposite: ObamaCare, etc.
on April 5,2013 | 01:05PM
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