The fiscal cliff: Getting down to brass tacks
Finding common ground on cutting spending
Nov 24th 2012 | WASHINGTON, DC | from the print edition
On entitlements, Mr Obama has proposed trimming federal and military retirement benefits and agriculture subsidies (see table). But on the big three he has largely gone after providers rather than recipients, such as by forcing drug companies to sell their products to Medicare for less or paying medical-equipment suppliers less out of Medicaid.
Republicans want to see more of the burden borne by beneficiaries. During negotiations with Mr Boehner last year, Mr Obama offered two substantial concessions: to raise the age at which Americans become eligible for Medicare from 65 to 67, and to index Social Security benefits to a less-generous version of the consumer price index. Because such changes can be implemented only gradually, they would raise a relatively paltry $225 billion over the next decade. Even that, however, may be too much for influential groups such as AARP, the 37m-member lobby group for the elderly, and the unions, who have launched campaigns urging Mr Obama and members of Congress to leave entitlements alone.
Peter Orszag, Mr Obama’s first budget director, thinks that this is short-sighted. Republicans will certainly demand entitlement cuts in return for a rise in the legal ceiling on how much the government can borrow, he reckons. And Democrats would do better to let Mr Obama deal with entitlements rather than waiting for a Republican president to do it, in perhaps four years’ time. Indeed, Mitt Romney and his running-mate, Paul Ryan, would have converted Medicare to a voucher system, and the federal share of Medicaid, which matches states’ contributions, to a simple block grant. Mr Ryan is still in Congress, and will be a force to be reckoned with in the deficit negotiations.
The re-elected Mr Obama is almost certain to reject both vouchers and block grants, just as he will tolerate no big changes to his health-care plan. But there may be other common ground, in particular on means-testing. Mr Obama has already proposed a modest increase in Medicare premiums for the affluent, and numerous bipartisan proposals would make Social Security less generous for richer beneficiaries. The door is open to a deal; the hard part is walking through it.
The original article is linked here.
Written by gregip
November 22, 2012 at 5:38 pm
Posted in Fiscal policy