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WASHINGTON – Facing ever more urgent warnings about the exploding costs of federal pension and health programs, President Obama is expected to include long-sought reductions in Social Security and Medicare when he rolls out his budget Wednesday.
But while the president’s budget may offer substantial overtures to Republicans, who long have pressed for entitlement cuts, the White House faces significant opposition from some Minnesota Democrats and others in Congress who are positioning themselves as defenders of the sick and elderly.
Chief among them is U.S. Rep. Keith Ellison, chief deputy Democratic Whip and co-chair of the Congressional Progressive Caucus, which is in the forefront of liberal efforts to block any proposals that would lower cost-of-living increases and raise age requirements.
Another prominent Minnesota voice is U.S. Sen. Al Franken, who has warned against budget savings that might “shift costs to our seniors, or parents raising children with disabilities.”
That wariness in Minnesota and elsewhere — combined with uniform GOP opposition to any new tax revenues — could derail even the faintest hopes of reaching an elusive “grand” budget bargain this year, or in the foreseeable future.
The political standoff is playing out against government reports projecting insolvency for Medicare by 2024, with Social Security following suit in 2033. Thereafter, without changes in the law, payroll taxes would cover only between 75 percent and 87 percent of benefits, creating a growing gap.
The longer that lawmakers put off a fix, the programs’ trustees say, the more intractable the problem becomes. “This year we sound the same warning, but with greater urgency,” they said in their last report in November.
But those warnings have been overwhelmed by political sparring over the month-old sequester budget cuts, which cover a smaller slice of the government spending pie.
Social Security and Medicare, by contrast, account for more than a third of federal expenditures and face a tsunami of new federal outlays as the bulk of the aging baby boom generation settles into retirement.
White House officials have signaled that Obama will seek a budget compromise by limiting tax deductions for the wealthy while trimming inflation increases for Social Security and other federal programs. The savings would be part of a broader plan to reduce the federal government deficit by $1.8 trillion over 10 years.
The proposal for the budget year beginning Oct. 1 is expected to build on previous White House offers to House Speaker John Boehner during last year’s “fiscal cliff” negotiations, in which Republicans acquiesced to $600 billion in tax increases for upper-income earners.
But the proposed bargain already is hitting turbulence among labor and liberal groups that support Democrats. Among the most vocal critics is Ellison, who recently issued a statement with Progressive Caucus co-chair Rep. Raul Grijalva of Arizona, saying “we should not try to bargain for [Republicans’] goodwill with policies that hurt our seniors, especially since they’ve been unwilling to reduce tax loopholes for millionaires and wealthy corporations by so much as a dime.”
Ellison recently helped lead 107 House Democrats in a letter to Obama opposing any benefit cuts to Social Security, Medicare or Medicaid. Among the signers was Minnesota Democrat Rick Nolan, who helped deliver a petition to the White House on Tuesday opposing the proposed cuts. Ellison cites a report by the New America Foundation arguing that Social Security should be expanded rather than cut to offset “rapidly disappearing” private pension plans and 401(k)s, which have not produced the retirement savings many Americans will need.
Retirement age could rise
Liberal groups also are fighting proposals to raise the Medicare eligibility age to 67 from 65 and to increase the Social Security full retirement age to 69 from 67. Among those most hurt are not only the poor and the elderly, they say, but veterans as well.
“Contrary to popular belief, not everyone is living longer or is able to work into their late 60s,” said Max Richtman, president of the National Committee to Preserve Social Security and Medicare.
Ellison and Franken argue that Social Security does not contribute to the nation’s fiscal problems because the trust fund currently has a surplus.
But some budget experts note that worker payroll taxes no longer cover current benefits. The fund is flush only because it counts as assets money owed from past government borrowing to finance other types of spending. Without those general revenue funds, which contribute to the annual federal deficits, the trust fund would be unable to meet its pension obligations.
“It’s very misleading to say the program is not contributing to the debt, because it is,” said Robert Bixby, executive director of the Concord Coalition, a Washington group dedicated to balancing the federal budget. “The Treasury has to come up with the money to make good on the bonds, which is a draw on general revenues.”
Early speculation about the Obama budget has focused on slowing the growth of Social Security benefits and reducing Medicare costs by cutting payments to health care providers and drug companies. But to make any changes, Obama would need some Democratic support, assuming he could make a deal with Republicans on new tax revenue.
Both are far from certain.
“If you want to set up a boogeyman against your [political] opponent, it’s very tempting to talk about how somebody’s going to take away Social Security or slash Medicare,” Bixby said. “ ‘Throw grandma in the street.’ It’s preying on the fears of the elderly, rather than solving a problem.”
Sizing up need for change
Franken acknowledges that changes are needed to keep Social Security solvent but says that reducing the cost-of-living index is not the way to go about it. “I don’t think the place to start is with a piecemeal proposal that disproportionately affects our oldest and most vulnerable seniors,” he said, “and I will fight against benefits cuts.”
U.S. Sen. Amy Klobuchar was more elusive: “I would have to see the specific proposal and what protections are included [in the budget], such as protections for older retirees and the nation’s most vulnerable.”
In the past, Klobuchar and Franken have said they would consider reforms such as raising the retirement age for future Social Security beneficiaries. They also have voiced openness to raising the cap on income subject to the Social Security payroll tax, now set at $113,700.
On Medicare, the Minnesota senators say savings could be achieved by allowing the government to negotiate drug prices and enact national reforms based on the Minnesota model of high-quality, low-cost care.
The Senate Democratic budget reform proposals stand in stark contrast to the House-passed GOP plan to repeal the Affordable Care Act, turn Medicaid into a state block-grant program and provide seniors with Medicare “premium support” vouchers to buy private insurance. In contrast to a Senate-passed budget plan, the GOP, with the support of all three Minnesota Republicans in the House, uniformly opposes increasing taxes on anybody. That, for the foreseeable future, leaves entitlement reform in limbo.