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Obama proposes curbs on Social Security, other programs

Combined News Services

WASHINGTON -- President Barack Obama is proposing new limits on the growth of Social Security and other benefit programs -- an attempt at finding middle ground with Republicans that drew the wrath of liberals, labor and advocates for seniors.

In exchange for the benefit curbs in the 2014 budget to be unveiled Wednesday, Obama wants Republicans to accept tax increases in a broad plan to reduce the nation's deficit.

The core of the plan would change the inflation calculation for Social Security cost-of-living increases, slowing benefit increases.

It also would limit inflation adjustments to tax brackets, according to an outline released by the White House. That could cause middle-class Americans to slip into higher tax brackets despite Obama's repeated vows not to add to the tax burden of the middle class.

"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," said White House press secretary Jay Carney.

The proposed changes, once fully phased in, would mean a cut in Social Security benefits of about $1,000 a year for an average 85-year-old and smaller cuts for younger retirees, according to Social Security Administration estimates.

Obama proposed much the same without success to Republican House Speaker John Boehner in December.

Boehner, in a statement Friday, said "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."

The proposal won praise from independent deficit hawks. "We do think that it's a very good sign that the president has included real entitlement reforms in the budget," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The budget's cuts and revenue increases would result in $1.8 trillion in deficit reductions over 10 years. That figure would replace $1.2 trillion in automatic spending cuts poised to take effect over the next 10 years if Congress and the president don't make a deal.

Obama's budget proposal also calls for additional tax revenue, primarily by placing a 28 percent cap on deductions and other exclusions. That would affect wealthy taxpayers, as would a new proposal to put limits on tax-preferred retirement accounts for millionaires and billionaires.

A key feature of Obama's plan is a revised inflation adjustment called "chained CPI." This formula would effectively curb annual increases in a broad swath of government programs, with the biggest impact on Social Security.

The plan would also include reductions in Medicare spending, much of it by targeting payments to providers and drug companies. The Medicare proposal also would require wealthier recipients to pay higher premiums or co-pays.

Advocates for the elderly say seniors pay a higher portion of their income for health care, where costs rise more quickly than overall inflation.

"The message seems to be that the president wants a deal and is willing to even sacrifice such important benefits as Social Security as part of that deal," said David Certner, the AARP's top lobbyist.

"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.

Obama's Social Security proposal is an about-face from his stand in 2008 when running against Republican nominee John McCain.

In a Sept. 6, 2008, speech to the 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."

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