Obama Stresses Need to Curb Medicare, Medicaid Cost While Skirting Details

President Barack Obama said the rising cost of Medicare and Medicaid is creating “huge problems” for the nation’s finances that must be dealt with “in a serious way.” He’s just not taking the first step.

In his Feb. 14 budget proposal and at a news conference yesterday, Obama said the entitlement programs were driving the U.S. debt, while offering no details on how to shore them up.

That puts the onus on Republicans, who won control of the House on a pledge to curb the deficit, to share the risk of proposing unpopular benefit cuts and tax increases to curb entitlement spending, which makes up 40 percent of the budget. It also gives them a chance to take the lead on revamping the two insurance programs and Social Security, something they have vowed to do, though they’ve offered no specifics.

“This is not a matter of ‘you go first’ or ‘I go first,’” Obama said yesterday. It’s about “getting in that boat at the same time so it doesn’t tip over.”

To arrest the debt, Obama and Republicans can’t avoid tackling entitlement programs, whose cost is expected to balloon by $6.85 trillion over the next 10 years, according to an analysis by the Bipartisan Policy Center in Washington.

Yet both the president’s and the Republican budget-cutting proposals so far center on freezing or cutting back discretionary spending that covers energy, housing, health care, transportation and other programs.

Photographer: Joshua Roberts/Bloomberg

U.S. President Barack Obama pauses during a news conference in Washington, D.C. Close

U.S. President Barack Obama pauses during a news conference in Washington, D.C.

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Photographer: Joshua Roberts/Bloomberg

U.S. President Barack Obama pauses during a news conference in Washington, D.C.

‘Fighting Over Trivialities’

Even if Congress adopted every one of those proposals, the U.S. debt would grow from 62 percent of the economy in 2010 to more than 75 percent in 2021, according to the center.

“They’re fighting over trivialities,” said Steve Bell, a senior adviser to former Senate Budget Committee Chairman Pete Domenici, a New Mexico Republican and chairman of a debt commission sponsored by the Bipartisan Policy Center.

“Do you know what happens if the Republican and president’s plans are passed? Nothing,” Bell said. “It makes virtually no difference in the path of the deficit and the debt.”

White House budget director Jacob Lew defended the administration’s reluctance to submit a concrete plan, in a Feb. 14 interview on Bloomberg Television.

“When you put a proposal out there, before you’ve laid the foundation for a bipartisan discussion, it actually doesn’t move the process forward,” and instead sets it back, Lew said.

‘A Tactical Move’

Democrats say Obama’s previous major legislative proposals, including on health care, have become fodder for attacks by Republicans such as Senate Minority Leader Mitch McConnell, who has said he wants to deny the president a second term.

The president’s strategy “has to be seen as a tactical move,” said Alice Rivlin, a former budget director under President Bill Clinton.

Obama is looking to two separate groups of senators working on deficit-reduction plans to “provide some bipartisan cover” for specific cuts, said Rivlin, who co-chaired the Bipartisan Policy Center’s debt commission with Domenici.

David Walker, former U.S. comptroller general, said Obama can’t leave it to the Republicans to take charge on an overhaul of the programs.

“President Obama is CEO of the U.S. government,” said Walker, the founder of a new organization advocating for fiscal restraint. “He has a fiduciary obligation to lead.”

More to Do

At his news conference, Obama underscored that non-defense discretionary spending amounts to only about 12 percent of the budget. “We’ve got a whole bunch of other stuff that we’re going to have to do, including dealing with entitlements,” he said.

Republicans are responding by saying they’ll tackle those programs.

House Majority Leader Eric Cantor, a Virginia Republican, said Feb. 14 that his party will propose “very bold” changes to entitlements in their 2012 budget resolution.

“We’re going to tee it up for them” and “if they don’t take up our offer, it’s going to be very plain” to voters “who’s leading and who’s not,” said Cantor.

Yesterday, House Speaker John Boehner said Republicans will offer specifics in their budget. “Republicans will not punt,” Boehner said.

A proposal released last week by House Republicans to cut $100 billion in discretionary spending from Obama’s 2011 budget request, including agriculture, health care and the environment, doesn’t address entitlements. The plan would be about $61 billion lower than last year’s spending levels.

No Consensus

House Budget Committee Chairman Paul Ryan, in a Feb. 13 appearance on “Fox News Sunday,” said he couldn’t “tell you exactly what” Republicans will propose because “quite literally we haven’t been able to reach consensus.”

Some entitlement experts say the president has carefully parsed his language to allow for negotiation.

In his Jan. 25 State of the Union address, Obama said Social Security needs to be preserved without “slashing” benefits for future generations, language he repeated in his news conference yesterday.

That doesn’t mean he’s ruling out cuts, said Ed Lorenzen, senior adviser at the Committee for a Responsible Federal Budget in Washington.

“They chose the extreme word of ‘slashing’ as a bogeyman that leaves a lot of room to make reductions in the rate of growth in benefits without crossing that line,” said Lorenzen.

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net;

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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