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GOP 'Fiscal Cliff' Plan with Big Reductions in Social Security and Medicare Rejected by White House

$200 billion in savings to come from GOP trick to change way inflation is calculated, thus reducing COLA for Social Security and slow Medicare benefit increases

Dec. 4, 2012 - The House Republican’s made a counteroffer to President Obama’s earlier budget proposal and it that for big cuts in the critical programs for America’s senior citizens – Social Security and Medicare – while still refusing to allow taxes to rise back to previous levels for the wealthiest taxpayers. The While House rejected the plan because it rejects the tax increase and does not meet his "test of balance."

“Of the plan’s savings, $200 billion over 10 years would come from changing the way the government calculates inflation, which would slow benefit increases in programs from Medicare to Social Security and raise taxes by slowing the annual rise in tax brackets. Republican aides said that it would be unpopular, but that it was the right response to deficits still topping $1 trillion,” according to the New York Times.


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“The Republican plan also called for $600 billion in cuts to federal health care programs, including an increase in the eligibility age for Medicare and increased means testing to shrink health benefits for more affluent elderly Americans.”

The Associated Press/Washington Post:
GOP Plan Would Raise Medicare Age, Lower Social Security COLAs, While Raising $800B In Revenue

Republicans are proposing a "fiscal cliff" plan that revives ideas from failed budget talks with President Barack Obama last year, calling for raising the eligibility age for Medicare, lowering cost-of-living hikes for Social Security benefits and bringing in $800 billion in higher tax revenue. The counter to a White House plan last week relies more on politically sensitive spending cuts and would raise half the $1.6 trillion in revenue proposed by Obama over the coming decade (12/4).

The letter to the president from Speaker Boehner and other House GOP leaders says,

“The House-passed Budget Resolution assumes enactment of structural Medicare reform that offers future beneficiaries guaranteed coverage options, including a traditional fee-for-service Medicare plan. This proposal is based on recent bipartisan efforts and would provide greater support for the poor and the sick and less support for the wealthy. We achieve these reforms in Medicare without affecting current seniors or those nearing retirement. This would slow the projected explosive spending growth in this program and eventually maintain Medicare spending as a share of the economy at 4.75 percent, thus saving the program for future generations.”

Los Angeles Times:
Republicans Counter With Their Own 'Fiscal Cliff' Plan

Under pressure from the White House to make a specific deficit reduction proposal, House Speaker John A. Boehner on Monday countered with one that rejects higher tax rates for the wealthy and deeply cuts Medicare, Social Security and other safety net programs. The offer from the Republican leader was swiftly dismissed by the White House as not meeting the "test of balance." President Obama, seemingly confident that the public is on his side, has insisted that the nation can no longer afford to continue tax breaks for the wealthy (Mascaro and Memoli, 12/3).

The Washington Post: Boehner, House GOP Leaders Offer 'Fiscal Cliff' Counterproposal
That framework aims to raise new revenue through an overhaul of the tax code. It also calls for slicing $600 billion from federal health programs, in part by increasing the Medicare eligibility age from 65 to 67, and saving $200 billion by applying a less generous measure of inflation to all federal programs, including Social Security benefits, according to GOP aides. For the first time, Boehner managed to get his entire leadership team … to publicly sign on to a plan that explicitly calls for new tax revenue. … But Democrats said the proposed cuts to social safety-net programs would outweigh higher taxes. And they said Republicans have not made clear how they would raise the additional tax revenue without imposing new burdens on the middle class (Montgomery, 12/3).

The Wall Street Journal: GOP Makes Counteroffer In Cliff Talks
The GOP offer was immediately rejected by the White House, but it provides the most detailed statement to date of what Republicans are willing to concede for now. It comes days after the White House put forward its opening bid in the high-stakes deficit talks. With both sides now having made preliminary offers, the parameters for future negotiations between Republicans and the White House are becoming clearer (Hook, Lee and Paletta, 12/4).

>> See NPR video report on what the leaders are saying about the current impasse on the “fiscal cliff” crisis. Click Here

The New York Times: Republicans Make Counteroffer In Fiscal Talks
The counteroffer represented an acknowledgment by Republicans that they had to issue their own proposal to head off around $600 billion in automatic tax increases and spending cuts next year, a fiscal combination that could send the economy back into recession. They said that their approach was a move toward the center rather than sticking to a position established last year with the passage of the House Republican budget, which included contentious changes to Medicare and Medicaid and deep domestic spending reductions (Weisman, 12/3).

Politico: GOP Cliff Offer Is No Deal-Maker
Boehner didn't pitch the plan with a personal phone call to the president or even with much advance warning to the White House. In a sign of how distant the parties remain, White House aides received the offer via email shortly before 2 p.m. — just as Boehner's staff began briefing reporters, a senior administration official said. House Republicans touted their offer as a middle-ground option outlined during a congressional hearing last year by Erskine Bowles, a Democrat who led the president's debt-reduction committee. But Bowles himself disavowed the GOP characterization (Sherman and Budoff Brown, 12/4).

Politico Pro: GOP Offer Suggests Higher Medicare Eligibility Age
House Republicans on Monday embraced the idea of raising the Medicare eligibility age as part of a $2.2 trillion fiscal cliff counteroffer to President Barack Obama. The plan, based on ideas in November 2011 testimony from Erskine Bowles, calls for coming up with $600 billion in health savings — the same target Bowles proposed to the deficit supercommittee that year. But the GOP offer doesn't break down the health care numbers, and Bowles's testimony to the supercommittee — which Republican leadership aides circulated with the counteroffer Monday — didn’t cite any specifics other than the eligibility age (Haberkorn, 12/3).

Los Angeles Times: White House Spurns Republican Offer On 'Fiscal Cliff' Negotiations
The White House on Monday dismissed a Republican counteroffer to avert the so-called fiscal cliff as failing to "meet the test of balance" by resisting higher tax rates for the wealthy, a point that remains a key hurdle in the impasse over spending and revenues. … Republicans greeted the White House response as a demonstration of "how unreasonable it has become" (Memoli, 12/3).

USA Today: GOP's $4.6T 'Fiscal Cliff' Counterproposal Rebuffed
The Republicans' proposal is based on a framework outlined last year by former Clinton White House chief of staff Erskine Bowles, who co-chaired Obama's debt commission, and included an increase in the eligibility age for Medicare benefits. Republicans did not offer specific language on raising the age in their proposal, but Bowles has supported raising the age to 67. Boehner called it a "la-la land offer" on Monday (Page, 12/3).

McClatchy: GOP Fiscal-Cliff Counter: Cut Tax Rates, Limit Deductions To Increase Revenue
A Republican proposal Monday to shave $2.2 trillion off projected budget deficits sets up a fiscal-cliff showdown with the White House because the plan includes reductions in the very tax rates that Democrats seek to raise. The Obama administration’s opening offer sought to raise $1.6 trillion in taxes over 10 years, much of it from higher income-tax rates on the wealthy. Republican leaders in the House of Representatives countered Monday with their own offer, saying their plan would raise $800 billion in new tax revenues but basing that on cuts in tax rates coupled with limits on deductions that would make more income taxable. …The other $900 billion would come from so-called mandatory programs and health care, presumably Medicare, Medicaid and other programs in which spending is often subject to automatic formulas (Lightman and Hall, 12/3).

NOTE: This is part of Kaiser Health News' Daily Report - a summary of health policy coverage from more than 300 news organizations. The full summary of the day's news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.


Some of this information is reprinted from with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.


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