Spending-Cut Proposals Drawing Democratic Flak

By JANET HOOK and CAROL E. LEE

One big question in Washington's budget talks is whether Republicans will make more concessions on taxes. This week, the counterpoint has started to come into play: What will Democrats swallow on spending cuts?

Enlarge Image

Close

Getty Images

House Democratic Leader Nancy Pelosi (D., Calif.) has argued against increasing the age of eligibility.

The prospect of cuts to Medicare and other entitlement programs is making many Democrats anxious. Of particular concern is Republicans' call for increasing the eligibility age for Medicare from 65 to 67, an idea that could split Democrats.

As budget talks with the GOP drag on, President Barack Obama has been quietly sounding out Democratic leaders about spending-cut options, while his top aides work rank-and-file party members. Mr. Obama has said he's willing to make decisions Democrats will find difficult if Republicans will bend on tax rates, but so far he has insisted Republicans first agree to raise rates for the top income-tax brackets.

"There is a recognition that if there's going to be a substantial deal, there's going to have to be entitlement cuts on the table," said John Podesta, former chief of staff under Bill Clinton. "But there is more pushback on the idea of raising the Medicare age."

Make Your Own Deficit-Reduction Plan

Try your hand at balancing the budget and share the results.

Falling Over the Fiscal Cliff

See some scenarios for how different groups of people may be affected by the tax changes that will take place if the fiscal cliff isn't resolved by the Jan. 1., 2013, deadline.

View Interactive

• More photos and interactive graphics

GOP leaders have this week sought to push Democrats into detailing long-term spending cuts in order to justify a potentially painful concession on taxes. "Every moment we spend talking about taxes is a moment we don't spend solving the real problem, which is spending," said Rep. Jeb Hensarling (R., Texas), outgoing chairman of the House Republican Conference.

The White House signaled Wednesday that Mr. Obama is willing to go lower than his latest offer of $1.4 trillion in new tax revenue over 10 years. Asked whether that number could pass the GOP-controlled House, White House press secretary Jay Carney said, "The president has made clear his willingness to negotiate and compromise."

Budget talks have proceeded haltingly this week, with wide differences remaining. Mr. Obama scaled back his initial demand for a $1.6 trillion tax increase. His new offer of $1.4 trillion, coupled with a commitment to overhaul the corporate tax code in 2013, was rejected by Republicans as inadequate.

In a closed meeting with House Republicans Wednesday, GOP leaders warned that Congress could be in session through the holidays to finish a deal. After describing his Tuesday night phone conversation with the president, House Speaker John Boehner (R., Ohio) told reporters, "I remain the most optimistic person in this town, but we've got some serious differences." White House officials said Wednesday the president is confident a deal is possible before year's end but suggested talks were at a lull after the two sides made their new offers.

Figuring out the spending side of the budget talks remains as thorny an issue as the tax side. The spending-cut possibilities include raising the Medicare retirement age. Mr. Obama was open to the idea in 2011 talks with Mr. Boehner as part of a broad deficit-reduction deal, but the White House expects it will be a tougher sell to Democrats this time because many believe he doesn't have to offer that concession after winning re-election.

The federal government would save $113 billion if it gradually raised the Medicare eligibility between 2012 and 2021, according to the Congressional Budget Office.

Asked about the idea in an ABC interview Tuesday, Mr. Obama said it wouldn't cut costs much in the short run, but he didn't close the door to the proposal, citing pressures on the health-care system from an aging population and rising costs.

Many Democrats, however, oppose the idea, starting at the top: House Democratic Leader Nancy Pelosi (D., Calif.) wrote an opinion article for USA Today that argued against increasing the age of eligibility. "It betrays the bedrock promise of Medicare: that Americans who work hard and take responsibility all their lives can know dignity in their later years," Mrs. Pelosi wrote.

Assistant Democratic Leader Jim Clyburn (D., S.C.), another opponent, said he made his feelings clear to White House economic adviser Gene Sperling when he met with House Democrats a few weeks ago.

Another proposal, also tentatively backed by Mr. Obama in 2011, would change the way the government calculates annual cost-of-living increases, which would slow the growth of Social Security benefits.

Budget experts figure a switch to what is known as a chain-weighted consumer-price index would reduce the projected deficit by about $200 billion over the next decade.

Democratic leaders have been more restrained in their criticism of that plan, but it is opposed by many. "Republicans are proposing we cut that COLA increase of $21 a month on average, in order to be able to preserve the tax rates that millionaires and billionaires are paying," said Rep. Xavier Becerra (D., Calif.).

Another option for curbing Medicare spending might be the easiest for Democrats to swallow: increase costs for higher-income beneficiaries. Mr. Obama has already broken ground in this area.

His budget includes proposals that would curb Medicare spending by raising premiums paid by higher-income beneficiaries to save around $28 billion over 10 years. Seniors groups, including AARP, oppose it, saying such beneficiaries already pay more, and that further increases could prompt them to stop participating in the program.

Write to Janet Hook at janet.hook@wsj.com and Carol E. Lee at carol.lee@wsj.com

A version of this article appeared December 13, 2012, on page A8 in the U.S. edition of The Wall Street Journal, with the headline: Spending-Cut Proposals Drawing Democratic Flak.