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Are We Heading Toward Another Grand Bargain?

Now that Paul Ryan is the Speaker Heir Apparent, they're taking aim at Social Security and Medicare.
Are We Heading Toward Another Grand Bargain?

There's eight days left until we reach our debt limit and start to default on it, which means all kinds of leaks from unnamed Congressional sources about "deals" being struck to raise the debt ceiling.

President Obama has flatly stated that he will accept nothing less than a clean raise of the debt ceiling, and he also vetoed the NDAA to send a message that he will no longer allow the Congress to slide on doing their jobs.

But still, the leaks continue, in the context of another "grand bargain" that would include a debt ceiling increase through March, 2017.

Members have been battling over how to fund the government and provide relief from a separate 2011 deal that created budget ceilings known as the sequester. Republicans have pushed to end the sequester for the Defense Department, but President Obama and Democrats want to get rid of the caps for both defense and nondefense spending.

A House source said that under the emerging package, both defense and nondefense programs would receive equal sequester relief.

The budget talks have also been linked to a long-term highway funding bill and a measure to renew the Export-Import Bank, but a congressional aide said those measures were not a part of the final deal.

The source said the final deal did include language to prevent double-digit premium hikes that would hit 8 million Medicare enrollees in 2016.

Averting the 52 percent premium increases has been a priority for Pelosi and could help win Democratic support for the package.

She began talks on the topic with Boehner in mid-September. Staving off the increases is expected to cost about $7.5 billion, and Democratic aides have said Pelosi's office was quietly negotiating with Boehner on the offsets.

So far, so good. But another report suggests that the hostage in this scenario is Medicare and Social Security.

While congressional aides cautioned that the deal was far from certain, and the Treasury Department declined to comment, officials briefed on the negotiations said the emerging accord would call for cuts in spending on Medicare and Social Security disability benefits.


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I'm not quite sure what those cuts are. No one is talking much about them, but we do know that the numbers they're working with have been inflated in order to overstate the deficit and the national debt.

The CBO assumes that Social Security and Medicare Part A will draw on the general fund of the U.S. Treasury to cover benefit shortfalls following the depletion of their trust funds, which at the current rate will occur in 2034.

That would obviously lead to an exploding debt, but it’s a scenario prohibited by law.

In the case of both programs, benefits must be paid either from revenue collected via payroll taxes or from accumulated savings in the programs’ trust funds. When those funds run out, full benefits will simply not be paid. “Because there is no borrowing authority, there is really a hard stop,” said Goss.

Congress could pass a law saying that Social Security and Medicare Part A would begin drawing on the U.S. Treasury general fund after 2034. Or, Congress could pre-emptively pass laws to avert the situation before the deadline; it could take the approach favored by progressives and increase revenue to the programs by lifting the payroll tax cap, or alternatively raise the retirement age and lower benefits.

But the bottom line is the CBO projections disregard the actual law and assume a worst-case legislative scenario—and one that is politically unlikely to boot. It’s hard to imagine Congress would simply leave the problem alone and watch Social Security and Medicare Part A devour the nation’s budget.

There is this, from the New York Times article quoted earlier:

Mr. Obama has repeatedly said that he would not negotiate over raising the debt limit and Republican congressional leaders have generally acknowledged that they would be forced to increase the government’s borrowing authority one way or another.

In this election cycle, any cuts to Social Security and Medicare should be completely off the table. They should raise the debt ceiling with a clean bill, negotiate the budget issues separately, and move on.

It's hard to tell where these leaks originate, though I did note that Josh Earnest confirmed budget talks are taking place. Democrats need to hear from all of us that we will not stand for any cuts to Social Security and Medicare under any circumstances, and certainly not because the debt ceiling needs to be raised.

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