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Tuesday, November 13, 2012

Will Obama Agree to Entitlement Cuts? He Already Has

Labor unions and other liberal groups that helped re-elect President Obama are starting a push this week to make sure that any new budget deal does not chisel away at entitlement programs.

Their message to the president, beginning with a meeting at the White House on Tuesday, is that he won a mandate to raise taxes on the wealthy while resisting cuts to Medicare and Social Security, and that they intend to stand firm with him on that position.

The problem here is that urging Mr. Obama not to join House Republicans in reducing entitlement spending is like pleading with John Travolta and Olivia Newton-John not to reunite for a Christmas album. It's just too late.

Sure, there was a lot of specious debate during the campaign about which candidate would protect older people from the evil designs of the other. Mitt Romney claimed, dubiously, that Mr. Obama had raided sacred Medicare financing to pay for his health care plan. Mr. Obama said that Mr. Romney would follow the lead of his running mate, Representative Paul D. Ryan, and scrap Medicare altogether for future generations.

But both candidates had to know how thoroughly disingenuous this debate really was. The fact is that Mr. Obama, during his “grand bargain” negotiations with the House speaker, John A. Boehner, in the summer of 2011, had already signed off on painful cuts to Medicare, Medicaid and Social Security, even if he never once mentioned that during his re-election campaign. So he knew there was a deal to be had that would preserve - and perhaps even strengthen - these programs without destroying them.

And if Republicans were outraged over those cuts, it's only because they were demanding far steeper reductions in all three programs. The idea that Republicans had to stop Mr. Obama from recklessly cutting Medicare was probably Mr. Romney's most misleading attack, and that's saying something.

None of this is theoretical or subjective. It's spelle d out clearly in the confidential offers that the two sides exchanged at the time and that I obtained while writing about the negotiations last spring.

In his opening bid, after the rough framework of a grand bargain was reached, Mr. Boehner told the White House he wanted to cut $450 billion from Medicare and Medicaid in the next decade alone, with more cuts to follow. He also proposed raising the retirement age for Social Security and changing the formula to make benefits less generous.

Mr. Obama wasn't willing to go quite that far. But in his counteroffer a few days later, he agreed to squeeze $250 billion from Medicare in the next 10 years, with $800 billion more in the decade after that. He was willing to cut $110 billion more from Medicaid in the short term. And while Mr. Obama rejected raising the retirement age, he did acquiesce to changing the Social Security formula so that benefits would grow at a slower rate.

T his distance between the two sides on entitlement spending was sizable but not unbridgeable. In the end, the deal fell apart over the ratio of cuts to revenue. Mr. Obama wanted $400 billion more in new revenue than he and Mr. Boehner had initially discussed. Mr. Boehner couldn't sell that number to his caucus, and he wasn't going to try without getting even more drastic cuts to entitlements in return.

What's relevant here, though, isn't simply that Mr. Obama agreed to scale back entitlement spending. It's that he had the support of his most liberal advisers and allies, too.

No one working in the White House was thrilled by the prospect of slashing Medicare and especially Social Security, which Democrats firmly believe should be excluded from any budget negotiation. Even so, there was near unanimity among Mr. Obama's advisers that making those cuts was worth getting a framework that would avoid a debt default and begin to put the nation on a different fiscal traje ctory.

And just hours before the deal with the speaker unraveled, Mr. Obama met with his party's top Congressional leaders, Harry Reid and Nancy Pelosi, and asked for their support. Neither Mr. Reid nor Ms. Pelosi felt like celebrating over the terms, to be sure, but it's significant that both lawmakers told the president they would get behind it.

Liberal activists will tell the president that things are very different now. He's won a mandate, they will say, and that means he doesn't need to compromise.

But while Mr. Obama can probably claim some vindication on the need to make the tax code more equitable, it would be a stretch to say that the voters demanded that he hold the line against entitlement cuts as part of a broader deal. The possible terms of a grand bargain hardly ever came up during the campaign, because neither side wanted to talk about it.

Mr. Obama may have more leverage now than he did in 2011 to put a hard limit on the scale of entit lement cuts, but it's unthinkable that he could reach a comprehensive deal - something he still badly wants to do - without at least accepting the terms he found acceptable the first time around. That's how negotiations work.

So while it may be good strategy for progressive groups to pressure the White House on entitlement spending, no one should harbor the illusion that the president won't sign off on reductions. The simple fact is, he already has.