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Harry Reid's Debt Proposal Will Leave Entitlement Benefits Untouched

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First Posted: 07/25/11 01:18 PM ET Updated: 09/24/11 06:12 AM ET

WASHINGTON -- Senate Majority Leader Harry Reid's (D-Nev.) $2.7 trillion debt ceiling proposal will not include reforms to the benefit structure of entitlement programs, several Democratic sources confirmed on Monday.

The plan, which is being crafted as a last-minute attempt to break through the political impasse on a deficit reduction package, would instead lean heavily on cuts to discretionary spending. The package will also reportedly include roughly $1 trillion in savings that will come from the drawdown of the wars in Iraq and Afghanistan (which the Congressional Budget Office does score). Reid's office was notably hesitant to confirm that detail, cautioning reporters to wait until the final package is unveiled. That said, if entitlement programs remain more or less untouched in the plan, there would be few other areas from which to draw ten-year savings.

Word that Reid is taking entitlements off the table will come as welcome news to Democrats who are still smarting from the idea that the party has gone from demanding a "clean" debt ceiling bill to willingly backing $2.7 trillion in cuts without measures to increase revenue. The Obama administration had offered to support an increase in Medicare's eligibility age, the means-testing of certain Medicare programs, cuts to Medicaid benefits and a restructuring of the payments of Social Security benefits as part of a grand bargain with Republicans. GOP leadership ultimately rejected that proposal over complaints that the president was insistent that additional tax revenues be added to the mix to round out the plan.

A top Democratic aide confirmed on Monday that none of those specific entitlement reforms will be included in the party's most current debt-ceiling proposal. As for cuts to Medicaid or Medicare providers -- namely hospitals and pharmaceutical companies -- that remains less clear. According to House Majority Leader Eric Cantor's (R-Va.) office, both parties agreed to $334 to $353 billion in health savings during talks organized by Vice President Joseph Biden. Those talks, which never resulted in a formal agreement, do serve as one pillar of the $2.7 trillion proposal that Reid has put forward. But one Democratic source, who has been plugged into negotiations, says that Medicaid, at the very least, will not be touched under the Reid plan.

In addition to the policy specifics, there remain questions about the politics of the proposal: namely, can Reid's package of cuts pass through Congress? As the Nevada Democrat constructs his plan, House Speaker John Boehner (R-Ohio) is charting a decidedly different path, one that would require two votes and the creation of a powerful deficit reduction committee to suggest future entitlement reform. While Democrats have insisted that they will oppose any measure that did not get the debt ceiling raised through the 2012 elections, Republicans have responded by saying that Reid is giving Obama a "blank check" to raise the debt ceiling.

He's not, of course. The cuts that the Majority Leader is proposing as a condition for raising the debt ceiling are real and they will, strategically, be drawn from Republican suggestions -- specifically the budget proposed by House Budget Committee Chair Paul Ryan (R-Wis.).

"The package will include only cuts that Republicans have previously agreed to," said the aide. "It is a similar tact to the short term [continuing resolution], when they jammed us with cuts that we similarly agreed to which made it hard for us to oppose.... All the cuts are cuts they supported in the past, that they either offered in the Biden negotiations or that were picked from Paul Ryan's budget."

One feature of Ryan's budget, for what it's worth, was the $1 trillion in savings that would come from the drawdown of the wars in Iraq and Afghanistan.

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