WASHINGTON -- President Obama will not include cuts to Social Security and other earned-benefit programs in his upcoming budget, the White House confirmed on Thursday.
The cuts had been included in past proposals to lure Republicans into a so-called "grand bargain" that would raise taxes and cut spending with the goal of deficit reduction. The president faced fierce resistance to the cuts, and while Republicans liked the idea, they never agreed to pair the policy with higher taxes.
The withdrawal of the offer from the budget is a recognition of the reality that a grand bargain is simply too unpopular on both sides of the aisle. The death of the grand bargain, first reported by the Associated Press on Thursday, comes as annual budget deficits have fallen from more than $1 trillion to less than $500 billion next year.
The Social Security cut would have worked by using a stingier formula for annual benefit increases known as cost-of-living adjustments, reducing Social Security spending by $127 billion over 10 years, according an estimate by the Congressional Budget Office. The difference in monthly benefits under a chained CPI would be modest at first, but the amount of missed benefits would mount for seniors the longer they live.
Republicans expressed disappointment at Obama's move.
"This reaffirms what has become all too apparent: the president has no interest in doing anything, even modest, to address our looming debt crisis," Brendan Buck, a spokesman for House Speaker John Boehner (R-Ohio), said in an email. "The one and only idea the president has to offer is even more job-destroying tax hikes, and that non-starter won’t do anything to save the entitlement programs that are critical to so many Americans. With three years left in office, it seems the president is already throwing in the towel."
But White House spokesman Josh Earnest said Thursday the chained CPI offer remains "on the table," if not in the budget.
Sen. Elizabeth Warren (D-Mass.) shook up the Social Security debate late last year by throwing her weight behind a proposal that would not just keep benefits stable, but would in fact increase payments to retirees. Warren's proposal spotlighted the difficult economic situations many seniors face, and the relative paucity of Social Security checks, moving the debate away from deficit concerns.
"I applaud the President’s decision to exclude chained CPI from the 2015 budget," Warren said in a statement later Thursday. "We are facing a very real and growing retirement crisis in America, and cutting social security is the last thing we should do.”
Social Security's actuaries say the program's trust fund can last until 2033 with no changes, and could pay roughly four-fifths of benefits thereafter. Lifting the cap on payroll taxes, which would require top earners to pay Social Security taxes on all income rather than just the first $117,000, would fully eliminate the funding gap.
Even conservative and moderate Democrats running for reelection in red states in 2014 have bucked the White House on the issue, either opposing the cut or advocating for a hike in payments.
Sen. Bernie Sanders (I-Vt.) has been one of the loudest critics of the chained CPI, joining with outside groups for press conference after press conference, holding events even when it seemed nobody in Congress or the White House had been discussing it publicly.
"They're working on it as we speak," Sanders said at an event last January when HuffPost asked why he was being so vigilant.
Sanders and other Social Security advocates applauded President Obama's decision Thursday.
"With the middle class struggling and more people living in poverty than ever before, we cannot afford to make life even more difficult for seniors and some of the most vulnerable people in America," Sanders said. "I look forward to working with the president to support the needs of the elderly, the children, the sick and the poor.”
Nancy Altman, co-director of Social Security Works, also hailed the White House's decision. "In light of our looming retirement income crisis, we should be expanding, not cutting, Social Security," Altman said.
This is a developing story and has been updated.