President Barack Obama will offer cuts to Social Security and other benefits programs in a budget proposal next week aimed at winning over enough congressional Republicans to pass a broad deal to reduce the deficit.
While Obama's previous budgets have largely been ignored in Congress, the White House wants to use this year's proposal, to be released on Wednesday, to move beyond the fiscal fights that have consumed Washington since 2010.
But several attempts to reach an agreement balancing spending cuts with tax increases have failed, and prospects for a "grand bargain" remain dim. House of Representatives Speaker John Boehner, who let taxes rise for the wealthiest Americans earlier this year, has ruled out any further revenue increases and was lukewarm about Obama's latest proposal.
Obama will also face resistance from his fellow Democrats as a senior administration official on Friday said the president will offer to apply a less generous measure of inflation to calculate cost-of-living increases that would affect Social Security and other government programs when he reveals his budget.
That change would result in lower payments to some beneficiaries of the Social Security pension program and is staunchly opposed by many Democrats as well as labor and retiree groups.
But, Obama will only accept the cuts to so-called entitlements like Social Security and Medicare if congressional Republicans agree to higher taxes, the official added.
"This isn't about political horse trading," the official said. "It's about reducing the deficit in a balanced way that economists say is best for the economy and job creation."
Sidetracked by a series of budget fights since the 2010 midterm elections that gave Republicans control of the House, Obama wants to focus more on issues like gun control and immigration reform in his second term.
"What I think he would like to have is a grand bargain which puts these fiscal issues behind us for a good number of years," said Rudolph Penner, a former Congressional Budget Office director. "If he doesn't get the grand bargain, his second term is not going to be a very happy one."
Analysts familiar with the administration's thinking, and who spoke on condition of anonymity, say the White House is considering a plan to raise revenues by limiting tax deductions to 28 percent for wealthier taxpayers.
Boehner, an Ohio Republican, made plain that spending cuts should not be accompanied by more tax increases.
"If the president believes these modest entitlement savings are needed to help shore up these programs, there's no reason they should be held hostage for more tax hikes," he said in a statement on Friday.
The White House and Republicans have had repeated high-stakes clashes over raising the nation's borrowing limit, tax increases, and government spending. Obama has been reaching out to individual Republicans to try to calm the waters, holding dinners and meetings.
SOCIAL SECURITY CUTS
He may have to focus his charm on Democrats to get them to accept using the different inflation gauge, the "chained Consumer Price Index."
Supporters of the switch say the standard CPI index overstates price rises, but opponents say moving to the chained CPI would unfairly deprive older Americans of benefits they have been promised.
"We're quite unhappy with this," said David Certner, the legislative counsel for AARP, an advocacy group for older Americans. "We don't think Social Security should be opened up as a token as part of a budget deal," he said before details of Obama's budget were released.
Obama's proposal would cut the deficit by $1.8 trillion over 10 years, the official said, and is expected to undo at least some of the $85 billion in across-the-board spending cuts known as sequestration that went into effect last month.
He would replace some of the harsher sequestration cuts with less onerous ones.
"Undoing the sequester is very important," said Michael Linden, managing director for economic policy at the left-leaning Center for American Progress. "Lots and lots of little bad things are happening all over the country and it's going to get worse over the next few months.
The sequestration cuts, as well as a payroll tax hike in January, were blamed by some economists on Friday for a jobs report that showed American employers hired at the slowest pace in nine months in March.
The nonpartisan Congressional Budget Office estimated in February that the deficit would shrink to $845 billion this year, or 5.3 percent of GDP, its smallest size since 2008. With the deficit declining, many of the president's supporters question why he would offer cuts to social welfare programs.
Obama's budget for the fiscal year that starts on October 1 will also contain a proposal to expand access to early childhood education, the official said. That program would be paid for by raising tobacco taxes, the official added.
In addition, the president wants to increase revenues by placing a $3 million upper limit on tax-preferred retirement accounts and by barring people from collecting disability benefits and unemployment insurance at the same time, the official said.
Analysts who have seen early drafts of the budget proposal say the president was considering cuts to Medicare through reducing payments to health care providers but also by requiring wealthier beneficiaries to pay more out of pocket.