WASHINGTON – President Obama on Wednesday proposed a $3.8 trillion budget for fiscal 2014, but the plan’s mix of cuts to programs such as Social Security combined with tax increases including a near-doubling of the federal levy on cigarettes drew a tepid response from the president’s fellow Democrats and disdain from congressional Republicans.
Most controversial, it seemed, was the president’s attempt to reach out to Republicans: a proposed revision in how inflation is calculated for many federal benefits.
The change would mean smaller increases in Social Security and veterans benefits in the coming years, prompting criticism from Democrats and Republicans alike.
“Like any budget proposal, there are things to like in this budget, such as expanding pre-K for children, and things I strongly object to, such as cutting Social Security and disability benefits for seniors and veterans that they have rightfully earned,” said Sen. Kirsten E. Gillibrand, D-N.Y. “We must have a balanced approach to reducing the deficit and growing our economy.”
Sen. Charles E. Schumer, D-N.Y., said he, too, disagreed with the proposed change in benefits – as did Republican Reps. Chris Collins of Clarence and Tom Reed of Corning.
“If you change the calculation of the Consumer Price Index and how you calculate inflation, that’s going to continue to pinch our seniors who, come the end of the month, the stories I hear, are having trouble putting food on the table,” Collins said.
The proposed cut in the growth of benefits highlighted a spending plan that eliminates the deep automatic spending cuts that took place under the March 1 “sequestration” but that proposes few other major changes for federal programs important to the Buffalo area.
The change to Social Security and veterans benefits would be a significant one.
The government now calculates benefit increases on the basis of an inflation index that uses price increases encountered by city dwellers.
Obama wants to replace that with what’s known as the “chained” Consumer Price Index.
A measure of inflation that takes into account the fact that consumers might buy less-costly products if prices start going up, chained CPI is considered more accurate than the current measure, running about 0.3 percent lower in any given year.
So what difference would a switch to that measure make for the average Social Security recipient?
Not much at first. The calculation would only cost the average Social Security recipient about $39 in the first year of the switch.
But the change would add up over time. Presuming fairly low inflation rates of 3 percent under the new measure, the switch would mean that within a decade, the average Social Security recipient would receive about $584 a year less than such a recipient would receive if the government stuck with the current inflation measure.
Obama portrayed his proposal to switch inflation measures, along with a proposed $400 billion cut in Medicare over 10 years, as a difficult move toward compromise with Republicans on a comprehensive budget deal. The Medicare cuts would hit medical providers rather than benefit recipients, with drug companies taking the biggest hit in the form of lower federal payments.
“I don’t believe that all these ideas are optimal, but I’m willing to accept them as part of a compromise – if, and only if, they contain protections for the most vulnerable Americans,” Obama said as he unveiled his budget.
Since top Republicans have long supported a move to chained CPI as well as far bigger changes in Medicare, some GOP leaders offered modest praise for Obama’s entitlement proposals.
“The president seems prepared to finally concede this time that at least something needs to be done to save entitlements from their inevitable slide toward bankruptcy,” said Sen. Mitch McConnell of Kentucky, the Republican minority leader.
But the president and GOP leaders clashed on the rest of his spending plan – particularly its tax increases.
Obama proposes a 94-cent per pack increase in the federal cigarette tax, along with several tax hikes he has proposed before, such as the elimination of loopholes enjoyed by wealthy taxpayers and corporations.
“If we’re serious about deficit reduction, then these reforms [in entitlements] have to go hand in hand with reforming our tax code to make it more simple and more fair, so that the wealthiest individuals and biggest corporations cannot keep taking advantage of loopholes and deductions that most Americans don’t get,” Obama said.
Republicans saw things far differently.
“The president got his tax hikes in January,” said House Speaker John Boehner, R-Ohio, in reference to the higher tax rates on the wealthy agreed to in the bipartisan deal to avert the “fiscal cliff.” “We don’t need to be raising taxes on the American people.”
Obama also proposed capping deductions for wealthier taxpayers, a move that would have a particular impact in New York State, which has an unusually large number of top wage earners and unusually high state and local taxes that now can be deducted in full.
That fact prompted Schumer to say: “I am against a decrease in state and local deductibility, which hurts New York more than almost any other state.”
Otherwise, Schumer praised the Obama budget.
“Overall, this is a jobs-focused budget that invests in infrastructure, education and scientific research,” Schumer said. “It will strengthen our competitiveness and help middle-class incomes rise.”
The spending plan includes a one-year, $50 billion increase in spending on highways and infrastructure. Rep. Brian Higgins, D-Buffalo, who has proposed $1.25 trillion in increased infra- structure spending over five years, termed Obama’s offering “wholly inadequate.”
Also under the Obama spending plan, education funding would increase 4.6 percent, in part to fund the president’s call to make preschool available to all 4-year-olds from low- to moderate-income families.
Implementation of his health care reform law would continue apace, with a big expansion of Medicaid, the health care program for lower-income Americans, moving forward largely as planned.
Meanwhile, the departments of Defense and Homeland Security would endure major cutbacks, and farm subsidies would be slashed.
Overall, the Obama spending plan would replace the controversial sequester with $1 trillion in cuts and $800 billion in new revenues over a decade.
Most programs with an especially large impact in Western New York would be spared the worst of the cuts. Funding for Great Lakes cleanup would be steady, and Community Development Block Grants, which provide Buffalo with about $11 million a year, would be trimmed modestly.
The West Valley Demonstration Project, the target of frequent proposed cuts in recent years, would see its funding fall by only $1 million, to $64 million.
Only one program of local note – Low Income Home Energy Assistance – would face a huge cut, with proposed funding shrinking from $3.7 billion this year to $2.9 billion in fiscal 2014. But Congress has long refused to agree to such deep cuts in that program.