In the Rose Garden of the White House on Wednesday, President Barack Obama delivered remarks on his fiscal 2014 federal budget. In his prepared comments, the president asked Congress to permanently increase funding for the International Monetary Fund (IMF), which would increase the status of emerging countries, including China.
If the president were able to gain authority to boost the previous $63 billion contribution to the IMF and finalize a 2010 deal then China would become the third-largest voting member, while Brazil and India would garner a larger role. The two emerging countries have long argued that they should have greater clout considering their influence on the international economic stage.
Although the budget demands a funding increase, the budget documents state that no new taxpayer funding would be required. Even so, it still faces tough opposition by Republicans in the House of Representatives.
“The 2010 agreement results in no overall change in U.S. financial participation in the IMF, while preserving U.S. veto power and restoring the primacy of the IMF’s quota-based capital structure in which the United States has the largest share,” the Obama administration noted in the budget text.
Social Security reforms
As the White House seeks to transfer a large amount of money to China, the president’s budget proposes slight cuts to Social Security. The budget plan would seek changes in the way annual cost of living adjustments for Social Security and other federal programs, like food stamps and veterans benefits. This would be done by revising social program to a “chained Consumer Price Index,” which could reduce the national debt by $230 billion over the next decade.
Presently, the chained CPI is expected to jump between 0.25 percent and 0.3 percent, much slower than the current inflation measure. Therefore, seniors would receive small increases in their Social Security checks. At first, the reduction in Social Security checks would be small (between $38 and $45 in the first year). However, as time goes by, that figure would increase to hundreds of dollars over the long-term.
“The president has made clear that any such change in approach should protect the most vulnerable. For that reason, the budget includes protections for the very elderly and others who rely on Social Security for long periods of time, and only applies the change to non-means-tested benefit programs,” the budget proposal stated.
The GOP believes the administration should be commended for taking some action to fixing Social Security funding and proposing reforms, but Speaker of the House John Boehner argues that they’re too small.
“He does deserve some credit for some incremental entitlement reforms he has outlined in his budget. I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes,” stated Boehner in an interview with Politico. “Why don’t we do what we agree to do? Why don’t [we] find the common ground that we do have and move on that?”
AARP issued a statement on the proposed reforms:
“AARP is deeply dismayed that President Obama would propose cutting the benefits of current and future Social Security recipients, including children, widows, veterans and people with disabilities, to reduce the deficit. Social Security is a self-financed program that doesn’t contribute to the deficit, so it shouldn’t be cut to reduce it.”
The National Committee to Preserve Social Security and Medicare (NCPSSM) also released a statement that urges members of Congress to represent the needs of the average individual. “The president’s budget is not the balanced plan promised to Americans before November’s election,” said Max Richtman, president of NCPSSM).
Peter Orszag, a Citigroup executive who’s a former Obama budget director and ex-director of the Congressional Budget Office, wrote in a column in Bloomberg last week that suggested the estimated savings by the Congressional Budget Office (CBO) of $340 billion over the next decade from switching to chained CPI is too high.
Orszag explained that the projected CBO savings are based on long-term historical gaps between chained CPI and indexes the government utilizes presently for benefits and taxes, but in recent years the gap has been smaller.
“This does not amount to bold long-term deficit reduction. On the other hand, it wouldn’t be the end of Social Security as we know it either,” added Orszag.
In the end, Obama’s latest proposal is different than what he was advocating during the 2008 presidential campaign against Republican nominee John McCain. Although he hardly mentioned Social Security in last year’s election, he criticized the Arizona Senator four years ago for suggesting cuts.
“John McCain’s campaign has suggested that the best answer for the growing pressures on Social Security might be to cut cost-of-living adjustments or raise the retirement age,” the president espoused in a speech to AARP, according to the Associated Press. “Let me be clear: I will not do either.”
Other budget details
Overall, Obama’s budget consists of $1 trillion in tax hikes over the next 10 years and targets corporations and wealthy households. Other tax increases, like the cigarette tax, would hurt low- and middle-income houses.