Week Ending December 7, 2012
Both Sides Dig in on “Fiscal Cliff,” Although Fiscal Cliff Talks Continue
House Republican leaders made a counteroffer to President Obama on a plan to reach a deal on end of the year budget and tax issues. But, just as the Republicans rejected President Obama’s plan, the President also rejected the Republican plan saying it did not meet the “test of balance,” and reiterated that he will not agree to any deal without raising tax rates on the richest 2% of Americans.
The GOP plan, which was submitted by the House Republican leadership led by House Speaker John Boehner (R-OH), called for reducing the deficit by $2.2 trillion over 10 years. The framework would call for new revenues through an overhaul of the tax code and deep cuts in domestic spending, including cuts to vital safety net programs. However, the GOP plan would not raise tax rates on high income earners, as Obama has demanded, but instead calls for $800 billion in revenue through tax reform, falling far short of the $1.6 trillion overall revenue goal in the Obama plan. Further, the GOP plan would end some unspecified tax deductions while actually lowering rates for the wealthy. The plan also includes a total of $900 billion in spending cuts – $600 billion in health care savings through cuts to Medicare by raising the eligibility age from 65 to 67, and another $300 billion in other savings in “entitlement” programs, including Medicaid, and $300 billion in other domestic program savings. They also would cut Social Security and other benefits by calling for revisions to the consumer price index, saving $200 billion.
The White House and GOP congressional leaders further skirmished over whether to include an extension of the debt ceiling in any deal reached. President Obama wants to include it to avoid the contentious negotiations that took place last year, which led to a downgrade in the U.S. credit rating. The debt limit is expected to be reached in early 2013.
Late in the week, the President, Speaker Boehner and their aides resumed behind-the-scenes talks after a private Wednesday phone call between the President and Speaker Boehner. In other action, Rep. Tim Walz (D-MN) filed a so-called “discharge petition” in the House to force a vote on a bill already approved by the Senate to extend the middle-class tax cuts for families with earnings up to $250,000 but letting the Bush tax cuts expire for the wealthiest 2%. House Democrats need a majority of House members to bring the petition to the floor. So far, no Republicans have signed on even though there is a small but growing group of House and Senate Republicans who have indicated a willingness to support increasing tax rates for the top 2%.
Republicans Make First Public Proposal to Cut Social Security
In recent weeks both the White House and key Senate Democrats have said that Social Security changes should not be included in a deficit reduction package. However, it has been unclear whether they would entertain a change in the way the annual cost-of-living adjustment is calculated. The change had been the subject of previous negotiations between the President and House Speaker John Boehner in 2011.
This week, House Republicans publicly proposed cutting Social Security benefits by changing the cost of living formula as part of the deficit reduction response they sent to the White House. The so-called “chained CPI” would slow down the rate of annual inflationary adjustments that both current and future Social Security beneficiaries would receive. Although initially the loss would be small, it would grow over time. Over a 30-year period it would mean a 9.3% benefit cut compared to current policy. The average earner retiring at age 65 would lose $653 per year at age 75 and almost $1,139 by age 85 (the equivalent of 23.8 weeks of groceries).
Because of concern that a deficit reduction agreement could include Social Security cuts, Reps. Keith Ellison (D-MN) and Joe Crowley (D-NY) this week released a letter signed by a majority of House Democrats stating that they oppose including Social Security cuts for future or current beneficiaries in any deficit reduction package. A virtually identical letter was signed by a majority of Senate Democrats and released in early October. Despite these actions, however, there is considerable concern that the cost of living change could end up in a final deal.
AFSCME Leading Charge to Protect Workers, Programs in Year-end Deficit Fight
Less than a month after the November elections, members of Congress are back in Washington, D.C. and are already hearing from AFSCME members back home about ending the Bush tax cuts for the rich and protecting Medicare, Medicaid and Social Security from cuts. With the December 31 deadline to reach a deficit deal rapidly approaching, AFSCME – along with the NEA, SEIU, the AFL-CIO and other progressive voices – is ramping up the fight to protect critical safety net programs and make the wealthy pay their fair share in taxes.
On November 28 AFSCME activists from Arkansas, California, Colorado, Delaware, Minnesota, Missouri, and Montana joined more than 175 union members from across the country on Capitol Hill to urge their members of Congress to stand up for working families and protect Medicare, Medicaid and Social Security from cuts. On Saturday, December 1, AFSCME members joined progressive activists around the country in events pressuring key congressional targets. And on Monday, December 10, AFSCME will be joining with the NEA, SEIU, the AFL-CIO and other progressive allies to host more than 150 events across the country at congressional offices. In addition, AFSCME, NEA and SEIU launched a new series of television ads targeted at various Democratic and GOP lawmakers urging them to oppose cuts in Medicaid and Medicare.
Federal Unemployment Insurance Benefits Set to Expire
On January 1, two million unemployed workers will be left facing a true fiscal cliff as the current federal emergency unemployment insurance (UI) program expires. Unlike in the past, this time the benefit cutoff will be a “hard cutoff,” meaning that federal benefits will end abruptly the first week of January instead of phasing out over a period of weeks.
Strong support exists at the White House and among key Democratic senators and representatives or continuing the federal UI program, and it generally has been assumed that the extension would be included in the end of the year deficit reduction package. However, if a package fails to come together, it is uncertain whether Congress would be able to clear legislation continuing the program after December 31. Seeking to build public support for continuing the current program for another year, 42 senators have signed a letter urging approval of a one-year continuation of the federal unemployment insurance benefits program.
Affordable Care Act Helps Medicare Beneficiaries Save $5 Billion
Thanks to the Affordable Care Act, Medicare beneficiaries saved $5.1 billion on their prescription drugs from the enactment of the law in 2010 through October 2012. The law helps Medicare beneficiaries who have high cost prescriptions in the “donut-hole” coverage gap. Recent research shows that taking medications can avert hospital admissions and thus reduce the use of costlier medical services. Proposals to shift more costs onto beneficiaries may actually increase the Medicare program’s costs as beneficiaries reduce their use of less costly medical interventions, like prescription drugs.
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