Obama hints at entitlements changes

The Congressional Budget Office today projected a $1.2T federal budget deficit for the fiscal year.  With that cheery news hanging like a big dark cloud, President-elect Barack Obama held a press conference and hinted at changes to Social Security and Medicare as a way to reign in federal expenditures. 

“We expect that discussion around entitlements will be a part, a central part” of efforts to curb federal spending, Mr. Obama said at a news conference. By February, he said, “we will have more to say about how we’re going to approach entitlement spending.”

Mr. Obama did not offer specifics on how he would address Social Security and Medicare, nor was there any hint that he expects to ask Congress to approve draconian cuts in benefits. The programs are vital to millions of Americans, and talk of cutting benefits has long been considered politically explosive. On the other hand, both programs face long-range problems, given the growing legions of baby boomers nearing retirement and, in the case of Medicare, the ever-rising cost of health care. (Link)

Throughout the presidential campaign, Mr. Obama had talked about raising the payroll tax limit for Social Security contributions, so one might expect this to be included in the proposed changes.  Other options are raising the retirement age a couple years, indexing payments to inflation.  More draconian measures such as cutting benefits or allowing benefits based on need are possibilities as well.

It will be interesting to see the public reaction to Mr. Obama's hints at change.  In 2004, as soon as President Bush had suggested Social Security changes, a public outroar ensued, no doubt, caused by a big distrust of the President's motives.  Mr. Obama may not face the same skepticism and folks may be a good deal more open to hearing his ideas this time around.