To judge by Barack Obama's latest offer in his negotiations with John Boehner, the speaker of the House of Representatives, the answer is, not much. The president will not even discuss Social Security, the White House says, on the ground that it is not a big contributor to the deficit. As for Medicare, the president is willing to make relatively modest savings by passing more of the cost of the programme to drug companies (by haggling for lower prices) and to the rich (by making them pay more for their coverage). Neither of these ideas, while sensible enough in itself, is remotely radical enough for Republicans' tastes. Nor is the sum the president proposed to save as a result: $400 billion, just a quarter of the $1.6 trillion he is seeking in tax increases.
Such tough talk delights the left, however. Mr Obama's stance, says the AFL-CIO, America's biggest trade-union federation, "keeps faith with the voters". Bernie Sanders, a senator who describes himself as a socialist, has commended the president for his refusal to touch Social Security. "Thanks for fighting to end Bush tax cuts for top 2%," tweeted Move On, a left-wing pressure group.
Such outfits are anxious to dissuade Mr Obama from repeating the offer he made to the Republican leadership last year, during their previous round of negotiations on the budget. At the time, he expressed willingness to raise the age of eligibility for Medicare and to use a stingier method to increase Social Security payments in line with inflation. Unlike the administrative reforms Mr Obama is now espousing, those changes would reduce the benefits Americans receive under the two programmes. That is anathema to many left-wingers, who want the burden of deficit reduction to fall on businesses and the rich, not the poor or middle-class.
This time around, pressure groups have mounted a ferocious campaign against any reductions in benefits. Before last month's election the Progressive Change Campaign Committee, another pressure group, persuaded some 200,000 people to sign a pledge stating, "President Obama: If you cut Social Security, Medicare, or Medicaid benefits for me, my family, or families like mine, don't ask for a penny of my money or an hour of my time in 2012." Both it and Move On have promised to support primary challenges to Democrats who betray the cause. The AFL-CIO recently released a fact-sheet arguing that changing indexation for Social Security would cost the average retiree $850 a year.
It seems to be working. Some 29 Democratic senators have signed a letter rejecting any changes to Social Security. Fourteen have also ruled out changes to benefits under Medicare and Medicaid. Both Harry Reid, the leader of the Democratic majority in the Senate, and Nancy Pelosi, the leader of the Democratic minority in the House of Representatives, have spoken against cuts in benefits.
Indeed, many Democratic politicians are so worried that Republicans will drive too hard a bargain on taxes and entitlements that they have advocated jumping off the "fiscal cliff" instead. That would involve letting tax rates rise for almost all Americans, and allowing gory cuts to government spending to go ahead. It is not that Democrats want these things; rather, they assume that Republicans would become much less obdurate in negotiations if such calamities were already unfolding.
Peter Welch, a Democratic congressman from Vermont, says that taxes must go up on the rich, but that any savings from entitlements should come from greater efficiencies or bigger contributions from wealthy recipients, not benefit cuts. Republicans, he believes, will not agree to that until the new year arrives, when "all of the middle class will get from John Boehner a Christmas present of a $2,200 tax increase". At that point, he predicts, Republican opposition will melt away.
The brinkmanship may not come to that point, of course, if Mr Obama strikes a deal first. Although his latest offer to Republicans involved only the most modest entitlement reforms, it seems safe to assume that he has left himself some bargaining room. What is more, he and most Democrats concede that the cost of Medicare and Social Security is rising too fast and will eventually need to be reined in. They are not quite so adamantly opposed to entitlement reform, in other words, as most Republicans are to tax increases.
It helps that Republicans such as Paul Ryan, a congressman and former vice-presidential candidate beloved by spending hawks, have proposed such radical overhauls that the sorts of reforms Mr Obama discussed last year look like mere tinkering around the edges. The increase in the eligibility age for Medicare he talked about need not start for several years and could be phased in slowly. By the same token, modifying Social Security's indexation to inflation is a far cry from privatisation.
Moreover, Mr Obama is leader of his party in a way that Mr Boehner is not, thanks to the authority of the presidency and to the Democrats' relative cohesion. Mrs Pelosi has a firm grip over her caucus; if anything, it is the centrists who tend to rebel, not the liberal fringe. Steny Hoyer, the number two in the Democratic hierarchy in the House, said this week that his party should not undermine negotiations by ruling out benefit cuts on principle.
Perhaps the best reason to suppose that Democrats may be less intransigent than they appear on entitlements, however, is that it is not their focus in the negotiations. Mr Obama has been banging on about higher taxes for the rich since his previous election campaign, yet the Republicans have managed to stymie them. Democrats in Congress, like the president himself, are determined to see them through this time. Success in that respect might ease the pain of entitlement reform.
Source: The Economist
