WASHINGTON (AP) -- President Barack Obama's proposed budget will call for reductions in the growth of Social Security and other benefit programs by including a proposal to lower cost-of-living adjustments to government social safety net spending, a senior administration official says.
The proposal attempts to strike a compromise with congressional Republicans on the Fiscal 2014 budget by combining the president's demand for higher taxes with GOP insistence on reductions in entitlement programs.
The official, who spoke on a condition of anonymity to describe a budget that has yet to be released, said Obama would reduce the federal government deficit by $1.8 trillion over 10 years.
A key feature of the plan Obama is proposing for the federal budget year beginning Oct. 1 is a revised inflation adjustment called "chained CPI." This new formula would effectively curb annual annual increases in a broad swath of government programs, but would have its biggest impact on Social Security.
President Barack Obama waves as he walks across the South Lawn of the White House in Washington, during his arrival on Marine One helicopter, Thursday, April, 4, 2013. Credit: AP
Obama's budget proposal also calls for additional tax revenue, including a proposal to place limits on tax-preferred retirement accounts for wealthy taxpayers. Obama has also called for limits on tax deductions by the wealthy, a proposal that could generate about $580 billion in revenue over ten years.
The inflation adjustment would reduce federal spending over 10 years by about $130 billion, according to past White House estimates. Because it also affects how tax brackets are adjusted, it would also generate about $100 in higher taxes and affect even middle income taxpayers.
Obama's budget, to be released next week, comes after the Republican-controlled House and the Democratic-run Senate passed separate and markedly different budget proposals. House Republicans achieved long-term deficit reductions by targeting safety net programs; Democrats instead protected those programs and called for $1 trillion in tax increases.
Obama's budget proposal includes features from an offer he made to House Speaker John Boehner during fiscal negotiations last year. Those talks ultimately failed but Congress did agree to increase tax rates on the wealthiest Americans.
The reductions in growth of benefit programs, which would affect veterans, the poor and the older Americans, is sure to anger many Democrats. Labor groups and liberals have long been critical of Obama's offer to Boehner for including such a plan.
This is a breaking news story. Stay tuned for updates.