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Critical Differences Belie Hopes for a Grand Bargain

President Barack Obama
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President Barack Obama

Even as President Obama lashes out at Republicans over the automatic spending cuts that take effect next week, he is simultaneously sending them a strikingly different message: he is still interested in a big deficit-reduction deal and as evidence of his good faith has left on the table proposed Medicare and Social Security cuts that liberals hate.

With neither side making much effort to avert the across-the-board reductions in military and domestic programs that kick in next Friday, signals from the White House about a much more ambitious budget package might seem to be somewhere between delusional and beside the point — not to mention politically self-serving. On Capitol Hill, Republicans say Mr. Obama has actually backtracked from where he was 18 months ago on reining in the entitlement programs and has shown no willingness to do anything really hard to get the nation's long-term debt problems under control.

But administration officials say that some kind of opportunity is likely to present itself this year to engage Congressional Republicans on a comprehensive plan. In addition to rebutting Republican claims that he has no plan of his own, Mr. Obama wants to make clear to Republicans, aides said, that even after the failure of successive negotiations he remains willing to make difficult concessions.

That is especially true, they said, when it comes to entitlement programs, the focus of the sharpest ideological clashes between the two parties and the biggest contributors to the long-term budget imbalances.

His aides point to Mr. Obama's continued willingness to swallow, over the intensifying objections of most of the left side of his party, a new way of calculating inflation adjustments for Social Security benefits that would reduce the growth of payments – in effect, a benefit cut. And Mr. Obama has alluded repeatedly to his willingness to re-engage with Republicans based on his last offer for $400 billion in Medicare cuts, made during the negotiations in December over the so-called fiscal cliff; that's a level that gives heartburn to some Democrats in Congress who see no need to compromise at this point.

"That offer is out there for them to accept anytime they want to take it, and it carries some considerable cost to us," said Dan Pfeiffer, Mr. Obama's senior adviser. "I'm not sure what more we could do to show we're serious."

The continued maneuvering reflects a calculation inside the White House that there is still a path to a legacy-enhancing budget deal, notwithstanding Speaker John A. Boehner's pledge not to allow any tax increases or engage in closed-door negotiations with the president.

The starting point, administration officials say, is to allow the normal budget process to play out in Congress in coming months, while encouraging both parties to explore ideas for overhauling the tax code. At some point the Democratic-controlled Senate and the Republican-controlled House could begin to consider areas for compromise, providing a natural forum for a negotiation in which Mr. Obama would not necessarily need to be the central player.

To the degree that an improving economy and signs of a reduced rate of growth in health care costs push projected budget deficits lower, the climate for a deal could also brighten.

But that optimistic view of the possibilities ignores the deep differences between the parties, not only on taxes, the most obvious sticking point, but also on entitlement programs, where Democrats and Republicans have such profoundly different viewpoints about what needs to be done that a deal would require one or the other of them to budge in a fundamental way.

While Mr. Obama clearly sees his offer on entitlements as a way to build trust with Republicans, many conservatives see it as evidence that they will never reach an accord because they define the problem in such different ways.

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Mr. Obama sees the challenge of Medicare largely as a matter of reducing federal outlays for the existing system by limiting payments to providers and better employing the government's purchasing power; many Republicans see the current system as unsustainable given the growing costs of an aging population and are seeking to rebuild Medicare in a way that injects far more market competition into health care. The mechanism preferred by conservatives in recent years has been the so-called "premium support" model, in which Medicare beneficiaries would receive a check from the government to purchase their own policies or regular Medicare coverage – the approach championed by Representative Paul D. Ryan of Wisconsin, the party's vice-presidential nominee last year.

In other words, where Mr. Obama sees dealing with Medicare as mostly a matter of math, Republicans see it as a matter of ideology.

"Republicans and Democrats are not just talking about differences of degree," said Yuval Levin, an informal adviser to Mr. Ryan and a fellow at the Ethics and Public Policy Center, a conservative research group. "They are talking about differences of direction."

Inside the White House, there is deep skepticism about whether Republicans actually want to address Medicare in an immediate and concrete way – or whether Republicans would prefer to pillory Democrats for backing Medicare cuts, as they did successfully in the 2010 midterm elections and could again in 2014, and avoid voting for anything themselves that could bring a backlash from voters. The most recent version of Mr. Ryan's plan, for example, would make no changes to Medicare for a decade.

Whether in dealing with the automatic budget cuts or the longer-term issues, the lack of trust between the two sides remains almost complete. To talk successively to senior administration officials and top Republican aides on Capitol Hill this week about the fiscal-policy climate is to be plunged back into bitterly competing narratives about how the other side is unable to stand up to its base, unwilling to give any ground and more interested in turning the politics to its advantage than doing what is right for the country.

"The menu of entitlement reform options discussed over the last two years is the bare minimum necessary to start solving our long-term debt crisis," said Kevin Smith, communications director for Mr. Boehner. "And the fact that this president is backpedaling on key reforms rather than showing the courage to take on his own party is not a promising sign."

At the White House, they say they do not get enough credit from Republicans for bucking the Democratic Party's liberal base by supporting the cuts to Social Security's cost-of-living adjustments. They also point to their willingness to embrace substantial Medicare cuts that would put some Democratic members of Congress at risk in their next elections.

Republicans are especially dismissive of Mr. Obama's outreach on the entitlement programs. They say that in the summer of 2011 the president was willing to consider increasing the age for Medicare eligibility but has subsequently backed away from that position under pressure from liberals in what Republicans interpret as a sign of unwillingness at the White House to take on anything other than relatively easy cuts to health care providers.

"There has been no leadership from the White House and Senate majority to pursue structural reforms to those programs," said Senator Charles E. Grassley, Republican of Iowa, "despite the importance of saving Medicare and Medicaid for future generations."

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