What Happens if Entitlement Programs Get Cut?

By FOXBusiness

The budget battle rages on in Washington, D.C. with the $84 billion sequester already underway. Now, White House officials say the president is willing to revisit the possibility of scaling back entitlement programs to help reign in the nation’s $1.1 trillion budget deficit.

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White House senior economic official Gene Sperling said Sunday that President Barack Obama is willing to work with lawmakers to cut entitlements such as Medicare and Social Security as long as tax reform remains part of the discussion.

"He's reaching out to Democrats who understand we have to make serious progress on long-term entitlement reform and Republicans who realize that if we had that type of entitlement reform, they'd be willing to have tax reform that raises revenues to lower the deficit," Sperling said on CNN’s "State of the Union."

While the White House declined to comment on specifics to FOX Business, a spokesperson pointed to the president’s plan on the White House’s website, which includes $25 billion in cuts from “Medicaid, Pay-for-Delay, IPAB and program integrity.”

Alex Brill, former economist for the House Ways & Means Committee and an American Enterprise Institute scholar, says tackling entitlements is the only way the long-term fiscal outlook for the U.S. can be stabilized.

“This president can do it or he can punt to the next president to make the more difficult choices for this country,” he says. “There have to be some steps forward, primarily in Medicare, but also in Social Security.”

The cuts made in sequestration have been inadequate in terms of curbing spending and debt, according to Brill, and he says Obama’s pivot help reignite budget talks.

Urban Institute senior fellow Eugene Steuerle says reducing entitlement programs will also help the middle class.

“Our current system is so out of balance that the middle class has to help pay for getting it in balance,” he says. “They can either pay by cutting benefits or increasing taxes.”

The country’s top earners can only foot so much of the bill via tax increases, he says, and that engaging the remaining 98% of the country in the situation is a necessary part of the solution.

Just how these cuts stand to impact the millions who rely on them remains to be seen. In 2012, 49,435,610 Americans were enrolled in Medicare, according to the Kaiser Family Foundation. The Social Security Administration estimates nearly 58 million people will receive $821 billion in Social Security benefits in 2013.

As it stands, both parties are proposing plans that would not impact those currently enrolled in both programs. Social Security will likely remain the same for those who are also close to retirement age, Brill says.

“It’s so important to tackle these issues now, not wait 10 years,” he says. “You want to minimize the impact on the elderly and allow today’s workers to adjust.”

Both political parties may agree that these programs need to be reformed, but it’s unlikely either will be jumping at the chance to lead the charge, Steuerle says.

“Neither party wants to lead,” he says. “In respect to the middle class, they are setting up the other party to score points, and maybe even win the next election. “

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