Tuesday, November 27, 2012

The Battle Over The Budget Shapes Up

Negotiations between Republicans and the administration are narrowing down to a fundamental trade off.  The trade off is between cuts in entitlement spending and increases in taxes.  As one might imagine, the GOP favors cuts to entitlements over tax increases.  The president had been more willing to cut entitlements in negotiations prior to the election. He is getting lots of resistance from within his party about entitlement cuts.  He correctly, separates Social Security from healthcare entitlements.  Social Security is primarily an issue for the GOP because it would like to privatize Social Security.  The president realizes that containing growth in healthcare costs is the real fiscal challenge that we face.  He favors programs that would reduce payments to service providers.  The GOP favors programs that reduce benefits or shift more of the cost burden to beneficiaries. 

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