Republicans want significant changes to entitlements in exchange for tax hikes. | John Shinkle/POLITICO Democrats talk tough on entitlements

Congressional Democrats are starting to draw a much tougher line on entitlements in the increasingly messy fiscal cliff talks, warning Republicans to keep their hands off Social Security and Medicare benefits.

Democrats also say they’ll refuse to look at GOP calls to dramatically slash Medicaid. And for them to even entertain any changes to Medicare and Medicaid, they say the price is for Republicans to agree to far higher taxes than they have flirted with so far.


On Tuesday, Senate Majority Whip Dick Durbin (D-Ill.) went even further with a fresh push for negotiators to keep all entitlement discussions out of the fiscal cliff talks, and instead keep the focus solely on taxes and automatic spending cuts.

For many Democrats, these entitlement programs are part of their core identity — aggressively protecting the social safety net programs created by the New Deal and the Great Society is as much a part of the progressive worldview as tax cuts and smaller government are for conservatives. And if President Barack Obama reaches a bipartisan deal with GOP leaders that cuts entitlements, he can expect a rebellion from his allies on the Hill — that is, unless he wins what they consider major concessions from Republicans on taxes.

“Let them put revenue on the table first,” veteran Sen. Barbara Mikulski (D-Md.) told POLITICO. “I don’t want to hear, ‘Oh well, we’ll close loopholes.’ What the hell does that mean? That’s nothing.”

The tougher line reflects an emboldened group of Democrats on the Hill whose tougher public posturing could complicate efforts by the White House to cut a sweeping deal with the GOP.

But there are some differences in Democratic negotiating strategies, including among some who want a major deal on taxes and entitlements in the lame-duck session. New York Sen. Chuck Schumer recently floated the idea to raise taxes on the top 2 percent and woo the GOP by agreeing to “hundreds of billions of dollars” in cuts out of Medicare to help reduce the inefficiencies in the program. But he, too, has resisted cuts to Medicare benefits.

“I personally believe there are things that we can do with entitlements that don’t hurt beneficiaries,” Senate Majority Leader Harry Reid said Tuesday, noting that he and Obama have insisted that Social Security be off the table. “We hope that they can agree to the tax revenue that we’re talking about, and that is rate increases, and as the president’s said on a number of occasions, we’ll be happy to deal with entitlements.”

But there is pressure from off of Capitol Hill to immediately adopt a grand bargain to shave trillions from the debt with a mix of spending cuts and tax revenue. On Wednesday morning, Reid and his leadership team will hear from business leaders behind a national campaign initiative known as “Fix the Debt,” officials said.

Republicans are dead set against raising the top income tax rate from 35 percent to 39.6 percent for families who earn more than $250,000, as Obama and his allies on the Hill have repeatedly demanded. But GOP leaders have signaled they’d be open to new revenue from other sources, mainly through closing loopholes and capping deductions, including from high earners, a potential break from their no-new-tax pledge administered by anti-tax activist Grover Norquist.

Still, even with a modest increase in new revenue, Republicans counter that Democrats must agree to significant changes to entitlement programs in order to win GOP support for higher taxes.

“We all know that the most critical steps to be taken are to save the entitlements, which are on an unsustainable path to bankruptcy,” Senate Minority Leader Mitch McConnell (R-Ky.) said after a caucus lunch Tuesday. “There’s no better time to begin to fix that problem than right now.”

The Senate GOP’s incoming No. 2, Texas Sen. John Cornyn, said “the emerging consensus” among Republicans is that capping tax deductions, leading to higher revenue — rather than raising marginal tax rates — and cutting entitlements must be components of a fiscal deal.

“Spending cuts can be illusory and they can be undone,” Cornyn told POLITICO. “I think Republicans have already indicated revenues are on the table. … But you know the problem is there’s a big hole — like trillion-dollar deficits and unfunded liabilities for entitlements.”

Staff-level discussions between congressional leaders and the White House continued Tuesday, but there were signs of neither side budging in the talks. Obama has offered to make unspecified cuts and changes to entitlement programs, but it hasn’t been enough to win GOP backing. Likewise, the GOP has been vague on exactly how it wants to raise revenue in the Tax Code. Both sides are waiting for the other to blink as they urge outside groups to ratchet up pressure.

Reid said Tuesday there’s been “little progress” and only “happy talk” among Republicans about revenues, rather than specifics needed to reach a deal.

Democrats also haven’t been clear on what exactly they would discuss on entitlements. In previous proposals, Obama has floated the idea of reducing some payments to Medicaid providers through so-called blended rates, raising the Medicare eligibility age or requiring wealthy seniors to pay more for Medicare.

Still, even those ideas could cause some in his party to scoff.

“I’m not at all the proponent of raising the age,” said Sen. Debbie Stabenow (D-Mich.). “There are things that we should be doing and there are things that I wouldn’t support doing, but I do support some things.”

“Medicare benefit cuts should be completely off the table,” Sen. Sheldon Whitehouse (D-R.I.) said Tuesday.

Durbin went even further in his Tuesday speech before the liberal Center for American Progress. While he said Democrats need to agree to overhaul entitlements to maintain their solvency, he argued those should not be part of the year-end talks.

“Progressives should be willing to talk about ways to ensure the long-term viability of Medicare and Medicaid, but those conversations should not be part of a plan to avert the fiscal cliff,” Durbin said in the speech.

Others on the left agree.

“I don’t think they should be put on the table,” Rep. Barbara Lee (D-Calif.) said of entitlement programs such as Social Security, Medicare and Medicaid. “Young people deserve exactly what we’ve provided for our current seniors. These are people who are poor. Why would we put that on the table?”

But Medicare is facing insolvency in 2024, according to the latest trustees report. Medicare services 48 million people over the age of 65 or with disabilities, while Medicaid and the Children’s Health Insurance Program provide coverage to about 60 million a month — and those social safety net programs eat up about 21 percent of the $3.6 trillion annual budget. Defense-related programs account for about the same percentage of the budget.

And for that reason, some Democrats realize a major deal on entitlements and taxes may have to happen now.

“It’s got to be balanced,” said Senate Finance Committee Chairman Max Baucus (D-Mont.). “Of course, that’s in the eyes of the beholder. It would have to be a significant revenue increase and some spending cuts.”

Seung Min Kim, Steven Sloan and Jennifer Haberkorn contributed to this report.