Boehner said Obama's plan was 'no way to lead and move the country forward.' | AP Photos Boehner rejects Obama budget

House Speaker John Boehner immediately dismissed President Barack Obama’s package of significant new entitlement cuts tied to new tax revenues, calling them “no way to lead and move the country forward.”

The White House had portrayed the proposal, part of the budget it will release next week, as a compromise with Congressional Republicans that could have put them on track for another run at a grand bargain.


But Boehner said he will not consider new revenues as part of the deal, arguing that “modest” entitlement savings should not “be held hostage for more tax hikes.”

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The budget proposal sets Obama up for major fights on his right and left. Republicans will not accept any new tax revenues and liberal Democrats have already signaled they will resist any cuts to Social Security and other entitlement programs that Obama is proposing.

The White House says the budget proposal would reduce the deficit by $1.8 trillion over 10 years, but it assumes the elimination of the sequester, which would otherwise account for $1.2 trillion in deficit reduction.

Already, Obama’s budget proposal goes farther than many in his own party and base said they would bear by including “chained CPI,” the adjustment that would over time reduce cost-of-living increases to Social Security and other federal benefit programs — effectively, a cut to Social Security benefits by tying them to inflation.

It’s the $9 billion in new tax revenue by setting limits on “tax-preferred retirement accounts for millionaires and billionaires” that Boehner is rejecting.

And Obama is already facing a backlash from liberal Democrats as he has floated the chained CPI idea. Sen. Tom Harkin (D-Iowa) said Friday that any Social Security cuts are a no-go for him.

“While there are large portions of the president’s budget that I strongly support, I remain firmly opposed to the chained CPI,” Harkin said. “This policy is an unnecessary attack on Social Security, a program that by law is unable to add to the deficit.”

At a lunch with Senate Democrats last month, Harkin and Bernie Sanders (I-Vt.) pressed Obama to take chained CPI off the table, arguing that Social Security doesn’t actually contribute to the deficit — since it’s walled off from the federal budget — and there are other ways to keep the government solvent.

To finance new spending programs proposed in his State of the Union address, Obama’s budget calls for new cigarette taxes and closing a loophole that now allows people to collect unemployment insurance and disability insurance simultaneously.

A senior administration official said Friday morning that Obama’s budget would include $1.8 trillion in deficit reduction – the offer the president has previously made to Boehner —and won’t add to the federal deficit.

“While this is not the president’s ideal deficit reduction plan, and there are particular proposals in this plan like the CPI change that were key Republican requests and not the president’s preferred approach, this is a compromise proposal built on common ground and the president felt it was important to make it clear that the offer still stands,” the senior administration official said.

The official added: “This isn’t about political horsetrading; it’s about reducing the deficit in a balanced way that economists say is best for the economy and job creation.

A senior Senate GOP aide said Republicans are translating the White House budget proposal as a signal to Senate Democrats that they must accept benefit cuts.

“The fact that chained CPI is in there, Republicans will take that as a signal that the White House is willing to use chained CPI as an offset,” the aide said. “It seems to me that the White House is sort of telling Senate Democrats to get used to it.”

Boehner said he was not interested in dealing any more on revenues, citing the higher tax rates on the wealthy Obama pushed through during the January negotiations over the fiscal cliff. The House speaker said as the sequester cut talks broke down that the “talk about raising revenue is over,” and he reiterated that Friday.

“The president got his tax hikes on the wealthy with no corresponding spending cuts,” Boehner said. “At some point we need to solve our spending problem, and what the president has offered would leave us with a budget that never balances. In reality, he’s moved in the wrong direction, routinely taking off the table entitlement reforms he’s previously told me he could support.”

Harkin said Boehner’s refusal to consider new revenues means Obama must rescind his offer to make entitlement cuts.

“It is clear from his statements today that Speaker Boehner has no interest in reaching a balanced agreement to reduce the debt and for that reason I believe the President ought to remove the chained CPI proposal from his budget,” Harkin said.

Sanders said he would block the proposal.

”I am terribly disappointed and will do everything in my power to block President Obama’s proposal to cut benefits for Social Security recipients through a chained consumer price index,” he said.

Liberal groups began attacking the benefit cuts Friday.

MoveOn.org emailed its members about Obama’s budget under the heading “terrible news.”

“This is a terrible idea. Social Security is such a popular and successful program that even Republicans didn’t touch it in their budget,” MoveOn wrote. “President Obama knows he can’t move forward on his second-term agenda without strong support from the progressive base. So if MoveOn members are vocal in opposing this plan, we have a real chance to change his thinking.”

The Congressional Progressive Caucus co-chair, Rep. Raúl Grijalva (D-Calif.), said Republicans will accuse Obama of seeking to cut Social Security.

“This is now more than a discussion, it is a commitment,” Grijalva said. “In doing so I think we kind of expose Social Security in a way where the next time we see this issue of chained CPI, we’ll see Republicans saying the president wanted it.”

He added: “The troubling thing is the fact that the compromise now is around Social Security as the giveaway.”

And Jim Dean, the brother of the former Vermont governor and chairman of Democracy for America, said progressives will fight Obama over chained CPI.

“Let’s be clear: President Obama, when it comes to cutting Social Security, Medicaid or Medicare benefits, over 200,000 progressive members of your own party don’t ‘have your back’ and we are prepared to fight you every step of the way,” Dean said.

Most congressional Democrats were quiet about Obama’s budget Friday, but before word of Obama’s budget proposal leaked, liberals on Thursday began attacking the expected inclusion of chained CPI.

“Millions of working people, seniors, disabled veterans, those who have lost a loved one in combat, and women will be extremely disappointed if President Obama caves into the long standing Republican effort to cut Social Security and benefits for disabled veterans and their survivors,” Sanders said.

The liberal Center on Budget and Policy Priorities has suggested that chained CPI could work, but only if it excludes Supplemental Security Income — a program for people with disabilities that also ties its benefit increases to the Consumer Price Index. The group also wants a special hike in benefits for seniors who have been on Social Security for 15 to 20 years, arguing that the effect of the smaller increases would build over time.

The cigarette tax, the official said, would fund the universal pre-kindergarden education program Obama proposed in the State of the Union. A White House official on Friday declined to give details on the rate or extent of the new cigarette tax ahead of the official budget release.

The document the official released to reporters Friday did not specify what other new programs Obama will propose when the complete budget is released, scheduled for Wednesday, April 10.

One new tax hike the administration is seeking is a $3 million limit on the size of Individual Retirement Accounts. That would allow retirees to finance an annuity of $205,000 a year. It would raise $9 billion over 10 years. The administration’s budget also seeks to close a loophole allowing people to collect unemployment insurance and disability insurance simultaneously.

”This will crack down on the practice of double dipping and claiming both unemployment benefits, which require people to show they’re looking for work, and disability benefits, which require them to show they are unable to work, saving money from duplicative payments,” the official said.

The chained CPI would change the way the government calculates the increases for Social Security and other programs — like veterans’ benefits and Supplemental Security Income for the disabled — by assuming people will change their buying habits when prices rise. For example, if steak becomes more expensive, they’ll buy chicken or fish instead.

While the White House views including the entitlement cuts as a compromise, Republicans in Congress are not likely to see accept the new tax increases Obama is proposing without a fight.

“The president has made clear that he is willing to compromise and do tough things to reduce the deficit, but only in the context of a package like this one that has balance and includes revenues from the wealthiest Americans and that is designed to promote economic growth,” the official said. “That means that the things like CPI that Republican leaders have pushed hard for will only be accepted if congressional Republicans are willing to do more on revenues.”

Obama included the chained CPI in his fiscal cliff offer to Boehner last year, but the idea is likely to generate strong resistance from Democrats – and from key allies like AARP and veterans’ groups – if it became part of a final deal. Liberal Democrats warn that it would take too big a bite out of Social Security benefits to seniors, who have expenses they can’t cut easily, especially medical care. AARP has already been sounding the alarms, warning that a 92-year-old senior would lose more than 8 percent of his or her Social Security benefits.

Obama has refused to rule out the entitlement cuts, though, and liberal think tanks like the Center on Budget and Policy Priorities have said they could work if it includes help for the seniors who need it most, like an extra one-time payment after they’ve been getting benefits for 15 or 20 years.

Obama’s last offer to Boehner says it includes “protections for vulnerable,” but omits details.

- David Nather and Jake Sherman contributed to this report