We’re just going to get trial balloon after trial balloon until next Monday, when the President is set to announce his batch of deficit reduction ideas for the Catfood Commission II. Now the balloon has flown all the way to England, and the offices of the Financial Times:

Barack Obama is expected to lay out a plan next week that would cut several hundred billion dollars from Medicare and Medicaid, the large government healthcare schemes for the elderly and the poor, as part of a pitch to cut future deficits by more than $1,500bn.

Senior White House officials said the US president would base a detailed blueprint for fiscal reform, which is to be delivered on Monday, on an earlier speech he delivered in April on deficit reduction.

The announcement could create tensions within the Democratic party, which has traditionally staunchly defended Medicare. Mr Obama’s fiscal proposal will be released just one week after the president unveiled a separate plan to raise more than $450bn to pay for a jobs bill that senior officials said would be the president’s singular focus in coming weeks.

If it is truly based on the April speech, it would include a really bad policy for Medicaid, the “blended rate” proposal that is mainly designed to reduce federal expenditures on the program, and force states to either pass the costs onto individuals or reduce reimbursements for providers on an already lean program, which is likely to lead providers to stop taking Medicaid patients. Either way, the impact on Medicaid recipients, among the poorest in society, is sharply negative.

But the April speech did not include the truly execrable increase in the Medicare eligibility age. The cuts to Medicare in that speech were more along the lines of provider reductions that built on the changes in the Affordable Care Act, and allowing Medicare to negotiate the price of prescription drugs. Since that speech, however, in July, we learned that Obama offered the increase in the eligibility age in “grand bargain” talks with John Boehner.

As Matt Yglesias points out today, if you really want to lower health care costs, you would be lowering the Medicare eligibility age, since Medicare provides health care at a much cheaper cost than the private insurance model. All this proposal would do is make health care more costly as a whole, while shifting those costs onto states and individuals. Hospitals would love it because they would get paid more for doing the same work. That’s why the American Hospital Association is on board.

The article says that ideas will also be drawn from the grand bargain that Obama and Boehner discussed in July, so it’s highly probable that an increase in the eligibility age will be in there, along with the previously mentioned hit to Big Pharma. And then there’s this, the return of the chained CPI.

Mr Obama’s plan could also feature a change in the way the US government measures inflation, switching to a less generous chained-consumer price index. The biggest impact of this measure – which could save between $250bn and $300bn over ten years – would be felt by recipients of Social Security, the retirement scheme.

During the failed July talks, the White House agreed to put that change in place starting in 2015, but with protections for low-income workers.

In his jobs speech last week, the President pointedly did not mention Social Security, while mentioning Medicare and Medicaid. The chained CPI would also be a regressive tax increase in addition to a cut on anything with a cost of living adjustment, like Social Security, food stamps and veterans benefits.

These are the kinds of programs that kept millions of people out of poverty last year, and their reduction would simply open the floodgates on poverty and increase human misery.

Again, let’s see what gets released on Monday. But if you think that the President is having trouble now with public opinion and institutional Democrats, wait until this thing gets released.

UPDATE: Let me throw on the flip a letter from Al Franken and several other Democratic Senators, urging the Super Committee to defend Medicare, Medicaid and Social Security. Just so you see the consternation that will result from this announcement by the White House.

Dear [Member of the Joint Select Committee on Deficit Reduction]:

Congratulations on your appointment to the Joint Select Committee on Deficit Reduction. Through this unprecedented bicameral and bipartisan process, you will have the opportunity to both stabilize our nation’s deficits and shape its fiscal policy for years to come. As you begin to take on this great responsibility, we write today to urge you to defend the programs on which tens of millions of elderly and disadvantaged Americans rely. Specifically, we urge you to protect Social Security, Medicare benefits, and the Medicaid program.

Our present deficits result largely from the unaffordable and regressive tax cuts signed into law during the previous administration. We therefore believe that deficit reduction should begin with closing unjustifiable tax loopholes and gimmicks, which overwhelmingly benefit large corporations and wealthy families. Special-interest tax deductions and credits operate as subsidies for favored industries and should be viewed no differently from direct cash payments. By streamlining our tax laws, we can generate hundreds of billions of dollars in revenue at the same time as we level the corporate playing field and ensure that millionaires and billionaires pay their fair share for the upkeep of our nation.

In contrast to profitable corporations and the wealthy, the tens of millions of Americans who rely on Social Security, Medicare, and Medicaid often have no resources to spare. In fact, the average annual benefit for the 38 million Americans who receive Social Security retirement benefits is just $13,600. This modest and essential income kept 36% of seniors out of poverty in 2008 according to the AARP. Just as critically, 37 million American seniors and 68 million children and adults rely on Medicare and Medicaid, respectively, for their health care. Even small cuts to these essential programs would bring widespread suffering to some of our most vulnerable citizens. We believe that is unfair and unnecessary.

Once again, we congratulate you on your appointment and wish you success in what will surely be an arduous process. We hope you will use this opportunity to stabilize the budget, so that Social Security, Medicare, and Medicaid will be secure for many generations to come.


Senators Whitehouse, Gillibrand, Blumenthal, Franken, Brown, Sanders, Lautenberg, Akaka, Harkin, Merkley, and Reed