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Obama Pledges Entitlement Reform
President-Elect Says He'll Reshape Social Security, Medicare Programs

By Michael D. Shear
Washington Post Staff Writer
Friday, January 16, 2009

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

That discussion will begin next month, Obama said, when he convenes a "fiscal responsibility summit" before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.

"What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further," he said. "We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

In a wide-ranging 70-minute interview with Washington Post reporters and editors, the president-elect pledged quick action on the Middle East once he takes office, promised to support voting rights for D.C. residents, and said he will consider it a failure if he has not closed the U.S. military prison at Guantanamo Bay, Cuba, by the end of his first term in office.

Obama repeated his advocacy of large and immediate government spending and tax breaks on the same day that House Democrats were announcing the details of an $825 billion stimulus package and the Senate voted to authorize the release of an additional $350 billion in funds under the Troubled Assets Relief Program.

He said that creating jobs and maintaining national security will be his top priorities and added that his efforts as president should be measured by whether the nation can overcome predicted job losses in the months ahead.

"I don't have a crystal ball," Obama said after being asked when the economy might begin to recover. "Nobody can tell." But he added: "Even with the stuff that we are doing, I think we can still anticipate that 2009 is going to be very tough."

Obama vowed to build a new financial regulatory system that inspires clarity and transparency, and endorsed the broad direction offered yesterday by a group led by former Federal Reserve chairman Paul A. Volcker, an adviser to the incoming president.

The president-elect also gave his support for legislation that would make it easier for workers to unionize, but he said there may be other ways to achieve the same goal without angering businesses. And while many Democrats on Capitol Hill are eager to see a quick vote on that bill, he indicated no desire to rush into the contentious issue.

"If we're losing half a million jobs a month, then there are no jobs to unionize, so my focus first is on those key economic priority items I just mentioned," he said. "Let's see what the legislative docket looks like."

Obama repeated his assurance that there is "near-unanimity" among economists that government spending will help restore jobs in the short term, adding that some estimates of necessary stimulus now reach $1.3 trillion.

The president-elect said he believes that direct government spending provides the most "bang for the buck" and that his advisers have worked to design tax cuts that would be most likely to spur consumer and business spending.

But he framed the economic recovery efforts more broadly, saying it is impossible to separate the country's financial ills from the long-term need to rein in health-care costs, stabilize Social Security and prevent the Medicare program from bankrupting the government.

"This, by the way, is where there are going to be very difficult choices and issues of sacrifice and responsibility and duty," he said. "You have to have a president who is willing to spend some political capital on this. And I intend to spend some."

Obama is not the first incoming president to make bold declarations about overhauling the nation's retirement and health-care systems. Both Bill Clinton and George W. Bush made similar vows.

Clinton's push for universal health care -- led by his wife, Hillary Rodham Clinton -- collapsed under opposition from insurance companies and leaders on Capitol Hill. In 1993, Clinton appointed a commission on Medicare and Social Security headed by then-Sens. Bob Kerrey (D-Neb.) and John Danforth (R-Mo.), but never implemented its ambitious recommendations.

Bush made Social Security reform a centerpiece of his domestic agenda in his second term and, like Obama, pledged to expend political capital on the issue. He recently cited his failed push to allow some younger workers to invest their Social Security money in the stock market as one of the regrets of his presidency.

Five days before taking office, Obama was careful not to outline specific fixes for Social Security and Medicare, refusing to endorse either a new blue-ribbon commission or the concept of submitting an overhaul plan to Congress that would be subject only to an up-or-down vote, similar to the one used to reach agreement on the closure of military bases.

But the president-elect exuded confidence that his economic team will succeed where others have not.

"Social Security, we can solve," he said, waving his left hand. "The big problem is Medicare, which is unsustainable. . . . We can't solve Medicare in isolation from the broader problems of the health-care system."

Medicare, the government health program for retirees and the disabled, is projected to be insolvent by 2019, according to the most recent report by the Social Security and Medicare trustees. Over the next two decades, Medicare spending is expected to double, consuming nearly one-quarter of the federal budget.

Beginning in 2011, Social Security will take in less revenue than it pays out and will be forced to dip into reserves to pay benefits. It is projected to deplete its reserves by 2041, according to the trustees.

"The longer action is delayed, the greater will be the required adjustments, the larger the burden on future generations, and the more severe the detrimental economic impact on our nation," the trustees wrote last year.

In 2007, Medicare spending consumed 3.2 percent of gross domestic product, while Social Security represented 4 percent of GDP.

Obama's call for a financial summit is in part a response to a growing anxiety in Congress, where members are being asked to approve an unprecedented amount of federal spending at a breakneck pace. Aides said it was modeled after a summit Clinton held in 1995 to discuss reforming welfare.

The president-elect has been in frequent conversation with lawmakers, including House Majority Leader Steny H. Hoyer (D-Md.) and the Blue Dog Coalition of fiscally conservative Democrats, who repeatedly told Obama they would be willing to support his stimulus package only if he pledged not to lose sight of the larger budget picture. Those who will be invited to attend the summit include the Blue Dogs, Senate Budget Chairman Kent Conrad (N.D.), ranking minority member Judd Gregg (N.H.) and a host of outside groups with expertise on the topics, the president-elect said.

Obama said he is confident that he can find a way to close the Guantanamo Bay prison while finding a way to deal with and house potentially dangerous detainees. Sources said an executive order will lay out a procedure for closing the facility, but strongly disputed reports that such an order will come on the first day of the new administration.

On Israel, Obama again declined to comment on the violence in the Gaza Strip, repeating his mantra that the United States should have only "one president at a time" when it comes to foreign policy matters. But he promised early engagement on peace in the Middle East.

"I know some people have said, 'You have this big economic crisis on your hands, and so President Obama is going to just put off issues like this until his second term or later in his first term,' " he said. "I don't think we have that luxury."

He added: "That doesn't mean that we close a deal or we have some big grand, you know, Camp David-type event early in my administration. It does mean that we have a team in place which is hitting the ground and starting to engage constructively."

Obama reacted to questions about the emerging structure of his White House by displaying confidence in his ability to manage people. He has begun assembling a powerful team of White House counselors who will compete with Cabinet secretaries for influence over the majority of domestic and foreign policy issues.

"The theory behind it is I set the tone," Obama said. "If the tone I set is that we bring as much intellectual firepower to a problem, that people act respectfully towards each other, that disagreements are fully aired, and that we make decisions based on facts and evidence as opposed to ideology, that people will adapt to that culture and we'll be able to move together effectively as a team."

He added: "I have a pretty good track record at doing that."

Staff writers Ceci Connolly and Lori Montgomery contributed to this report.

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