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Originally published January 8, 2009 at 12:00 AM | Page modified January 9, 2009 at 8:51 AM

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Social Security, Medicare are in Obama's sights

President-elect Obama said Wednesday that overhauling Social Security and Medicare would be "a central part" of his administration's attempts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs.

The New York Times

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Source: Seattle Times news services

WASHINGTON — President-elect Obama said Wednesday that overhauling Social Security and Medicare would be "a central part" of his administration's attempts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs.

As the Congressional Budget Office (CBO) projected a record $1.2 trillion budget deficit for this year even before the costs of the nearly $800 billion economic-stimulus package being taken up by the House and the Senate, Obama stepped up his effort to reassure lawmakers and the financial markets that he planned a vigorous effort to keep the government's finances from deteriorating further.

At a news conference in Washington, he provided no details of his approach to rein in Social Security and Medicare, which were projected to consume a growing share of government spending as the baby-boom generation ages into retirement during the next two decades. But he said he would have more to say about the issue when he unveiled a budget next month.

Obama faces a confluence of bad economic news and problems. Tax revenue is declining, public confidence in the financial system is shaky and the president-elect has called for spending close to $800 billion to stimulate the economy and create some 3 million jobs. The budget office predicted the unemployment rate, which was 6.7 percent in November, would climb above 9 percent by the end of 2009.

Should he follow through with a serious effort to cut back the rates of growth of the retirement programs, he would be opening up a potentially risky new battle that neither party had shown much stomach for.

Social Security and Medicare have proved almost sacrosanct in political terms, even as they threaten to grow so large as to be unsustainable in the long run. President Bush failed to overhaul Social Security, and Medicare grew larger during his administration with the addition of prescription-drug coverage.

Obama also promised a more intensive effort to weed inefficient and bloated programs out of the federal budget in the short run, creating a White House position to "scour this budget, line by line, eliminating what we don't need, or what doesn't work, and improving the things that do." He named Nancy Killefer to the post, called chief performance officer.

"If we do nothing," Obama said, "then we will continue to see red ink as far as the eye can see."

Killefer, a partner at the management consulting company McKinsey, said that she would "do my best to create a government that works better for its citizens," and that government employees "will be central to this effort."

On Capitol Hill, some Republican leaders warned the deficit would be even larger than the Congressional Budget Office has projected, perhaps up to $1.8 trillion once additional spending bills are approved this year.

Sen. Judd Gregg of New Hampshire, senior Republican on the Budget Committee, and his House counterpart, Rep. Paul Ryan of Wisconsin, said the extensive borrowing by the government could be a disaster if congressional Democrats and the Obama administration did not also work on long-term solutions to Social Security and Medicare.

During the campaign, Obama supported addressing Social Security's projected long-term imbalance, in part by imposing an additional payroll tax on income of more than $250,000; the amount subject to the payroll tax now is capped at about $100,000.

Copyright © 2009 The Seattle Times Company

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