Can Entitlement Reform Squeeze Its Way into the Grand Bargain?

At the same time, Daniels says those older Americans need to help find a solution and take the financial burden off the backs of younger Americans. He admits the problem is serious, but there is a way to fix the situation.

“We are still above water. We do have the opportunity. We don’t have to dream that we can somehow do it all at once. We don’t have to do that. Maybe we start with a few changes that people can absorb and understand,” Daniels said.

Both Daniels and Johnson think part of the problem is people have been misled to believe they are only taking out what they put into the system. They say the truth is Americans are taking out much more, at the cost of future generations.

“They think it’s their money that they put in a little box somewhere, and they’re just getting their own back, when in fact they’re getting huge multiples of anything they put in there,” Daniels said.

The president included some cuts to Medicare and Social Security in his 2014 budget proposal, hoping to bring Republicans to the table and negotiate a “grand bargain.” The president’s budget, however, failed to convince Republicans that the White House is serious about entitlement reform, while at the same time angering some Democrats for even considering any sort of cuts to entitlement programs.

In spite of talk of reform as part of the budget ceiling negotiations, reforming entitlement programs still means very different things to Republicans and Democrats, and the two sides remain far apart on how to deal with Social Security and Medicare reform.

House Republicans have repeatedly voted to turn Medicare into a voucher-style program, but only for Americans younger than 55, such that younger generations would be subsidizing baby boomers. So far, Democrats have avoided talking about making any major changes to Medicare.

In 2011, Sen. Ron Wyden (D-Ore.) infuriated some fellow Democrats by teaming up with Paul Ryan (R-Wis.) to write a Medicare reform plan. The senator eventually distanced himself from the proposal, after 2012 presidential candidate Mitt Romney used it to tout Ryan’s willingness to reach across the aisle.

The president has been criticizing Republicans for not talking about entitlement reform and instead focusing on defunding the Affordable Care Act.

“They are not talking now about spending cuts,” Obama said. “They are not talking about entitlement reform. They are not talking about any of that. Now they are talking about something that has nothing to do with the budget.”

The Congressional Budget Office (CBO) said that U.S. public debt will increase to 100 percent of the nation’s GDP in 25 years if no action is taken to stabilize it. Near-term deficits are shrinking due to revenue growth from a recovering U.S. economy and a January tax increase on the wealthy, but this is not enough to overcome the costs associated with the aging baby boomers.

The CBO also warned that if Congress does not take any action entitlement spending would increase to 14 percent of GDP, or twice the average over the last 40 years, and the annual deficit would grow to 6.5 percent of GDP by 2038.

Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, said the CBO’s report should serve as a call to action to take up meaningful structural entitlement reform as a part of the debt ceiling negotiations.

“The White House would like the world to think that the nation’s debt isn’t a problem – when, as CBO says, our debt, fueled by the rapid growth of our entitlement programs, is on an unsustainable path. The White House would like everyone to believe that we just need a little more revenue, when CBO found that revenue will be higher than it’s been over the past four decades,” Hatch said.