Republicans on Sunday conceded on their demand that any "fiscal cliff" deal trim Social Security cost-of-living increases, signaling the end — for now — of their push to reform entitlements in exchange for higher tax rates.
Proponents said they might try to revisit the issue next year, but senators from both parties said they were playing a losing hand when they appeared to be demanding cuts to the federal government's public pensions program in exchange for protecting tax rates for families making more than $250,000.
"I'm not a fan of affecting those who are currently on Social Security — especially the more elderly," said Sen. Olympia J. Snowe, Maine Republican. "That'll probably be part of a larger debate in conjunction with the debt ceiling next year, and other issues regarding entitlement reform."
Social Security emerged as a last-minute stumbling block Sunday when Senate Majority Leader Harry Reid, Nevada Democrat, went to the chamber floor and said he had hit an impasse with Republicans over the issue. He said his party would consider cost-of-living changes at some point in the future, but ruled it out as part of the smaller deal he and Sen. Mitch McConnell, Kentucky Republican, were negotiating.
"We're not going to have any Social Security cuts," he said flatly.
Deleting Social Security from the equation means Republicans now are fighting a strictly defensive battle and the fiscal cliff debate centers around how much taxes are going to go up, and on what spending will be added — such as another extension of unemployment benefits for the long-term jobless.
Some Republicans said the demand was just a bargaining chip they were expecting to drop, while others questioned whether it was even on the table.
"That's the first I've heard of it on the floor," said Sen. Lindsey Graham, South Carolina Republican, adding that he wanted to save that fight for another day.
For Democrats, cutting into entitlement programs is anathema — similar to the way Republicans see tax increases.
But in the wake of Mr. Obama's re-election and Democrats' gains in Congress, Republicans have been forced to cave on their tax principles, while Democrats have been able to hold firm in defending entitlements.
At issue is the measure of inflation used to calculate inflation. Most federal programs are tied to the Consumer Price Index, but Republicans want to use what is called Chained CPI, which would lead to lower cost-of-living adjustments.
The Congressional Budget Office projects that would mean a quarter of a percentage point slower growth per year, which could add up over the decades.
Mr. Obama signaled early in fiscal cliff negotiations that he could accept using Chained CPI as long as protections were in place for those with the lowest incomes.
House Minority Leader Nancy Pelosi of California disputed the views of other Democrats who called it a benefit cut.
"No. I consider it a strengthening of Social Security," she told reporters in mid-December.
Democrats said they would accept it only as part of a broad deal and that the package being considered this weekend didn't qualify.
Liberal interest groups, who had rallied their supporters to call congressional offices and oppose Chained CPI, cheered their win.
"Today's victory shows that activism works," said the Progressive Change Campaign Committee, which vowed to field primary challengers to run against any Democrat voting for the proposed policy.
• Sean Lengell and David Sherfinski contributed to this report.
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