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Obama budget proposal to drop Social Security cuts

U.S. President Barack Obama joins Mexico's President Enrique Pena Nieto (unseen) and Canada's Prime Minister Stephen Harper (unseen) for a n
U.S. President Barack Obama joins Mexico's President Enrique Pena Nieto (unseen) and Canada's Prime Minister Stephen Harper (unseen) for a n

By Steve Holland and Roberta Rampton

WASHINGTON (Reuters) - President Barack Obama on Thursday dropped a measure to trim cost-of-living increases in Social Security from an upcoming budget proposal in an election-year move that may insulate fellow Democrats facing heat from senior voters.

The White House said Obama's budget proposal for the 2015 fiscal year, to be released on March 4, will not include a plan he made last year that represented an effort to gain some Republican support and break through congressional gridlock.

Dropping the offer this year is a sign Democrats are girding for November congressional elections and in no mood to risk supporting proposals that could cost them votes from seniors on Election Day on November 4.

Obama had offered to make a controversial change in how the government calculates inflation for Social Security and other federal benefits in a way that could lead to cuts in benefits for some Americans.

But since Republicans have never come forward to identify tax loopholes for the wealthy or corporations in return for Obama's concession, the Social Security proposal was dropped, White House officials said.

One official said Republicans had shown a lack of willingness to negotiate on a deficit reduction deal, "refusing to identify even one unfair tax loophole they would be willing to close despite the president's willingness to put tough things on the table."

The move was greeted with derision from Republicans on Capitol Hill.

"This reaffirms what has become all too apparent: The president has no interest in doing anything, even modest, to address our looming debt crisis," said Brendan Buck, spokesman for John Boehner, the speaker of the U.S. House of Representatives and the top Republican in Washington.

Politically, the move could help Democrats facing tough re-election campaigns in mid-term congressional elections in November, when traditionally the party in power in the White House loses seats.

The AARP, an association for older Americans, had urged its members to protest the cuts, saying they would hurt seniors.

Democrats were thrilled by Obama's decision. They are fighting to hang on to control of the U.S. Senate in November elections and pick up seats in the Republican-controlled House.

Democratic Senator Mark Pryor of Arkansas, facing a tough re-election fight this year, said he had fought against the president's proposal.

"With over 400,000 seniors in our state relying on these earned benefits, I'm glad the president heeded my call and withdrew his reckless proposal," he said.

JOBS, TRAINING, PRE-SCHOOL

The budget offer will adhere to spending levels agreed to in a two-year bipartisan budget deal that was achieved at the end of last year, White House officials said, speaking on condition of anonymity.

It will include a $56 billion initiative aimed at making good on Obama's promises of expanding U.S. manufacturing jobs, expanding college training programs and apprenticeships and helping states expand pre-school programs.

The officials said this initiative will be fully paid for in the budget through closing some tax loopholes for wealthy Americans and corporations and reforming spending programs, but they were not specific.

In past budget proposals, the Obama administration has sought to end billions of dollars in tax loopholes that, for instance, benefit the oil and gas industry.

The Obama budget will include new proposals, including expanded tax credits for the working poor, the officials said.

The offer to trim Social Security costs remains on the table "for whenever the Republicans decide they want to engage in a serious discussion about a balanced plan to deal with our long-term challenges," a White House official said.

Indeed, the Obama budget figures to emphasize Democratic priorities rather than seek a middle ground between Democrats' desires and Republican insistence on cutting spending to bring down chronic annual budget deficits.

"President Obama's budget will be a powerful statement of Democratic principles," said Senate Majority Leader Harry Reid, a Nevada Democrat.

Senior administration officials who briefed reporters said reducing deficits remain a priority but that a sizeable decrease in deficit spending in recent years has made this not as big a priority as previously.

The Congressional Budget Office forecasts that deficits for the next few years will be about half that of the more than $1 trillion in each of Obama's recession-shadowed first four years in office.

A year ago Obama engaged in a charm offensive seeking to build support among Democrats and Republicans for a long-term deficit reduction deal that would be built around entitlement reforms and changes to the tax code.

That initiative fizzled as partisan budget battles raged, climaxing in a 16-day government shutdown and close brush with a debt default in October.

The senior official said Obama would still like a deal, but that it is not as mathematically urgent because deficit spending has fallen and at any rate, the Republican House has shown no inclination to agree to one.

(Additional reporting by Caren Bohan; Editing by Sandra Maler, Meredith Mazzilli and Eric Walsh)

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