President-Elect Obama Says Overhauling Entitlement Programs ‘a Central Part’ of Administration Spending Control Efforts

During a speech in Washington, D.C., on Wednesday, President-elect Barack Obama said overhauling entitlement programs such as Medicare and Social Security will be "a central part" of his administration's efforts to curb federal spending, the New York Times reports (Zeleny/Harwood, New York Times, 1/8). Obama said, "We are beginning consultations with members of Congress around how we expect to approach the deficit," adding, "We expect that discussion around entitlements will be a part, a central part, of those plans" (Montgomery, Washington Post, 1/8). Obama said, "If we do nothing, then we will continue to see red ink as far as the eye can see," and "at the same time, we have an economic situation that is dire, and we're going to have to jump-start this economy with my economic recovery plan, creating three million jobs. That's going to cost some money" (Weisman/Meckler, Wall Street Journal, 1/8). Obama said he plans to unveil more details about his approach to rein in entitlement spending when he releases his budget next month, the Times reports.

Obama also created the new position of White House chief performance officer and named Nancy Killefer to the post (New York Times, 1/8). Killefer is a senior director at the management consulting firm McKinsey (Wall Street Journal, 1/8). Obama said Killefer will "scour this budget, line by line, eliminating what we don't need, or what doesn't work, and improving the things that do."

NPR's "All Things Considered" on Wednesday reported on Killefer's appointment (Horsley, "All Things Considered," NPR, 1/7).

NPR's "Day to Day" on Wednesday also reported on Killefer's appointment (Adams/Naylor, "Day to Day," NPR, 1/7).

CBO Report
Obama made his comments on the same day that the Congressional Budget Office released a report projecting a record $1.2 trillion budget deficit for fiscal year 2009 (New York Times, 1/8). According to the CBO report, the deficit would account for 8.3% of gross domestic product in FY 2009. The estimate trumps last year's record-setting deficit of $454.8 billion (Sanchez, CongressDaily, 1/7). According to the report, the deficit in FY 2010 is projected to decline to 4.9% of GDP, or $703 billion. However, the Washington Post reports that these figures "substantially understate the problem" because if an economic stimulus package is approved, this year's deficit could increase to $1.6 trillion. The report also estimates government spending to reach nearly 25% of GDP this year, "a level exceeded only during the later years of World War II" (Washington Post, 1/8). The report estimates that the deficit will increase by more than $3.1 trillion over the next 10 years (Wall Street Journal, 1/8).

The CBO report is available online.

PBS' "NewsHour with Jim Lehrer" on Wednesday reported on the CBO report (Ifill, "NewsHour with Jim Lehrer," PBS, 1/7).

Stimulus
Despite the record deficit, Obama emphasized the need for an economic stimulus package. Obama on Wednesday gave his first estimate of the cost of the package, which he expects to be around $775 billion over two years. According to the AP/Bergen Record, "The stimulus package is expected to easily pass Congress, now controlled by solid Democratic majorities in both houses," but "since it is the first major legislative test of an administration that promised to usher in a new era of bipartisan cooperation, and a measure of such enormous scope and import, Obama doesn't want to see it approved on a merely party-line vote" (Loven, AP/Bergen Record, 1/8). Senate Budget Committee Chair Kent Conrad (D-N.D.) and House Budget Committee Chair John Spratt (D-S.C.) said they have warned Obama to limit the stimulus to temporary measures that will not increase the deficit in the future (Washington Post, 1/8).

The package is expected to include a temporary increase in the Federal Medical Assistance Percentage for states' Medicaid programs and funds for health information technology (Loven, AP/Miami Herald, 1/8). The lawmakers also urged Obama to find offsets for other initiatives, such as efforts to expand access to health care for the uninsured (Washington Post, 1/8).

Medical Debts
In related news, Obama and Vice President-elect Joe Biden have proposed creating an exemption in bankruptcy law for individuals who can prove they filed for bankruptcy because of medical expenses, the Wall Street Journal's "Health Blog" reports. The exemption would establish a process to forgive the debt and help individuals regain financial stability.

According to Melissa Jacoby, a professor at the University of North Carolina Law School who has researched medical debt and bankruptcy, Obama's proposal appears to be a reaction to revisions of bankruptcy law made several years ago that made it more difficult for some consumers to eliminate their debts under bankruptcy. According to Jacoby, those revisions "were geared toward people who had been irresponsible spenders." She added, "People with serious medical problems do not fit that model" (Rubenstein, "Health Blog," Wall Street Journal, 1/7).