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Obama’s Budget Proposal Mixes Help and Cuts for Older Americans

President Obama on Monday offered a $3.834 trillion budget that increased funding in some areas important to older Americans and cut in others.

His blueprint, which goes next to Congress, would spend $1.6 trillion more than it raises for the budget year that begins Oct. 1. The plan would limit increases in some areas of domestic spending, raise taxes on wealthy Americans, pump $100 billion into infrastructure projects like road building to revive the still-lagging economy and give small businesses tax incentives to hire employees.

“It’s time to hold Washington to the same standards families and businesses hold themselves,” Obama said Monday morning. “It’s time to save what we can, spend what we must, and live within our means once again.”

Republicans said they were disappointed in the plan. Senate Republican Leader Mitch McConnell of Kentucky said in a statement that it will raise federal payments on the debt to an average of $600 billion a year over the decade.

“But it’s now crystal-clear that this budget is more spending, more taxes and more debt,” McConnell said. “Anyone listening to the American people knows this isn’t what they support. It’s not what our country needs. And it’s not the way to grow good jobs.”

Obama had hoped to have a health care reform measure by now, but after stumbling near the finish line last month, the bill is on hold in Congress. Still, Obama’s budget chips away at reform, by proposing more funding for state Medicaid programs and beefing up other programs that bring down health care costs or expand accessibility.

The budget also aims to improve retirement saving through new workplace IRAs, savings tax credits and transparency requirements for retirement plans.

Though those programs will help many older Americans, said Nancy A. LeaMond, AARP executive vice president, she is concerned about the impact of cuts elsewhere in the budget and a proposed debt commission that could look at Social Security and Medicare benefits.

“While the administration’s budget request offers some welcome relief for older Americans who are struggling to find employment, strengthen their retirement nest eggs, and pay for rising health care costs, we need to make sure that broad efforts to cut spending don’t do more harm than good,” she said.

The White House’s three-year spending freeze, announced in the president’s State of the Union address last week, was applied to some programs but not others. It does not affect Social Security and Medicare benefits. The Social Security Administration would in fact get an 8 percent increase for its administrative costs, intended to make service faster, especially for new retirement and disability applicants. And Social Security recipients would get $250 each to offset the lack of a cost-of-living increase this year.

But the programs that were shielded from the freeze or even received increases were balanced out by cuts elsewhere. A program for housing for low-income older Americans would drop from $825 million this year to $274 million next year.

Douglas Rice, senior policy analyst at the Center on Budget and Policy Priorities, says the cut reflects U.S. Department of Housing and Urban Development plans to reform the housing program for the elderly, which pays for new construction of housing for older low-income residents and for rental assistance. Current project residents would not see cuts, but new construction would not get money.

“It looks like HUD has been somewhat frustrated by the elderly housing program and is seeking to reform it,” Rice says.

That cut, though, is offset by increases for the Section 8 housing program, which provides aid to hundreds of thousands of older residents, Rice says.

Obama said the nation had started the decade with a surplus but now faces $12 trillion in debt. He blamed the Medicare prescription drug expansion and the tax cut programs from 2001 and 2003 for the $7.5 trillion debt he inherited. The recession added an additional $3 trillion, and Obama’s stimulus plan last year added $1 trillion. His budget rolls back the tax breaks for families earning more than $250,000.

Obama said his budget priorities reflect the “building blocks of the middle class.

“Americans are willing to work hard, and, in return, they expect to be able to find a good job, afford a home, send their children to world-class schools, receive high-quality and affordable health care, and enjoy retirement security in their later years,” he said.

Here are some of the programs for older Americans that would see increases under the budget:

Retirement security

Checks for $250. Obama proposed distributing $250 each to Social Security recipients because no cost-of-living adjustment is planned this year. Although inflation is negligible, older Americans still face rising costs such as health care. “It matters a lot to seniors on fixed incomes,” said David Sloane, AARP’s senior vice president for government relations and advocacy. And the money will be spent, which will help the economy.

Auto-IRA. Saving for retirement would get a lot easier for the 50 percent of workers who have no workplace retirement savings program now. Under the auto-IRA proposal, small businesses would get increased tax credits to administer new IRAs for their workers where retirement savings is automatically deducted from paychecks. Workers would be enrolled unless they proactively opted out. Studies show those programs make a big difference in getting people to save, Sloane said.

“This is one of our top priorities,” Sloane said. “If people don’t have an opportunity to save for their retirement, it will put pressure on the federal government,” to help them out later.

Tens of millions of workers without pensions would benefit from the automatic IRAs, the budget estimated. The White House also wants to make it easier for companies that have 401(k)s to adopt automatic enrollment, which is a particularly effective way to increase saving among low-income and minority workers. Automatic enrollment increases participation in 401(k) plans from 70 percent to about 90 percent.

Saver’s Credit. Families earning less than $85,000 would get more help under the saver’s credit. Their retirement savings would get a 50 percent federal match, up to $1,000.

401(k) Changes. The administration would beef up the transparency of 401(k)s so that savers have more information about fees and so that conflicts of interest with pension advisers are reduced. The White House also would make it easier to turn 401(k) assets into annuities that provide lifetime payments.

Veterans Payments. Obama would make a change for military retirees that veterans groups have been seeking for years. Currently, seriously disabled veterans who are retired from the services cannot receive both their disability payments from VA and their military pension. Obama would end that practice and allow them to receive both concurrently.

Social programs

Caregivers. About $102.5 million would be set aside to help the “sandwich generation” that is caught between caring for kids and older parents. The money would beef up respite care for family members caring for older relatives. About 200,000 caregivers would get help if it passes Congress. And older Americans also would get more help with transportation, adult day care and other assistance designed to let them stay in their own homes.

Middle-class families taking care of older relatives (or children) also would see their tax breaks increase by $900 to $2,100.

“Caregiving takes a pretty significant toll on people—financially and emotionally,” said David Certner, AARP legislative policy director. “Getting relief is very helpful.”

Energy Assistance. The Low Income Home Energy Assistance Program would increase from $5.1 billion in 2010 to $5.3 billion in 2011 and include $2 billion for a new policy to increase aid when energy costs spike or large numbers of families are in poverty.

Food Assistance. Nutrition programs like Meals on Wheels would receive $828 million, an increase of $8 million. That adds up to about 219 million meals delivered to homes or community settings for 2.4 million older Americans.

Health care

Several small pieces of Obama’s health care reform measure are embedded in the budget. “They’re not going to just wait for health care reform,” says William Pierce, senior vice president of APCO Worldwide and a former senior official at the Department of Health and Human Services.

Drugmaker Fees. For instance, Pierce says, Obama would levy a fee on drugmakers for generic drugs—similar to what the federal government already does for name-brand pharmaceuticals. The money would be used to speed up the process of getting new drugs approved by the Food and Drug Administration. “This signals a goal of the administration to bring more generics to the market,” Pierce says. “It clearly is an indication they are looking at cost reductions in health care.”

Medicaid Help. States would receive an extra $25.5 billion for Medicaid, the federal health program that assists low-income Americans, including those who are older or have disabilities. Obama had sought to do that as part of his reform plan to expand access to health care by adding moderate-income families to the Medicaid rolls. States have been asking for more money because the recession has made more people eligible for Medicaid just as state revenues have dropped.

Fighting Fraud. The budget also increases spending on preventing and detecting fraud in Medicare, Medicaid and the Children’s Health Insurance Program. That effort, the Health Care Fraud Prevention and Enforcement Action Team, will scout for improper payments and loopholes.

COBRA. Obama also would continue a program to help unemployed workers who have extended unemployment benefits pay to continue their health insurance coverage under COBRA. The aid runs out later this month without the extension.

“It’s absolutely critical, especially for older Americans,” AARP’s Sloane said. “It’s very relevant because it’s harder to buy individual insurance.”

This won’t be the last federal budget full of difficult tradeoffs, AARP’s Certner said. “There are some serious challenges out there: trying to get our fiscal house in order while trying to help millions in need,” Certer said. “We are anticipating a number of difficult budgets in the years ahead.”

Tamara Lytle was a correspondent and Washington bureau chief for the Orlando Sentinel from 1997 to 2008.