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Why it's so hard to tell if Trump really is open to cutting entitlements like Medicare

Updated 1:20 PM ET, Fri January 24, 2020

New York (CNN Business) - Was he serious? Or just riffing?

Politicos, market watchers and deficit hawks are trying to figure out if the president really opened the door this week to entitlement reform.

Asked if entitlements are "on his plate," the president told CNBC's Joe Kernen Wednesday, "At some point they will be." The president said strong US growth made addressing entitlements "the easiest of all things."

Cue the Democrats.

"The president promised that unlike other Republicans, he wouldn't touch Social Security, and Medicare," said Senator Chuck Schumer during a press conference to discuss the president's impeachment trial. "He's already broken that promise and gone after Medicare. Now it looks like Social Security is in the president's crosshairs as well."

Just as the White House was dangling an election year tease for new tax cuts, the president made different headlines by casually touching the third rail of American politics.

"Social Security reform is a virtually impossible sell, and Democrats are smacking their lips -- Trump has given them an issue," wrote political economist Greg Valliere in a note to his clients.

Trump had promised during the election that a super-strong Trump economy growing at 4 percent would fix the long-term problems for big government outlays like Social Security and Medicare. (The economy instead is growing around 2 percent.)

Some think the president tried to climb down Thursday with a tweet he would "save" Social Security from Democrats who want to "destroy" it.

But it hasn't quieted the debate.

"Democrats in this town have been hand-wringing about their prospects in the presidential race," writes Valliere, DC-based chief US policy strategist at AGF Investments. "Las Vegas oddsmakers have made Donald Trump the clear favorite. Inexplicably, he gave Democrats a major opening this week -- Social Security, the third rail that politicians never want to touch."

It's unclear if the White House is serious about entitlement reform or if the president was just, well, talking.

What is clear: the combination of an economy growing at just about 2% the president's 2017 tax cuts, and a huge spending bill, have sent the deficit soaring. The budget deficit has already topped $1 trillion in the Trump Administration, and grew another 12% from the year before in the first quarter of this fiscal year.

Even if entitlement reform were a priority, the balance of power makes it unlikely.

"If re-elected, the President will pursue more tax cuts and will not pursue significant entitlement reform," economist Mark Zandi of Moody's Analytics tells CNN. It "wouldn't happen unless the (Republicans) captured the House and held onto the Senate, which at this point seems unlikely," Zandi says. "If President Trump is re-elected, we can expect $1 trillion plus budget deficits for the foreseeable future, and much large deficits when the next recession hits."

Politics aside, there's a case for slowing the growth of entitlement programs like Social Security, says Valliere. Congress periodically considers reforms to the cost of living adjustments, raising the age of eligibility, increasing Social Security taxes, means-testing benefits, and tightening eligibility rules. But cowed by public outcry and lack of consensus, never acts. And the deficit hawks in the traditional Republican party appear to be in hiding.

"Chances of enactment are close to zero," in a second Trump administration, says Valliere.


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