Dems signal Obama flexibility on spending in talks

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The proposal to scale back cost-of-living increases is a regular at deficit reduction talks.

Obama tentatively agreed to back it more than a year ago in talks with Boehner that eventually collapsed, although he sought steps to shelter the lowest-income beneficiaries from its effects.

Democrats have said they would object much more strongly if the president would to accept a plan to raise the Medicare eligibility age from 65 to 67. He was ready to embrace that proposal in the earlier round of talks, but he would face opposition from congressional Democrats and the AARP as well as other groups in the current political climate.

The new inflation adjustment would create government savings of an estimated $168 billion over a decade, according to a recent estimate by the Congressional Budget Office. It also would raise tax revenue by $54 billion by affecting the adjustment in income tax brackets that occurs annually to take inflation into account, CBO said.

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Associated Press writers Ben Feller, Andrew Taylor and Stephen Ohlemacher contributed to this story.

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