Obama's Budget Proposal Encouraging for Sen. Lindsey Graham

Sen. Lindsey Graham (R-S.C.) said Sunday he was encouraged that President Barack Obama will include some entitlement reforms in his budget proposal, which is expected this week. Though Obama does not go far enough, it demonstrates a willingness to compromise on a "grand bargain," Graham said on NBC's "Meet the Press."

The grand bargain would lower deficit spending two ways: first, it would reduce the long term growth of government by reforming entitlement spending; and second, it would increase government revenue without increasing tax rates by reforming the tax code.

Obama's budget proposal will include a reform to Social Security that will lower the growth rate of benefits to what is called "chained CPI," and include reforms to Medicare that will cut payments to service providers, according to White House sources.

"There are nuggets of his budget that I think are optimistic," Graham said. "It's overall a bad plan for the economy, but when you look at chained CPI and Medicare reductions, we're beginning to set the stage for the grand bargain."

The grand bargain, Graham believes, should include the chained CPI reform, as well as an increase in the retirement age for Medicare, means testing both Medicare and Social Security, and raising about $600 billion in revenue by making the tax code "flatter," which means eliminating deductions and credits while lowering overall rates.

Many of Graham's fellow Republicans, including Senate Minority Leader Mitch McConnell (Ky.) and Speaker of the House John Boehner, have said that they favor tax reform, but only to reduce rates, not increase revenue. Taxes were already increased, they complain, with the "fiscal cliff" bill and they should not go up any further. Obama, on the other hand, insists that any grand bargain that reforms entitlements must include additional revenue as well.

Graham believes that compromising with Obama on revenue would be worthwhile to get entitlement reform.

"The president is showing a little leg here," Graham added, "this is somewhat encouraging. His overall budget is not gonna make it, but he has, sort of, made a step forward in the entitlement reform process that would allow a guy like me to begin talking about flattening the tax code and generating more revenue."

Obama had dinner Sunday night with a group of Republican members of Congress, which he refers to as the "coalition of the willing," to further discuss the possibility of a grand bargain. No congressional leaders was present.

Obama has resistance from the liberal side of Congress to reforming entitlements. Sen. Bernie Sanders (I-Vt.), for instance, said Obama's Social Security reform proposal was a "bitter disappointment" and he "will do everything in [his] power to block" it.

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