In his first foray into the hazardous terrain of entitlement programs, Barack Obama said yesterday that his administration would overhaul Social Security and Medicare to clamp down on government spending. At a news conference and in a subsequent interview with the New York Times, the president-elect said, "If we do nothing, then we will continue to see red ink as far as the eye can see."
This week the Congressional Budget Office projected an unprecedented $1.2 trillion budget deficit for 2009—even before Obama introduces his stimulus package, estimated at around $800 billion. For lawmakers and investors, promises of entitlement reform are critical reassurances that Obama will not allow public finances to spiral out of control. But the president-elect may face an uphill battle to transform the two mega-programs: President Bush failed in his campaign promise to overhaul Social Security, and Medicare has only grown.