Compromise hits highest/lowest incomes

Wednesday - 12/19/2012, 2:00am EST

For most of the year, congressional Democrats and Republicans have battled (slowly) over ways to cut the deficit and reduce spending. Democrats favored higher taxes on the rich. Republicans wanted to go after entitlements.

For a time, both sides followed the first commandment of American politics which is:

Thou Shalt Not Touch Social Security. Do it and die!

It now appears that both sides have blinked. Republicans appear willing to accept some higher taxes (although the level is still up for grabs). Democrats seem to have agreed that Social Security's growing costs must be curtailed. Slightly and slowly.

With the infamous self-inflicted fiscal cliff just days away, both sides have blinked. The Republicans have tentatively agreed to higher taxes on the rich, although whether the threshold will be $400,000 or $1 million in income remains to be seen. The White House compromise plan includes switching to a new inflation formula — called the Chained COLA — that will slightly reduce future inflation-adjusted raises in Social Security, CSRS, FERS and military retirement benefits.

Until now, most federal workers and retirees haven't focused on the chained COLA, in part because it is hard to understand. But federal and postal unions and groups like NARFE have been sounding the alarm for a long time. Yesterday, AFGE President J. David Cox, a strong supporter of the administration, said that President Obama "could not have picked a worse or more regressive" proposal from the GOP budget plan.

If the chained COLA becomes law, experts say it will reduce the amount of each future cost-of-living adjustment by 0.3 percent. Critics say that is horrible, supporters say it isn't much and people will hardly notice it. One angry fed says he's done the math and that it would add up, big time, over time. He writes:

Mike, this chained CPI is a bigger thing than some folks understand. A person with a $50,000 retirement today losing 0.3 percent can add up. I used a 2 percent versus 1.7 percent rate in my calculation and discovered, in 20 years of retirement, the person loses $39,888 total. Someone that had a higher grade, longer service time or longer life after retirement could lose $100,000 (over a) lifetime. — Barry Sparks
What's next? Today at 10 a.m., on our Your Turn radio show, the guests are Federal Times senior writers Sean Reilly and Stephen Losey. They'll give us the latest on the avoiding-the-fiscal cliff negotiations, the likelihood of sequestration, the status of buyouts and what you can expect in 2013.

Listen if you can (1500 AM or online), and if you have questions email them to me at mcausey@federalnewsradio.com or call in during the show at (202) 465-3080. The show will be archived here.

To reach me, mcausey@federalnewsradio.com


NEARLY USELESS FACTOID

By Jack Moore

"Jedi Knight" is the most popular alternative religion in England and Wales, according the 2011 British census. Of the 240,000 Brits who picked "other religion," nearly 74 percent described themselves as Jedi.

(Source: Salon.com)


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