Nip and Tuck or Guillotine Time?

Thursday - 7/21/2011, 4:00am EDT

Politicians, voters and the economy itself have apparently decided that it is time the federal government needs a little surgery. Whether it will be cosmetic surgery or the more drastic off-with-their-limbs exercise will be decided shortly. And under the political gun which does not encourage clear thinking.

Meantime nervous federal workers are worried about whether they've seen their last pay raise, if they are facing a permanent pay cut, and if they will have time to bail out before their retirement benefits are reduced.

In an effort to cut federal costs and, maybe, raise federal revenue, lots of important men and women have formed, or been named to, committees that among other things may decide how the rest of your career goes, or not. And this is a bipartisan effort. Despite the hopes of federal unions, the White House won't send in the cavalry at the last minute to rescue or protect federal fringe benefits. The best your self-designated friends in Congress (and there are some) can do is minimize the pain.

Whether it is the Gang of Six (Congressional) or the recommendations of the White House appointed Fiscal Commission, or a Senate or House budget plan, federal and postal workers current and future, and retirees, are on the bulls-eye list. Here are some of the targets:

  • Federal Retirement Funding: In a best-case scenario, the retirement fund contribution of federal workers may be raised from .8 percent to 3.2 percent. Worst case, the increase could be 5 percent meaning a permanent reduction in take-home pay. An increase of "only" 3.2 percent in contributions would be good (as in relatively good) news for federal-postal workers.

  • Retiree COLAs: A new yardstick (called the chained CPI) would be used to measure inflation. The result would be that future COLAs for retirees are predicted to be as much as .5 percent less (each year) than under the current formula. COLAs for all retirees might not begin until age 62. Currently CSRS retirees get COLAs regardless of age. Those retired under the FERS system don't get them until age 62, and they are one percentage point less than the actual increase in inflation.

  • Possibly extend the current federal pay freeze another year or two. Or three. That would - as many have asked - include Congress.

  • Consolidate a number of federal operations and reduce federal employment by as much as 300,000 jobs over the next few years. This is a far cry from the Obama administration plan to increase federal employment by as much as 150,000 jobs by in-sourcing "inherently governmental" worked now being performed by outside contractors.
The good news: Many Congress-watchers say the Gang of Six proposal to use a different yardstick to measure inflation adjustments for retirees could take side-track some more draconian proposals. Under the proposal cost of living adjustments for Social Security, federal and military retirees would be determined by using the so-called "chained Consumer Price Index" as outlined here Monday.

Steve Watkins, editor of the Federal Times, was our guest yesterday on our Your Turn radio show. He said the chained CPI proposal might satisfy budget-cutters and derail efforts to make other cuts in federal program. To listen to the broadcast click here.

Congress, as per usual, is waiting until the last minute to make tough decisions. And that habit means that some of the cuts will be nastier and deeper than if they had been made earlier.

Meantime, here's a comment from Joan at the IRS that probably reflects what lots of feds are thinking. She says:

  • "Am I hearing what I'm hearing? The government may shut down in two weeks, and our President, the director of OMB, the Treasury secretary, and the other grownups in charge have no idea what will happen, who will not get paid, or what programs will shut down. Can we call in a Brownie Troop to save the country?" - J of the IRS

To reach me, mcausey@federalnewsradio.com


NEARLY USELESS FACTOID

The national debt is $14.3 trillion. According to Reuters, "In $1 bills, the pile would reach to the moon and back twice."


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