A $48K hit to your retirement? Pray For Gridlock!

Friday - 2/21/2014, 1:35pm EST

Could gridlock, which just about everybody deplores, turn out to be your best bud in 2014?

Could gridlock, caused by the refusal/inability of Congress and the White House to play nice, keep you from losing out on as much as $48,000 in lifetime retirement benefits?

Because this is an election year, Washington's political community — elected politicians, their staff, lobbyists, lawyers, the media and other camp followers — is concentrating on one thing: Getting reelected. That means the other person (incumbent or challenger) gets beat. Bad grammar, but beat it is.

Democrats are desperate to hold onto the Senate. Republicans desperately want to take control of the so-called upper chamber while holding onto the House of Representatives.

To do it, candidates must have (or be perceived to have) brains, talent, integrity, good hair and money. Not necessarily in that order.

Money is the name of the game. And getting it means lunches, dinners and tours (if you have a nice, big home) where the attendees bring their checkbooks.

In addition to $$$, candidates for political office also need votes. Votes from the little people. Ordinary folks, like the one in six Americans who gets Social Security. Which is where election-year gridlock comes in, because...

Gridlock in Washington is terrible!

Except when it isn't!

Politicians — not tsunamis, foreign affairs or even climate change — are the culprits behind gridlock, when little or nothing gets done.

Gridlock can be terrible if you are counting on passage of a piece of legislation that will benefit you or yours. But it can be your best friend when there are lots of options and none of them are good for you.

A long-standing proposal called the chained CPI. The CPI stands for the various consumer price indexes the Labor Department uses to measure prices, costs and the cost of living. Currently it uses the CPI-W to monitor monthly changes in the price of various goods and items on a city-by-city basis. That data is the basis for annual Cost of Living Adjustments (COLAs) due each January for retirees — federal, military and Social Security. This year the COLA was 1.5 percent.

But a lot of people in Congress think that the current inflation- measuring yardstick overestimates inflation and its impact on people. They proposed using a new measuring tool, the chained CPI. They say it more accurately reflects not only costs, but people's reactions to rising prices. That is, that when things get expensive people adjust and downsize.

Example:

  • Backers of using the chained CPI say it reflects real-world habits. When steak gets too expensive, people switch to hamburger or chicken. Things like that.

  • Opponents of the chained CPI say all it would do is punish retirees, especially lower-income individuals. That they would go from steak, to hamburger, to chicken, to cat food.
Using the chained CPI would result in small (like 0.3 percent) reductions in future COLAs, according to some estimates. But over time that would produce big as in multibillion dollar, savings to the government.

Groups that oppose using the chained CPI said the savings would come at the expense of individuals. The National Active and Retired Federal Employees says that over a 25-year retirement, the typical civil service retiree (under CSRS) would get $48,000 less in COLAs. For Social Security retirees, the loss would be $23,000 and for military retirees it could be as much as $42,000.

The White House used to support the chained CPI proposal, but just yesterday White House officials announced President Barack Obama was dropping the COLA trims from its budget for fiscal 2015 due out next month.

And there are even more reasons why the chained CPI may be receding as a potential threat. Congress is going to be out of session even more than last year. Most members will be busy raising money for their own campaigns, or to help the party. Groups representing feds, as well as federal, military and Social Security retirees are pressuring key members of Congress. And pushing Democrats to convince the White House not to push the chained CPI this year. Not before an election.

So if that's gridlock, lots of people who do or will depend on COLAs in retirement have got to be saying: Bring it on!


NEARLY USELESS FACTOID

Compiled by Jack Moore

A tacky costume could (theoretically) cost a figure skater a medal. The International Skating Union rulebook allows judges to deduct 1 point from a skater's score for outfits that overly "garish or theatrical in design." However, the costume deduction is rarely used.

(Source: Slate)


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