If you’re unhappy with the White House proposal to deflate future inflation-adjustments for retirees, clap your hands!
On second thought, don’t clap your hands.
The noise might trigger earthquake monitoring devices in the Washington area and panic people in communities that have lots of federal workers and retirees.
President Barack Obama has said that he wants to make federal service “cool” again. But the budget he presented to Congress on Wednesday has made a lot of active and retired feds hot under the collar.
While it calls for a 1 percent pay raise next year — which would be the first in three years — the minuses are striking:
The White House wants current and future federal retirees to pay more for their pensions. At present the majority of workers who are under the Federal Employees Retirement System pay 0.8 percent of salary into the retirement fund. Under the Obama plan, their contributions would increase by a total of 1.2 percent over the next three years. CSRS employees would also be required to kick in more.
The president views his budget as a compromise with House Republicans. Differences between the White House and the GOP-dominated House over higher taxes and reduced entitlement have taken the country near several fiscal cliffs and has put the government under little-understood sequestration guidelines. Initial reaction from Senate Republicans indicate they don’t think the proposals — which seem draconian to many workers and retirees — are enough. The House GOP budget was silent on the chained CPI but calls for an increase of about 5.5 percent in retirement contributions.
Under his plan, the future Social Security, civil service and military retiree cost-of-living adjustments would be based on the chained Consumer Price Index known lovingly by economists at C-CPI-U. It would replace the current system of measuring inflation which, many experts say, inflates the rate of inflation. The C-CPI-U takes into account monthly changes in prices of the various items in the Bureau of Labor Statistics market basket of items we commonly buy and use. Like the price of gasoline. Or meat and potatoes. The idea is that many, if not most of us, adjust our buying habits when prices for things go up, and switch to less costly items — or drive less. That, they say, is a truer measure of the real inflation.
Critics of the switch say that the chained CPI is a statistical fix to reduce government outlays by an estimated $35 billion in coming years. Another way to put that is that millions of people, mostly those getting Social Security, but also federal retirees would see their future benefits reduced by that amount.
Not suprisingly, people are upset:
“Like Just a thought: Since a number of commentators that I’ve listened to in the last few days point out that the chained CPI does not take into account the volume and cost of health care that seniors consume, since seniors utilize health care much more heavily than other groups of Americans. So, since it appears that the chained CPI will not adequately represent the increases in costs a senior faces, and since there are multiple CPIs now, why not create a new CPI that more accurately looks at what seniors buy and, therefore, what the increase in their spending is over time due to inflation in those items?
“I’m sure such a senior CPI will not have the same deficit-reducing impact that the chained CPI will have, but why not take advantage of a mood to make changes and make a change that more accurately reflects the kind of purchases and increases in the costs of those purchases that seniors actually make?” — Wayne, a Former Fed
Interesting idea but not likely, because grandfathering in current retirees would push most of the projected savings well into the future.
So how angry and upset are federal employees? We don’t have room to reprint all the comments. But you can take a look at them by clicking here and then going to the comments section.
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