Boehner pushes COLA cuts in fiscal cliff talks


Multiple news organizations are reporting that House Speaker John Boehner included the so-called chained Consumer Price Index in his latest proposal to President Obama seeking to avert the fiscal cliff.

This would put a big dent in the deficit — perhaps raising more than $290 billion over a decade — but it would hit federal and military retirees right in their pensions. Economists say the chained CPI is a more accurate method of determining inflation that is usually 0.25 to 0.30 percentage points lower than the current method. Adopting it for pensions, Social Security benefits and other indexed portions of the government’s budget would, over time, dramatically lower cost-of-living adjustments. The change would mean only a few hundred dollars at first for federal retirees. But its effect would compound over time, until eventually federal retirees would likely earn tens of thousands of dollars less than they would under the current system.

As Federal Times reported last week, several federal employee groups had been fearing momentum was building on Capitol Hill to adopt the chained CPI. They oppose such a change, and say federal employees have already contributed $103 billion to deficit reduction over the next decade.


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  1. $290 billion over 10 years represents a “big dent” in the deficit? Annualized, given trillion dollar annual deficits this “big dent” is 2.9% of the annual deficit. The cost to retirees would be huge, given that health care, food, medicine and utilities, all of which are excluded from calculationg the CPI, constitute large portions of their expenses.

    Instead of nibbling around the edges, why not take the bull by the horns and reduce federal manpower? The DoD has 150000 more civilians than it did 10 or so years ago. We can and should reduce headcount. Every agency should strive to cut their staffs by 5% per year for the next 5 years and capitalize on technology for productivity gains. In the long run, far more money is saved than by nickeling and diming retirees.

  2. Pingback: Fedline » Federal unions plan ‘Day of Action’ Tuesday to protest cuts

  3. While reduction is workforce may sound good, the reality is that the reduction in workforce cannot occur without a reduction in services. It’s the need to provide the services that costs money, either in government employees or contractors. I have yet to see either political party suggest an actual, honest, reduction in services to correlate with a reduction in workforce. It’s either do more with less, or hire out their contractor buddies to do the work more “efficiently” without any requirement for proving they actually are.

  4. Both the FERS and the CSRS pension funds have large enough balances to pay out the pensions owed, at the rates agreed to at the time the workers came on board. The problem is that these funds are in the form of IOUs from Congress.

    When the CSRS pension fund was first established back in the 20’s, there were plenty of funds coming in, with little going out for the first couple of decades. The politicians of course were not going to let a pile of money sit around when they could spend it on their pork-barrel projects. So as revenues came in to the fund and payments went out, any increase to the fund was grabbed by Congress and an IOU was written.

    This continued until FERS came along. The FERS fund in its early days grew rather quickly as there were few pensioners collecting for the first couple of decades. And as happened to CSRS, Congress took the fund’s cash and replaced it all with IOUs.

    The problem is that since CSRS has not had any new blood come in to pay into the fund, the payouts are now exceeding the receipts. The politicians are upset because they never actually intended paying back any of those IOUs they wrote, but are now having to do so in order to meet their obligations to the CSRS retirees.

    I recently heard that the balance of IOUs in the CSRS fund is around 680 billion dollars, and is going down due to the excess of pensioners to contributors at this time. However given the size of the balance it is expected that when the very last CSRS pensioner passes away, there will still be around 170 billion in unredeemed IOUs that the Government will then just conveniently forget about.

    So the conclusion is that all of the politicians’ efforts to increase pension contributions and reduce pension payouts is nothing more than trying to overload these funds so there is plenty of cash to borrow with no intention of ever paying it back. Something that in the private sector is known as looting the pension fund, and is highly illegal.

  5. The truth is the political employees of the USA are weak. The major disaster (depression) is the inevitable conclusion of the lack of leadership in the USSA. While they try to figure out ways to lie and cheat the books out of this mess, a true repair is ignored, laziness, incompetance. The lier’s lie to the lier’s, parasites feeding on each other. Self destruct sequence enabled, sad part is the political emploees have children, (all sides) yet they naively assume the bubble around them is better than the bubble around anyone esle. fools being fooled. Morals and values have been redefined to suit the pigs. Everyone loses, mostly the children.

  6. Adding to Steve’s comment, Congress has looted the civil service retirement system and the Social Security Retirement System. All the crap about state retirement funds having problems is the same thing. The governors loot the state retirement systems to balance their budgets and put IOU’s in them. The retirement systems are not the problem, its the elected officla s stealing from the systems with no intention of ever paying them back. Those looted balances are your unfunded liabilities,

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