CBO: Policymakers should consider trimming benefits to feds, vets

This story has been clarified to emphasize that CBO is nonpartisan and does not make specific policy recommendations. The head of the nonpartisan Congressional Budget Office on Friday reiterated that policymakers consider trimming federal employees' retirement benefits to help reduce the deficit over the long term.

CBO Director Douglas Elmendorf last week outlined ideas on restoring the federal budget to health, which could include less generous benefits for federal civilian and military retirees in addition to cuts in veterans' benefits. The comments were posted on the Director's Blog. Elmendorf said the government could "substantially reduce" its role in other areas including defense, unemployment compensation, transportation and health research.

CBO is a nonpartisan office that does not make specific policy recommendations to lawmakers.

Specifically, Elmendorf said the government must deviate from the policies of the past 40 years in at least one of the following ways:

  • Increase federal revenues significantly above their average share of gross domestic product;
  • Implement major changes to benefits, including Medicare and Medicaid, for seniors;
  • Substantially reduce its role in areas such as vets' benefits and federal employees' pensions.
"Continuing Social Security and major health care programs -- most of whose benefits go to older Americans -- in their current form, and operating the rest of the government in line with its role in the economy and society during the past 40 years, would cost 23.7 percent of the GDP by 2021," wrote Elmendorf. "That amount exceeds the historical average revenue share of GDP by nearly 6 percentage points -- and interest payments on the debt haven't even been included yet."

A March CBO report on reducing the deficit included several proposals that would alter federal pay and benefits, including:

  • Smaller annual pay increases for federal civilian workers and military personnel
  • An increase in medical cost-sharing for military retirees who are not yet eligible for Medicare
  • A decrease in TRICARE health benefits for military retirees and their dependents
  • A voucher plan to help slow the growth of federal contributions to the Federal Employees Health Benefits Program
  • An end to enrollment in Veterans Affairs Department medical care for vets in priority groups 7 and 8
The report said if the government capped the basic pay increase for service members from 2012 to 2015 and set raises at a rate 0.5 percentage points below the increase in the Employment Cost Index, it would save about $6 billion between 2012 and 2016, and $17 billion between 2012 and 2021. Since 2001, lawmakers generally have approved military pay raises for the average service member that exceeded the ECI by 0.5 percentage points.
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