Pay & Benefits Watch Pay & Benefits WatchPay & Benefits Watch
Key developments in the world of federal employee benefits: health, pay, and much more.

Chained to the Fiscal Cliff?

ARCHIVES

Here we are again, back in that old, familiar Washington place known as Down to the Wire.

With 19 days left until the end of the year, and even less time for cutting a deal on the fiscal cliff, President Obama and Republican House Speaker John Boehner reportedly are in their second round of the deficit reduction offer-counteroffer game.

The Republican and Democratic proposals aren’t long on specifics but both sides seem to be drawing on ideas they (and others) have floated before. Boehner’s opening parry after the White House released its first “offer,” included reducing federal pay and benefits as a way to help shrink the deficit. His second counteroffer reportedly is similar to the first one. (Second verse, same as the first.) Specifically, Republicans have called for extending the federal pay freeze, decreasing the government workforce by 10 percent through attrition and requiring feds to contribute more to their pensions. The pension proposal also is something Obama supports, although the contribution amounts from feds would be smaller under the administration’s plan.

Still, it’s looking more like any deal made before the New Year will be broad, and quite likely, short-term. In other words, there probably won’t be specific proposals reducing federal compensation included in the plan. Federal employees could dodge a bullet between now, and whenever Congress and the administration can agree on a mutually satisfactory long-term deficit reduction plan.

But civilian and military retirees would take a hit if both sides agree on a proposal to switch to what’s known as the “chained CPI” formula to determine cost-of-living adjustments for federal retirees and Social Security beneficiaries. The chained Consumer Price Index is viewed as a more accurate measure of how people substitute one item for another in the face of a price increase. The result would be lower COLAs over time. COLAs currently are determined using a formula that takes into account increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, but some experts argue that a chained CPI, which takes into account modifications in purchasing habits as prices change, provides a clearer understanding of inflation.

Republicans are floating the chained CPI proposal as part of their fiscal cliff deal; during the past few years, Obama reportedly has expressed support for switching to a chained CPI, at least in private deficit reduction talks. It also was considered by the joint congressional committee on deficit reduction, and endorsed by Simpson-Bowles, Rivlin-Domenici, and other double-barreled deficit duos.

This is how a 2010 memo from the nonpartisan Congressional Budget Office explains it: “The chained CPI grows more slowly than the traditional CPI does: by an average of 0.3 percentage points per year over the past decade. As a result, using that measure to index benefit programs and tax provisions would reduce federal spending (especially on Social Security and federal pensions) and increase revenues.”

And this is how a February article from the Center on Budget and Policy Priorities puts the issue into context: “Many of the federal government's retirement, disability and income-support programs -- including Social Security, federal civilian and military retirement, railroad retirement, [Supplemental Security Income], and veterans' compensation and pensions -- pay annual COLAs that are linked to the CPI.” The line was included under a subheading that read “Using Chained CPI Would Affect a Number of Programs and Save Significant Amounts.”

None of this is welcome news to retirees who already aren’t receiving an overly generous COLA in 2013. Federal retirees will receive a 1.7 percent cost-of-living adjustment in 2013, according to figures the Bureau of Labor Statistics released in October. And the COLA amount that recipients actually end up with is affected by Medicare Part B premiums, since those premiums are deducted from Social Security payments. The Centers for Medicare and Medicaid Services announced in November that the 2013 monthly premiums would increase 5 percent, so most retirees will end up with less than the 1.7 percent COLA.

Christmas Eve

It’s no secret feds are waiting to hear whether Obama grants them time off on Dec. 24. It certainly would a bright spot in an otherwise Dickensian Christmas in Washington this year. There’s still no word yet, but this being America and all, there is a public petition on the White House’s We the People website calling for the holiday. Click here for our recent story on it.

The petition, created Dec. 1, already has 18,242 signatures and is growing by the hour -- maybe even minute. If it crosses the 25,000 signature threshold before Jan. 1 (highly likely), then the White House will issue a response. The White House’s average response time on petitions, though, is more than a month now. By then, Christmas Eve 2012 will be a distant memory.

There is reason for hope this year, since Christmas falls on a Tuesday. The past two times that happened -- in 2001 and 2007 -- President George W. Bush gave federal employees Christmas Eve off, creating a four-day weekend. I’m willing to bet, however, that most feds would be more than happy to settle for a fiscal cliff deal that doesn’t touch their pay and benefits in exchange for the holiday.

 

Kellie Lunney covers federal pay and benefits issues, the budget process and financial management. After starting her career in journalism at Government Executive in 2000, she returned in 2008 after four years at sister publication National Journal writing profiles of influential Washingtonians. In 2006, she received a fellowship at the Ohio State University through the Kiplinger Public Affairs in Journalism program, where she worked on a project that looked at rebuilding affordable housing in Mississippi after Hurricane Katrina. She has appeared on C-SPAN’s Washington Journal, NPR and Feature Story News, where she participated in a weekly radio roundtable on the 2008 presidential campaign. In the late 1990s, she worked at the Housing and Urban Development Department as a career employee. She is a graduate of Colgate University.

FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download

When you download a report, your information may be shared with the underwriters of that document.