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Hidden disaster in new budget: Demonic plot to raid pensions
Salon ^ | December 11, 2013 | David Dayen

Posted on 12/12/2013 3:09:04 AM PST by Cincinatus' Wife

2013 has not been a pleasant year if you work for the federal government. You’ve been subject to pay freezes, furloughs and shutdowns. One of you got yelled at by a Tea Party Republican at the World War II memorial. And if Congress passes the budget deal announced Tuesday night by Rep. Paul Ryan and Sen. Patty Murray – a big if – you will get a final Christmas present: You’ll have to pay more into your pension, an effective wage cut that just adds to the $114 billion, with a “B,” federal employees have already given back to the government in the name of deficit reduction.

The deal between House and Senate negotiators Ryan and Murray would reverse part of sequestration for 2014 and 2015, itself a major source of pain for federal workers. But negotiators want to pay for that relief in future years, with the overall package cutting the deficit by an additional $23 billion. And one of the major “pay-fors” is an increase in federal employee pension contributions. President Obama’s 2014 budget included such a proposal, which would have raised the employee contribution in three stages, from 0.8 percent of salary to 2 percent. Congress had already made this shift for new hires; the Obama proposal would affect all workers hired before 2012.

That proposed increased contribution translated to a 1.2 percent pay cut, and a total of around $20 billion in givebacks over 10 years. Negotiators were pressured by the powerful Maryland Democratic delegation, including Minority Leader Steny Hoyer, House Budget Committee ranking member Chris Van Hollen and Senate Appropriations Committee chairwoman Barbara Mikulski, into softening the blow on federal employees, many of whom live in their districts. According to Sen. Murray, the increase in contributions now equals about $6 billion over 10 years. But negotiators traded some of the cuts to federal employee pensions with different cuts to military pensions, also totaling $6 billion. So whatever the occupation, people who work for the government will bear the brunt of the pain.

A small pay cut doesn’t sound like much. But you have to add that to the pile of hits federal workers have taken over the past several years. Government pay has been frozen since January 2010. The only way you’ve gotten a raise over the last four years if you work for the government is if you received a promotion or a similar advance. The Congressional Budget Office estimates that this has reduced the purchasing power of a government salary by over 7 percent since 2010. The deal to avoid the government shutdown in October finally broke this fever with a 1 percent pay raise starting in January. This budget deal would wipe much of that out.

Pay freezes are just the beginning. In February, hundreds of thousands of federal workers were forced into unpaid furloughs in accordance with sequestration’s across-the-board budget cuts. In virtually every federal agency, workers had to take as many as 15 unpaid days off during the last fiscal year. Then, when the government shutdown occurred, workers were again sent home without knowing if they would ever get paid for the missed time. The lack of cash flow stressed workers and made it difficult to pay bills on time. Fortunately, Congress did provide back pay for the 6.6 million work days missed during the shutdown. However, that comes out of agency budgets, and workers have to still complete their tasks without the ability to hire additional personnel to make up the time.

The Federal Workers Alliance, a coalition of unions representing federal employees, estimated in a message to the budget negotiators that between the pay freeze and furloughs, federal employees have sacrificed $114 billion in pay cuts over the past three years, an average of over $50,000 per employee. Yet somehow, budget negotiators are going to the well again.

It’s notable that this attack targets public pensions, which have been under assault all over the country. Last week, a federal bankruptcy judge allowed Detroit to enter bankruptcy and impair pensions for city workers and retirees, and Illinois passed a sweeping law that would cut pensions significantly. Both of those states have constitutional protections preventing cuts to pensions, but no matter. Now, under the proposed budget deal, federal pensions would be subject to higher employee contributions. The Federal Workers Alliance notes that the average annual pension benefit for federal employees is just $12,800 per year. The proposed increased costs amount to close to hundreds of dollars a year in lost take-home pay without any increase to that meager benefit. Moreover, they represent a weakening of public pensions generally, at a time when the loss of pensions in the private sector, in favor of shaky 401(k)-style plans, has contributed to a retirement crisis. The threat to a dignified end of life is now coming to government workers, who explicitly forgo wages in exchange for the promise of a modest retirement benefit.

Sequestration in 2014 was scheduled to squeeze agency budgets even more. The budget cuts are larger, particularly on the military side. Cuts from 2013 sequestration have not been fully implemented, and agencies were able to shuffle around money to lessen the pain in ways that would not be available to them next year. All this means that a full sequestration in 2014 would have, in all likelihood, lead to layoffs. Now, just as Congress closes in on limited relief from sequestration, workers are told they’ll have to pay for some of that relief themselves.

You could probably find some federal workers to blame for the economic predicament in which we find ourselves, but those would be members of Congress. By contrast, federal employees, who inspect our food, work in veterans hospitals, investigate crimes at the FBI and generally ensure the smooth functioning of essential government services, have been blasted over and over again, as if their pay and benefits packages are a cookie jar to be repeatedly raided by Congress. This has led to terrible morale for federal workers, and a difficulty in finding and recruiting new talent. Federal retirements have risen as workers cash out rather than subject themselves to more stings. If you wanted to devalue the role of government from the inside out, what we’ve done to federal employees over the past few years would be the perfect blueprint.

President Obama just gave a speech highlighting inequality as “the defining challenge of our time.” If he signs a budget deal that knocks federal employees once again, he will have contributed to the continued hollowing out of the middle class, which after all is one of the biggest causes of inequality. If you cannot secure the promise of a decent living and an honest retirement even by working for the government, then there’s little hope that we can arrest this growing split between the ultra-rich and everybody else.


TOPICS: Business/Economy; Government; Politics; Society
KEYWORDS: budgetdeal; governmentwork; pensions; politicalclass; ryanmurraybudget; sequester
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To: rlmorel

You are right, but think of this. If Salon is against this bill it HAS to be horrific.


21 posted on 12/12/2013 4:34:38 AM PST by Venturer (Half Staff the Flag of the US for Terrorists.)
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To: tanknetter

It is compulsory in about the sense that breathing is. The government is broke. It is running serial deficits. Unless you expect them to simply print money to pay for those pensions(which due to inflation would make the pensions worthless), it has to come from somewhere, and it doesn’t particularly bother me if it happens to be from the people who directly benefit from the pensions.

Alternatively taxpayers can be put on the hook for this, and the general consensus among the taxpayers here is that they are on enough hooks already.

Though actually compulsory is one of the more hyperbolic claims. Nobody has those federal employees chained to a desk, slaving away at out behest. They are perfectly free to go find a job in the private sector where they could generate wealth rather than consume it.


22 posted on 12/12/2013 4:35:06 AM PST by drbuzzard (All animals are created equal, but some are more equal than others.)
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To: Cincinatus' Wife

You citizens of the Districts have no idea how we in the Capital have suffered.

23 posted on 12/12/2013 4:35:08 AM PST by Flick Lives (Greetings from District 12!)
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To: Cincinatus' Wife

Let me see if I have this straight: “...would have raised the employee contribution in three stages, from 0.8 percent of salary to 2 percent.”

This “news” story is whining about federal employees — employees paid out of taxpayers’ pockets — having to contribute 2 PERCENT to their retirement?!?!?!?!

I was paying five percent in 1972, fer cryin’ out loud.

ESAD, whiners...


24 posted on 12/12/2013 4:39:28 AM PST by Peet (Oderint dum metuant)
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To: tanknetter
That point you raise is disingenuous (not necessarily deliberately so, on your part).

It's only compulsory because this is a defined-benefit pension fund, not a self-directed IRA or 401(k) plan. If your employer is responsible for managing your pension, then the employer has a lot of control over what you contribute.

Social Security "contributions" are a tax. A pension contribution is not.

25 posted on 12/12/2013 4:47:51 AM PST by Alberta's Child ("I've never seen such a conclave of minstrels in my life.")
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To: Cincinatus' Wife

Time to go find a real job, if you don’t like your federal feather bed. But don’t be surprised when you find there are none paying what you are getting now and that virtually all of them will require you to pay more for your fat retirement plan, the best in the nation.

Good luck on trying to find sympathy from the millions who have lost their jobs and can’t find another, or those who have been forced into part time jobs with less than 30 hours because of ObamaCare. Everyone knows the five wealthiest counties in America are clustered around Washington D.C. for a reason.


26 posted on 12/12/2013 4:51:41 AM PST by txrefugee
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To: Cincinatus' Wife
Hmmm, let me see... As a private sector employee, I get NO pension, NO free health benefits, AND I have not gotten a raise in 7 years. I have a good job working for a very well-known company, and am thankful that I HAVE a job in the crap Obama economy.

And the WaPo thinks I feel bad for federal employees? Really? Screw all of the bloody useless leeches and parasites that most of them are.

27 posted on 12/12/2013 4:57:01 AM PST by Sicon ("All animals are equal, but some animals are more equal than others." - G. Orwell x)
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To: Sicon

Salon, not WaPo. Got my Obama mouthpieces mixed up there...


28 posted on 12/12/2013 5:01:01 AM PST by Sicon ("All animals are equal, but some animals are more equal than others." - G. Orwell x)
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To: Progov

They aren’t putting money away for their retirement and that is the crux of the whole problem. They are getting a defined benefit in retirement. They do not contribute to a 401K or similar pension program. If anyone was serious about cutting the cost of government new hires would all be on a defined contribution system. You can call these proposed cuts a paycut or a tax increase, but you cannot truthfully say they are an increase to retirement contributions.


29 posted on 12/12/2013 5:03:46 AM PST by csmusaret (Will remove Obama-Biden bumperstickers for $10)
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To: Cincinatus' Wife

So my 401K contributions to my retirement account should be considered “pay cuts”? Boy have I been getting ripped off!


30 posted on 12/12/2013 5:06:05 AM PST by blackdog (There is no such thing as healing, only a balance between destructive and constructive forces.)
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To: Alberta's Child
Federal workers also have a generous 401k match. On top of the Thrift Savings Plan, which is matched 1 for 1 up to 5% of one's salary, many agencies include their own 401k in addition to the TSP, with the same match.

IOW, where can you work where your 401k contribution is matched 100% up to the first 10% of your salary?

31 posted on 12/12/2013 5:11:12 AM PST by Night Hides Not (The Tea Party was the earthquake, and Chick Fil A the tsunami...100's of aftershocks to come.)
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To: Night Hides Not
Do Federal workers have BOTH a pension and a 401(k), or is it separated based on hire dates -- with pensions for older workers and 401(k) plans for younger ones?

P.S. I think a 401(k) is only for private companies, so I'm guessing the Federal version of this is something different -- maybe a 403(b)?

32 posted on 12/12/2013 5:13:33 AM PST by Alberta's Child ("I've never seen such a conclave of minstrels in my life.")
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To: Venturer

Actually the opposite is usually true. If salon is against a bill it’s a good one. In this case they are railing against pension reform...but that’s the good part of the bill.


33 posted on 12/12/2013 5:30:19 AM PST by what's up
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To: tanknetter

not even close to the same. It is more like if your company changed your benefit package. Most companies went away from this model long ago.


34 posted on 12/12/2013 5:35:59 AM PST by pas
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To: Cincinatus' Wife

The Federal Workers Alliance notes that the average annual pension benefit for federal employees is just $12,800 per year

I call that, absolute BS


35 posted on 12/12/2013 5:39:14 AM PST by Undecided 2012
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To: Night Hides Not

IOW, where can you work where your 401k contribution is matched 100% up to the first 10% of your salary?

My daughter works for the local sheriff’s office. They match at (this is gonna be hard to believe) at 250%, plus a guarantee of 7% interest. I did the numbers and told her, I’m not sure if the politicians (and yes this is Texas) know that this is way better than if you even had a defined plan. She must be vested at 8 yrs. The only good thing this plan has vs defined is that there is only a 7% payment after you no longer work there BUT when I ran the numbers, if she saves $1,000,000 before retirement which will be easy as she’s only 26, they’ll be paying out $70K per year just in interest alone. I asked her if she can max it out and she said no, everyone contributes 6%. If you leave before 8yrs you only get back what you put in but if you stay on it I very very lucrative.


36 posted on 12/12/2013 5:49:50 AM PST by Undecided 2012
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To: Alberta's Child
Do Federal workers have BOTH a pension and a 401(k), or is it separated based on hire dates -- with pensions for older workers and 401(k) plans for younger ones?

I believe they are separated based on hire dates: there's an "old system" and a "new" system. My wife opted for the old system when the feds moved toward the defined contribution plan.

When I accepted a term contract a few years ago, I was limited to the 401k (with the match...a no-brainer). I'm also paying back additional money to "buy back" my military years to increase my annuity later on.

I don't pay that much attention to the various plans, all that reading makes my head hurt...lol.

Yes, I will be one of those evil "double dippers", drawing SS and a (small, very small) federal pension. However, I've paid in to SS for 30+ years, and I'm following the rules on the other plan.

37 posted on 12/12/2013 6:17:32 AM PST by Night Hides Not (The Tea Party was the earthquake, and Chick Fil A the tsunami...100's of aftershocks to come.)
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To: Cincinatus' Wife

Major disconnect between the headline and the article.

I thought this was another story about Theresa Ghilarducci and that long rumored plan for the Feds to help themselves to our 401K.

Instead it’s about a bunch of government union workers whining about a tiny cut to their pensions.


38 posted on 12/12/2013 6:34:41 AM PST by Buckeye McFrog
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To: Salvavida

Thanks. That’s how it is to some extent with management in general, no accountability. If a guy in the trench makes a minor mistake he’s held accountable yet managers can make major mistakes with none of their fellow managers batting an eye. Those managers live by the motto; “Beatings will continue until moral improves.” about the guys in the trenches. You can substitute safety or other words for moral. The double standard is nauseating.


39 posted on 12/12/2013 6:36:41 AM PST by dynoman (Objectivity is the essence of intelligence. - Marylin vos Savant)
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To: Cincinatus' Wife

Pay cuts and adjustments to pension funding is not the solution.

The solution is to DownSize DC! Close entire Rogue/Unconstitutional Departments. Move any worthwhile functions back to the States. Get the Fed Monster out of our lives except for what is constitutionally authorized and makes sense.

This is the only path out of this mess.


40 posted on 12/12/2013 6:37:27 AM PST by Texas Fossil
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