“I really doubt the federales fear a reduction in retirement benefits. As you know, they get nowhere near what their counterparts (if any) in state and local government get.”
Your statement is largely misinformed about benefits and ignorant about the impact of the coming financial meltdown. Federal retirement compensation matches or possibly exceeds the most lavish state plans. You are focusing on the benefit rate (1% compared to 2.5%) for the most lavish state plans (benefit rates are 3% for law enforcement in some state plans). You are missing some very important components of retirement compensation that compensate for the lower benefit rate. Federal employees contribute less than 1% (0.8% I believe) for the defined benefit plan. The federal government contributes 11.2% but this contribution is different than state contributions because the federal government does not have portfolio to support benefits. the defined benefit plan for federal employees provides an early retirement bonus. From age 57 to 62, federal retirees receive an additional payment to provide essentially early Social Security benefits. Federal pensions are substantially increased by a generous COLA (CPI-W - 1). No state plan has anything close to the same COLA. Federal government retirees also receive generous early retiree medical benefits. Federal retirees must pay the same rate as employees, a very large benefit. Early retiree medical benefits exist in some state and local government plans. In addition to these lavish benefit levels, federal retirees also have a 401K plan in which the employer contributes 5 percent. The combination of the very low employee contribution, early Social Security subsidy, COLA, medical benefits, and 401K plan are on par with the best state/local government plans.
The federal government has no portfolio to support federal retiree benefits. There are large unfunded liabilities (more than $1 trillion) for federal pensions. The federal government will be forced to substantially reduce spending either directly or indirectly in the coming decade. It looks like indirect reduction through a substantial decline of the dollar will occur. Federal pensions will not be spared in the coming financial meltdown. Your federal pension just like other forms of government spending are not secure. It is basically dependent on the full faith of the government which will not be worth much in the coming decades.
“The federal government has no portfolio to support federal retiree benefits. There are large unfunded liabilities (more than $1 trillion) for federal pensions.”
You forget one huge difference between Federal pensions and state/local pensions: unlike states and cities, the federal government can print money to pay its obligations.
You do allude to the danger of inflation, which is proper. But in that case, federal retirees will suffer the effects just like every other American.