Obama wants to increase contributions by federal employees to their pension plan as one of his tools to fight the nation’s deficit. The increase of 1.2 percentage points, which would be phased in beginning in 2013, would generate $21 billion in savings over 10 years. That’s not much in the overall deficit reduction target of $4 trillion, but individual employees would feel that hole in their pockets.
The plan calls on federal employees to share the burden “to make sure our fiscal health is strong,” without hurting the government’s ability to recruit and retain good workers, Office of Personnel Management Director John Berry said in an interview.
A separate proposal that could result in reshaping the federal civil service could have a much greater impact on federal employment. This call for a congressional Commission on Federal Public Service Reform doesn’t carry a price tag, so it will be largely overlooked for now. But don’t forget about it. It has the potential to change the lives of federal employees.
Back to the retirement payments. Obama’s plan is modest when compared with calls for mandatory furloughs, extending the federal pay freeze, reducing retirement income and a range of other daggers pointed at federal workers.
Nonetheless, who can blame federal union leaders for the anger they have toward Obama’s plan? After all, federal employees were among the first to be sacrificed on the altar of deficit reduction. They still have to live through most of the two-year pay freeze that was imposed in January. That’s worth $60 billion.
The American Federation of Government Employees quickly called the Obama plan unfair. For an employee with an annual salary of $47,500, AFGE said, the plan amounts to a $570 annual pay cut.
“Asking federal employees to accept additional cuts to their take-home pay is unfair, especially at a time when citizens are demanding more services from their government,” said AFGE President John Gage. “This is a double whammy for federal employees, who are facing the same economic hardships as most other Americans. Enough is enough.”
And contrary to Berry’s prediction, National Treasury Employees Union President Colleen M. Kelley said that over time, “continually targeting the federal workforce will impact the government’s ability to attract and retain the caliber” of people the nation needs.
AFGE tried to place the retirement contribution hike in taboo territory, saying “The proposal amounts to a $21 billion tax increase on federal employees, a stunning violation of the president’s promise not to raise taxes on families earning under $250,000. No federal employee earns anywhere near that threshold.”
Framing the plan as a tax increase is a slick move, and there’s more to it than union rhetoric.
An August 2009 report from the Congressional Budget Office looks at various budget options, including an “increase in federal employees’ contributions to pension plans.” Obviously, this 2009 report was written long before Obama’s plan was released on Monday. But it’s telling that this option was included in a chapter on “taxation of payroll income.”
If the president’s proposed increase in employee contributions to retirement costs can legitimately be considered a tax increase, where does this leave Republicans who have taken a vow against tax increases? Where does this leave Obama, who does not want to raise taxes on middle-class families?
It leaves them with the more common definition of tax increase. Rep. Dennis A. Ross (R-Fla.), chairman of the House federal workforce subcommittee, welcomed the president’s plan as “a first step.” His spokesman later said that Ross would not consider the plan as a tax increase, because the money does not go to the general fund; instead it goes toward a fund meant to benefit the individuals paying into it.
Ultimately, the tax increase rhetoric probably won’t be as strong for the unions as reminding everyone that federal workers are already paying to prop up Uncle Sam. And they will pay even more when the White House and Congress settle on how to arrive at trillions of dollars in deficit cuts. However it’s sliced, much if not most of that money is going to come from government spending, and that could mean further cuts to the federal payroll and additional employee contributions for benefits.
“Federal workers have already made tough sacrifices that they can ill afford in these tough economic times,” said Rep. Elijah E. Cummings (D-Md.), the top Democrat on the House Oversight and Government Reform Committee. He opposes the increased retirement payments for federal workers.
But many others in Congress don’t. In fact, members like Ross favor even tougher measures.
It could have been worse for federal employees, and it still might be.
Staff writer Eric Yoder contributed to this column.