It's that time of year again. Beginning with April 1 checks, retired military and federal civil servants will receive a boost in their annuities to compensate for rising living costs. This time the increase will be 6 percent, covering the six-month period from June to December 1979. Six months ago, the bonus was 6.9 percent. Next time, in view of the most recent price reports, who knows?
Don't misunderstand me: how can I object when I am one of the almost three million benefiting from the system? Besides, the increases are not designed to give the retired any advantage, just to help them keep up with inflation by adjusting their annuities in line with increases in the Consumer Price Index (CPI). Yet, from time to time, I can't help thiking that someone (taxpayers?) should be raising a few questions:
1. Why are federal retirees entitled to bonuses every six months while Social Security recipients receive their cost-of-living hikes only once a year? There is a real difference, both to the beneficiary and to the taxpayer, between a single annual increase and two semi-annual increases. When a proposal was developed to put the two systems on the same (Social Security) track, the budget savings were projectedat about $200 million the first year and over $800 million in each subsequent year.
2. How accurate are living conditions of federal retirees measured by changes in the CPI? In the past, there may have been times when the CPI understated aprice changes for the elderly because rapidly rising food and medical costs fell more heavily on them than on the "average" family. With Medicare, however, this is no longer true of medical-care costs. Also, because of a large proportion of the elderly own their homes, they are protected against the rising costs of new mortgages, a major factor in this year's CPI rise. Nor do they depend so heavily on the automobile and the price of gasoline.
3. Can the country continue to afford full protection for retirees against rising prices? In the old days when the economy was more productive, inflation less menacing and the international scene more tranquil, this protection was a valuable way to maintain equity between the active and the retired population. More recently, with inflation far more serious from sources far more difficult to control, many well-accepted policies have had to be reconsidered. If, as seems likely, the country must devote a higher proportion of its output to defense needs, this puts even greater strain on the uses to which the civilian economy is devoted. As for maintaining equity with the working population, in 1979 workers were asked to limit their increase in wages to 7 percent annually, and the comparable target for 1980 will almost certainly be 7 1/2 percent to 9 1/2 percent, still well below this year's expected inflation rate. Should retirees be entitled to more?
Obviously, it is much easier to ask than to answer these questions, and a full discussion of them would require a far more detailed investigation. Let me merely suggest one approach worth considering. The generous nature of the federal retirement system is well known; it encourages early retirement -- by military beginning in their 40s, for civilians beginning at age 55. Many of the younger retirees continue in the labor force. That is good; the country can use their contribution. But do these relative youngsters require full protection against any upward creep of the CPI? Might it not be sufficient to protect this group against, for example, only half the rise in the CPI, assuming that they are young and active enough to supplement their annuities by their own efforts? Some exceptions might be in order -- the fully disabled, for example. Then at a later age, perhaps 65 or 70, all retirees would be given full protection against CPI increases.
The savings generated by this proposal could be substantial, but more than money is involved. If belt-tightening is to be the order of the day, the retired should also make a contribution.