Although President Carter promised that the "first and most direct efforts" to stop inflation would be "within government itself," he ignored the inflation machine that automatically spends billions of dollars to support retired federal workers in relative luxury.
Few inside the government itself are even hazily aware of that machine or its built-in political time bomb. In about 20 years taxpayers will obligated to almost $361 billion of pension rights due retired federal workers, but not covered by contributions.
Because federal workers have some of the country's most powerful unions, most politicians do not hear the bad news. They prefer ignorance in hoped of putting off the days of political reckoning. Unions are to be feared; unknowing taxpayers are not. Still, public-opinion polls show voters today on the brink of a true taxpayers' revolt.
Unlike other pension plans, the government's retirement systems today have legal obligations about $120 billion higher than income from matching contributions of federal workers and their federal employers. By actuarial statistics, over the next 20 years this spread between income and obligations will pass the $300-billion mark.
Where will the money come from? Out of the U.S. Treasury for future decades, adding to the federal deficit and creating ever more momentum to inflaton.
The insouciance on Capitol Hill was typified last week when Sen. Gaylord Nelson (D-Wis) introduced new ledislation to put all federal employees under Social Security as the first step to end future taxpayer-financed pensions. Nelson was told by one of the foremost leaders in Congress: "This can't be needed, because the retirement system has always paid its own way." Thus, congressional fancy.
In point of fact, federal employees - postal workers, forest rangers, congressmen, government lawyers, to name only a few - contributed under $3 billion to their retirement systems last year. The government (meaning taxpayers) paid in $9.3 billion - $3 billion to match those contributions plus $6.3 billion from "general revenues," invisible in department budgets.
By 1985, those federal employees will pay $4.2 billion and the taxpayers will pay $17.9 billion, on the basis of an unrealistically low inflation rate of 4 percent. The inflation rate governs the cost of money borrowed from the treasury and built-in federal pay hikes that automatically increase retirement benefits.
Those figures do not include the even more generous, noncontributory military retirement plan. Its cost: $13 billion by 1985.
The staff of the Civil Service Commission completed a secret report on the cost of federal retirement pay a year ago. Considering its political dynamite, secrecy was understandable. Nelson, chairman of the Senate Social Security subcommittee, ran into a stone wall when he began his study of future civil service pension costs. Only after Associated Press reporter Brooks Jackson obtained a copy of the report and published highlights was it sent to Nelson.
Well aware of the political passion he will unleash, Nelson sees only one solution: Put federal workers under the Social Security System (which will notdip into the treasury if Congress does not change tax hikes passed last year). That would gradually phase out the luxurious non-Social Security systems.
Most of the 75 different federal retirement plans work on his agency each pay about 7 percent of salary into a retirement fund. But those payments are not nearly adequate to pay present and future obligations (which increased $18 billion over contributions in 1977 alone).
The forgotten taxpayer, under Social Security, works 10 years to be eligible for benefits; a federal worker earns his after five years. The non-government worker gets reduced benefits at age 62; a federal worker can retire with full benefits at 55.
President Carter's anti-inflation speech made only slight obeisance to the federal government's wondrous inflation machine: He opted for a 5.5 percent federal pay hike this year, down from around 7.5 percent. That might seem bearable considering that most federal workers got a 10 percent increase last year.
Federal employee unions screamed in protest, but their howl would be drowned out if the American taxpayer knew what was really going on.