A 4 percent ceiling on annual inflation adjustments for federal retirees over the next three years was approved yesterday by the Senate Governmental Affairs Committee as Senate committees appeared to exceed their overall target for spending cuts in the budget that Congress approved last month.
The lid on inflation adjustments, which would save an estimated $5 billion by 1985, would affect about 3 million federal retirees, both military and civilian. A pay cap of 4 percent for active federal workers is also prescribed by the budget, but it will be handled under a separate process later in the year.
The retirees' cost-of-living cap would give them less than half the 8.7 percent increase they received this year and less than two-thirds of what the Congressional Budget Office estimates they would otherwise get under the existing no-limits linkage of inflation adjustments to the Consumer Price Index (CPI).
Yesterday was the deadline for Senate committees to come up with "reconciliation" savings of $27.2 billion in benefit entitlement programs by 1985 to comply with mandates of the budget. A preliminary, unofficial count indicated they had proposed cuts of about $29.5 billion.
On the Senate floor, Republicans won a series of procedural test votes on the tax bill, demonstrating a level of unity which, if it holds up through the final vote, guarantees the bill's passage. The bill would raise taxes by $21 billion in 1983, and force domestic spending cuts totaling $4.2 billion that year.
By votes of 53 to 44 and 54 to 43, Republicans cleared the way for Senate approval of reviving the Airport and Airways Trust Fund, which would authorize spending $20 billion in airport development and equipment over the next five years.
Democrats were unanimously opposed to allowing the addition, contending that it sets a precedent under which the budget bill can be used as a vehicle for any kind of legislation, including such controversial proposals as antiabortion amendments or prayer in public schools. The Democrats were not opposed to the airport legislation itself, which was approved by a vote of 93 to 5.
Meanwhile, the Democrats unveiled their plan for amending the Republican-written tax bill. The substitute would defer until the budget is balanced the third stage of the individual tax cut, due next July 1, for families with incomes above $46,000 a year. Those earning $40,000 to $46,000 would get a portion of the reduction; those below $40,000 would receive the full 10 percent cut as scheduled.
The Democratic plan, spelled out by Sen. Bill Bradley (D-N.J.), would eliminate Republican proposals for raising taxes on cigarettes and telephone service and continue current-law deductions for medical expenses and casualty losses. GOP spending cuts that would require Medicare recipients to pay more for supplementary benefits would be eliminated.
A vote is expected on the Democratic plan Wednesday.
Republican sources said they hope to finish the tax bill today. The one section of the legislation facing the possibility of GOP defections is a proposal to require 10 percent withholding on dividend and interest income, they said.
House committees have until Aug. 1 to make their spending retrenchment proposals, and the job of meeting the targets is expected to be more difficult in the Democratic-controlled House than it was in the Republican Senate. The federal pension cap, for instance, is expected to encounter resistance when the House Post Office and Civil Service Committee meets today on its designated budget cuts.
While the Governmental Affairs Committee has jurisdiction only over Civil Service retirees, its action automatically brought military and other federal retirees under the proposed cap as well.
Cost-of-living adjustments (COLAs) had been a chief target for many congressional budget-cutters who argued that restraint in annual inflation adjustments for benefit programs was imperative in bringing the growth of domestic spending under control.
But both President Reagan and Democratic leaders flinched from the idea of capping Social Security increases and other programs were dropped as well, leaving federal retirees as a primary target for restraint in COLAs.
In yesterday's committee session, Democrats, led by Sen. Carl Levin (D-Mich.), attempted to soften the pension blow by proposing an alternative under which retirees would get 2 percentage points less than the CPI, saving only about two-thirds as much as the 4 percent cap. It was defeated 9 to 5, on a largely party-line vote in which Sen. Charles McC. Mathias Jr. (R-Md.) voted with his constituents instead of his party to support the smaller pension cutback.
Then the committee approved the 4 percent ceiling, on a tentative vote of 10 to 3.
As chairman of the civil service subcommittee, Senate Minority Whip Ted Stevens (R-Alaska), who has often campaigned for federal pay and pension increases, led the fight for the 4 percent lid, although he said it was with reluctance.
Stevens contended that the the committee's "reconciliation" target could not be met without the cap and said retirees shouldn't get more than 4 percent when active workers were being limited to raises of no more than 4 percent.
The committee also approved a proposal under which retirees from high-grade jobs could no longer get bigger inflation adjustments than active workers, which, among other things, would put a damper on big pension increases for former members of Congress.
While there is still some doubt as to whether House committees will meet their reconciliation targets, most if not all Senate committees appear to have done so, although one or more have fallen somewhat short in prescribed savings for the years beyond fiscal 1983.
As part of the budget passed by Congress last month, committees of both houses were instructed to come up with $6.6 billion in spending savings for next year, adding up to $27.2 billion by 1985.
These cuts, coupled with three-year totals of $98 billion in tax increases, $26.3 billion in defense spending cuts, $26 billion from federal pay and $35.3 billion in nondefense appropriations savings, constitute the congressional share of an estimated total of $378.5 billion in deficit reductions over the next three years. A presumed reduction in interest costs and an estimated $46.4 billion in "management savings" account for most of the rest of the anticipated deficit reductions.
Appropriations savings, both from defense and domestic programs, are to be made later as money bills, held up in the five-month fight over the budget, begin threading their way through Congress later this summer.
By proposing cuts in Medicare and most of the big welfare programs, the Senate Finance Committee, in its bill now on the Senate floor, has exceeded its target with $17.5 billion in spending cuts over the next three years, mostly from Medicare and Medicaid.
Medicare, the old-age health program, is sustaining the biggest single cut of all domestic programs: $13.3 billion by 1985, including increases in out-of-pocket costs for recipients as well as new limits on government reimbursement of hospitals.
Food stamps were squeezed by $2.6 billion over three years by the Senate Agriculture Committee. A House Agriculture subcommittee voted to cut only $206 million from the food-stamp program for 1983 and to leave the program intact through September, 1985.