House-Senate conferees wrapped up their latest round of budget cuts yesterday by voting to delay payment of cost-of-living increases to federal pensioners and to cut the increases for younger retirees by half.
The pension compromise, which is subject to final approval by the House and Senate later this week, climaxed a lengthy, volatile congressional struggle in which the expensive inflation adjustments for government retirees became a central issue in the drive to cut federal spending.
Along with new limits on dairy price supports also approved today, the money saved by the pension compromise brings the spending cuts approved by the conferees to almost $30 billion. Combined with the $98.3 billion tax increase that Congress also will be voting on later this week, the package emerging from House-Senate negotiations is designed to reduce federal government budget deficits by about $130 billion over the next three years.
In his nationally televised address last night, President Reagan called on Congress to give final approval to this "bipartisan comprehensive package of revenue increases and spending cuts" as "a price worth paying" to reduce budget deficits and assist economic recovery.
Although there was disagreement over the validity of some of the claimed savings, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said it appeared that they would exceed the overall targets set in the budget that Congress approved earlier this summer.
The federal pension issue was the knottiest of the spending cuts and the last to be resolved -- crucial, in the minds of many conservative lawmakers, to passage of the tax measure. It was also both sought and fought as a possible opening wedge for broader future cuts in other government benefit programs, principally Social Security.
Under the compromise approved yesterday by the conferees, payment of annual inflation adjustments for all military and civilian pensions would be delayed for one month in each of the next three years, meaning that each payment would cover 13 months instead of the current 12 months.
In addition, the estimated 1.1 million retirees who are under age 62 would receive only half the cost-of-living increase to which all retirees are now entitled in accord with rises in the Consumer Price Index. This means that if the CPI-set increase for pensions is 6.6 percent next year, as predicted, retirees who are under 62 would get a 3.3 percent pension increase, while older workers would get the full 6.6 percent. Survivors and disabled annuitants would continue to get the full adjustment, however, regardless of age.
Among other smaller changes, an estimated 140,000 military retirees who hold civilian government jobs would have their salary inflation adjustment reduced by an amount equal to their military pension increase. And most government workers would get docked an estimated $3 to $9 a year because of an accounting change in computing hours in a work year.
The pension and pay savings add up to $4.1 billion over three years, about $1 billion short of the budget target but "excellent compliance," according to Domenici, in light of the merely token savings the House had earlier approved.
While the Senate had won most of its proposed savings, it had to give up its proposed 4 percent "cap" on cost-of-living increases for all government pensioners, which had been viewed as a possible precursor for similar limits on Social Security adjustments. House Post Office and Civil Service Committee Chairman William D. Ford (D-Mich.) claimed this meant that the "principle" of tying pension increases to the CPI had been preserved, although the issue of limiting cost-of-living increases is surely not dead.
The agriculture conferees reached their agreement by quickly approving a dairy program that drew U.S. Department of Agriculture objections as unworkable, although officials stopped short of threatening a presidential veto.
"I'm not here to say the president would veto this," said William G. Lesher, assistant secretary for economics, "but if this is enacted, there is a high probability that the administration would seek changes in the program early next year."
All sides agreed the plan would save money, but no one was certain how much. The USDA calculated savings between $2 billion and $2.5 billion through 1985. The Congressional Budget Office calculated $4.5 billion.
Overall, the farm and food savings over the three-year period are calculated at $7 billion. That includes $1.9 billion in food stamps, mostly in scaled-back benefits, and savings of $361 million in the wheat, feed grain and rice programs, by raising price supports and paying farmers not to plant part of their crops.
But the big-ticket item was dairy. With government spending on dairy surpluses expected to exceed $2 billion again this year, the administration has put Congress under renewed pressure to devise a formula for curbing costs and reversing the rise in production.
The conferees' plan calls for freezing the current dairy price support at $13.10 per hundredweight for the next two years, but farmers actually would get only $12.60. To deter production, they would be "assessed" 50 cents for each 100 pounds, with the proceeds channeled to USDA to help pay for handling surpluses.
The 50-cent penalty would be suspended when government purchases fell below 5 billion pounds during one year. If projected surpluses go beyond 7.5 billion pounds, however, the secretary could levy a second 50-cent fee per hundredweight, cutting the effective support price to $12.10. Rebates of that assessment would go to farmers who cut their production.
Lesher and other USDA officials contended that the conferees' plan will cause administrative problems in collecting the assessments, while at the same time encouraging deception by farmers.
Those objections notwithstanding, the tone of the conference was one of saying good-riddance to a dairy-cost problem that has plagued Congress since early last year when President Reagan attacked the program head-on.
"It must be a good compromise," said Sen. Thad Cochran (R-Miss.). "The administration has problems with it and the dairy industry has some problems with it."
To reach their agreement, the conferees also scrapped an unusual House plan, drawn up by the industry, that called for creation of a producer-controlled National Dairy Board, which would have been empowered to partially control price-support levels and to purchase and resell surpluses. Also ditched was a House plan to set up a dairy products promotion scheme.