President Reagan's proposals to freeze the pay and slash the retirement benefits of federal employees are both unfair and unfounded. They further erode the family budgets of a work force already demoralized by pay caps, furloughs, reductions in force, increased health-plan premiums, and decreased health-plan benefits. At the same time, they do virtually nothing to stanch the hemorrhaging, self-inflicted Reagan deficits.
Federal workers have consistently been asked to sacrifice on behalf of national economic goals. Even in better times, when other Americans received pay raises in line with the rising cost of living, we had our pay held down in the name of holding the line on inflation. We have been sacrificing for each of the last six years, to the point where federal pay is now 20 percent below private sector pay for equivalent jobs.
If Mr. Reagan is sincere in his desire to reduce federal deficits, perhaps he should consider the following bugget alternatives:
Aim for a reasonable rate of growth in defense procurement.
Continue to relax tight monetary policy.
Cap the third year of the tax cut for households earning more than $50,000 a year.
Provide countercyclical assistance to state and local governments. (Help them put people back to work.)
5 Reform the 1981 federal depreciation rules, which drastically reduced corporate income taxes.
Repeal indexation of income-tax rates, slated to take effect in 1985.
Close tax loopholes that funnel money into unproductive uses (e.g., the capital gains exclusion for investments in jewelry, art, and antiques).
The enactment of any of these suggestions (except for the repeal of the 1985 tax indexing) would have a salutary effect on the 1984 budget deficit, which is more than can be said for the president's proposals to raise the federal annuities from the highest three-year average salary to the highest five-year average.
But beyond that, there are serious inequities in the proposals concerning federal retirees.
Among the inducements to a career in the federal--or postal--service, is retirement at age 55 after 30 years of work, with a pension based on an employee's highest average salary over a consecutive three-year period. The administration's proposed changes would be a breach of promise for current federal and postal workers. Moreover, they would serve as a disincentive to federal service for talented young job seekers.
If, as many warn, the attacks of the past years on the pay, security and status of federal workers threaten to cause a "brain drain" within the civil service, these assaults on the Civil Service Retirement System will only speed up that process.
The same argument can be made against the Social Security advisory commission's proposal to take all new federal workers into the Social Security system as of Jan. 1, 1984. The commissioners (with the exception of Lane Kirkland), the president and the speaker of the House may all support the plan; but that does not necessarily make it wise or fair.
The CSRS is a sound, adequate pension plan. Social Security, in contrast, was never meant to be a retirement plan; it was designed as an old-age income floor. Our system provides adequate benefits (subject to federal, state and local taxes), flexible retirement ages, and full cost-of-living adjustments, because we have worked hard and contributed generously to it over the last 62 years.
Although the "newly hired only" feature of the commission's report seems like a fair compromise, the fact remains that without the contributions of new employees, the CSRS will fall apart. The absorption of all new federal pension monies into Social Security will bankrupt the CSRS in less than 20 years, necessitating yet another salvage operation. The proposal only looks worse when one considers the attendant liabilities the Social Security system will face: small revenues in comparison to benefits paid out to federal and postal retirees.
Had all government workers been covered by Social Security rather than the CSRS in 1982, $2.4 billion would have been lost in federal taxes. Reducing current unemployment by 1 percent, on the other hand, would bring more revenues to Social Security than would be gained by taxing federal employees. Those two facts alone should indicate that quick fixes and half-baked proposals are not solutions to America's budget deficits and Social Security shortfalls.