The government could trim more than $100 billion from its deficit over the next decade through spending cuts that would directly impact federal employees and retirees, according to an analysis done for Congress.
A Congressional Budget Office report issued last week lists deficit reduction options, many of which it raised in similar past reports and that House Republicans and others have used in budget plans.
The nonpartisan CBO does not formally recommend policy changes, but its analyses carry weight because they “score” such measures as actual deficit reduction in the congressional budget process.
Options specific to federal employees and retirees include:
- Basing the calculation of retirement benefits for those who retire in 2016 and later on the highest five consecutive salary years rather than the currently used three years, for a 10-year saving of $3.1 billion.
- Shaving a half-percentage point off the annual federal employee raises indicated by a pay law’s formula — which has not been used in pay-setting decisions of recent years in any event — for a 10-year saving of $53.6 billion.
- Allowing federal agencies to fill only one of every three vacancies, with certain exceptions, until the workforce is reduced by 10 percent, for a 10-year saving of $49.4 billion; agencies would not be allowed to backfill with contractors.
Also, one option, changing to the “chained” Consumer Price Index, would impact federal retirement along with Social Security, military retirement and various other programs indexed for inflation. That measure is designed to take into account changes in what consumers buy as the prices of certain goods rise. Using that measure would hold down the rate of increase by a quarter of a percentage point each year compared with the current method, meaning spending $116 billion less over 10 years, CBO said.
The idea has been included in budget plans including a 2013 proposal from the Obama administration.
Richard G. Thissen, president of the National Active and Retired Federal Employees Association, said in an e-mailed statement that neither the current CPI measure nor the chained CPI accounts for the disproportionately high percentage of income that retirees spend on costs such as health care where inflation has been higher than the overall average.
“Inflation protection is a vital part of any federal benefits program, and NARFE welcomes a discussion surrounding the adequacy of the current measure,” he said. “However, having this discussion within the context of deficit reduction strategies clouds the debate regarding the role inflation plays in the lives of our nation’s seniors, veterans and the disabled.”
Also included in the report are options to increase the amount of money going into, and to decrease the amount of money going out of, Social Security, which covers about nine-tenths of current federal employees although only a quarter of retirees.
It also includes various options for reducing spending on a range of programs including defense, agriculture, transportation, space, education and veterans, as well as options for increasing tax revenue.