As lawmakers debate how to avoid the first-ever U.S. government default by raising the federal debt ceiling, some areas of consideration include federal workers’ pensions as well as federal pay reductions.
While negotiations are still in the early stages, all areas are being looked into for potential cost savings and budget cuts. At a recent conference by the Bipartisan Policy Center on the deficit and raising the debt ceiling, key lawmakers said all reductions should be considered, including pay and pensions.
"We ought to all be willing to put everything on the table," said House Minority Leader Steny Hoyer, D-Md, as reported by Government Executive.
Rep. Gerry Connolly, D-Va., agreed with considering all areas for cost savings, yet said reducing federal pay and benefits would only make federal employees “scapegoats" for the deficit.
Congress must raise the $14.3 trillion debt limit by Aug. 2 or risk a first-ever government default said Treasury Secretary Tim Geithner. While the limit was reached on May 16, the Treasury Department implemented what it called “extraordinary” measures to keep the government from defaulting on its loans. The Obama administration and several economists have warned that Congress must raise the debt limit by Aug. 2 to avoid economic catastrophe.
The fiscal 2012 budget resolution passed by the Republican-ruled House called for a freeze in federal pay through 2015 and for federal employees to pay half the defined benefit they receive with their pensions at retirement.
"Federal workers deserve to be compensated for their important work, but pay levels, pay increases and benefit packages need to be reformed in line with the private sector," said the GOP resolution.
As it is now, most federal civilian workers contribute 0.8 percent of their wages to pension benefits, and the government contributes 11.2 percent of payroll. A revision to the rule requiring workers and the government to contribute 6 percent apiece would save about $121.7 billion if implemented immediately, according to the House Budget Committee.
The House budget reveals Republicans are leaning towards gradually phasing out government pensions in favor of a system that lets employees decide how to invest their retirement savings, much like the private sector does.
Also, the bipartisan presidential deficit commission recommended a three-year civilian pay freeze across government and an increase in the amount of money federal employees pay in premiums under the Federal Employees Health Benefits Program. In a March report, the nonpartisan Congressional Budget Office said reducing annual pay hikes for federal civilian workers and military personnel would save the government billions of dollars during the next decade.