October 14, 2010

Another Pay Increase for the Fat Cat Bureaucrats and Another Social Security Benefits Freeze for the Senior Citizens

2009 was a calamitous year in which an estimated 4.2 million American jobs were liquidated. In addition, more than 920,000 “discouraged workers’’ left the labor force entirely, having given up on finding work and therefore not included in official unemployment data. Meanwhile, millions of Americans who do have jobs have been compelled to work part-time or at reduced wages; many others have not seen a raise in years. But not everyone is having a rotten recession. All the while, the federal government has been adding jobs at a 10,000-a-month clip. Between December 2007 and June 2009, federal payrolls exploded by nearly 10 percent. “Federal workers are enjoying an extraordinary boom time in pay and hiring,’’ USA Today observes, “during a recession that has cost 7.3 million jobs in the private sector.’’ And to add public-sector insult to private-sector injury, data from the Office of Personnel Management show the average federal salary is now roughly $71,000 -- about 76 percent higher than the average private salary. - Jeff Jacoby, Income angst? Not for public employees, Boston Globe, January 27, 2010

Fact Check: How Much Pain from COLA Freeze?

2-year Freeze in Social Security Benefits Follows Biggest Boost in 27 Years

The Associated Press
October 14, 2010

Seniors will remain ahead of the inflation curve despite a second straight year without an increase in their Social Security benefits.

Some seniors and their advocacy groups have raised the specter of millions of the elderly struggling to pay for food, utilities and health care under a benefit freeze. Struggle, many do, particularly those who rely on Social Security for most if not all of their income.

But beneficiaries received a whopping 5.8 percent cost-of-living increase in January 2009, when the actual cost of living had risen only a tiny fraction of 1 percent. In effect, they got a double boost.

This year marked the first time recipients have gone without a benefit increase since 1975, when Congress adopted a system of automatic increases based on the Consumer Price Index. The Social Security Administration is set to announce on Friday that there will again be no increase in 2011.

So is the government turning its back on the elderly — only a few weeks from an election, no less?

That's hard to substantiate, given the fact that the last increase in the cost of living allowance, or COLA, in January 2009, was the biggest in 27 years

The big increase in 2009 was due to an economic anomaly. The Social Security Administration bases the cost-of-living increase for the coming year on the inflation rate during the third quarter — the months of July, August and September — of the current year.

The third quarter of 2008 was the summer of $4-a-gallon gasoline, jolting up the inflation rate and resulting in the higher COLA. When gasoline subsequently collapsed to below $2 a gallon, so did the overall inflation rate in 2009, to one-tenth of 1 percent for the year, the lowest since 1954.

There will be no increase in Social Security benefits until consumer prices surpass those measured in the third quarter of 2008, the last time a COLA was awarded. This year, the inflation index is still a little less than 1 percentage point below the 2008 level.
"Objectively speaking, they got an unusually generous increase" that year, said Gary Burtless, senior fellow in economic studies at the Brookings Institution.
Burtless said seniors have also been the beneficiaries of two stimulus packages. One measure, passed in February 2008 under President George W. Bush, included tax rebates that provided $300 even for seniors and others who did not earn enough to pay taxes.

Then, in the stimulus passed in the early days of President Barack Obama's administration, seniors were awarded $250 to help them pay for prescription drugs.

With the average Social Security benefit about $1,072 a month, that $250 is about the same as a 2 percentage point COLA increase.

Such numbers are cold comfort to Marianne Cusumano, 81, of Kansas City, who relies solely on Social Security.
"That makes it rough," she said of the freeze. "Food, everything is going up. If you do have to eat out, prices in the restaurants are up."
Jean DeBaare, also of Kansas City, said she lost half her income after her husband of 62 years died in August.
"I don't like what they are doing," she said of the benefits freeze. "They are punishing people like me."
What shouldn't be forgotten, said David Certner, the AARP's legislative policy director, is that "for older Americans that is a huge income source." The Social Security Administration says that its checks are the primary source of income for 64 percent of retirees who got benefits in 2008, and a third relied on Social Security for at least 90 percent of their income.

Certner said a second straight year of frozen benefits comes as the elderly are seeing shrinking pensions, losses in their investments, negligible bank interest rates and retail prices for brand name drugs up 8.3 percent in 2009.
"That's why the COLA is so important to them."
Kent Smetters, professor of insurance and risk management at the Wharton School of the University of Pennsylvania, said many people approaching or in retirement have taken a big hit because their hopes of living off their biggest asset, their homes, by downsizing to a smaller residence have been dashed by the dreadful housing market.

Moreover, a report by Fidelity Investments earlier this year estimated that a 65-year-old couple with Medicare coverage will still need $250,000 to cover health care expenses in retirement, up 4.2 percent from last year.

On the other hand, seniors have benefited in recent years from the 2003 Medicare prescription drug bill that reduced their health care costs.

And Jason Fichtner, a senior research fellow at George Mason University who served as deputy commissioner at the Social Security Administration, pointed to a "hold harmless" provision in law that protects some 93 percent of seniors from paying higher Medicare Part B premiums if they don't get a Social Security COLA increase.

Seniors for the first time next year also get a 50 percent discount for brand-name drugs when they hit the "doughnut hole," the gap in Medicare drug coverage under the 2003 law that is being phased out under the new health care law.

Fichtner stressed how important Social Security is in keeping the elderly out of poverty, and in that respect it appears to have been paying off. The poverty rate for those 65 and over fell to 8.9 percent in 2009, down from 9.7 percent a year earlier. This was the only age group that saw a decline in poverty.

But Congress is receptive to elderly voters, and one item that could be on the agenda when lawmakers return for a lame-duck session after the November election is a $250 payment to compensate people for going without a COLA increase next year.

Public Servants as Ruling Class

By Robert L. Hale, NorthJersey.com
January 4, 2010

Federal employees are not experiencing a recession; they are experiencing unprecedented growth and financial gains.

In 1997, Robert De Niro and Dustin Hoffman starred in a film titled "Wag the Dog."

The film portrayed a sex scandal involving the president shortly before the election. De Niro, a Washington spin doctor, was brought in to distract the electorate and save the election. He hired Hoffman, a Hollywood movie producer, to help fake a war to distract attention from the scandal.

The president's advisers expressed initial skepticism, arguing that the plan was too absurd and the public would not fall for it. De Niro and Hoffman assured them the public would, saying, "They always do." Sure enough, the president was reelected.

Today, we see the reality of "Wag the Dog" being played out in Washington on a daily basis. The spin doctor's assurance the public will "fall for it" seems to be holding. Global warming, health care, cap and trade, bank bailouts, a $14 trillion debt and "we can spend our way out of the recession" are all promoted as necessary. The public is repeatedly told that if these issues are not immediately addressed and action taken, catastrophe is sure to follow.

On Dec. 13, Larry Summers, the president's top economic adviser, informed the nation, "Everybody agrees that the recession is over." Although time will tell, this assertion does not match the conclusion of most private economists.

Disturbing trend

These pronouncements are certainly reminiscent of the scenario of the movie. Yet, another tail-wagging-the-dog scenario is being played by our federal and local governments, possibly an even more troublesome one.

Jessica Klement, government affairs director for the Federal Managers Association, told USA Today that federal employees make 26 percent less than private sector workers for comparable jobs.

The average federal worker's pay is now $71,206.

The facts find the average private sector salary to be $40,331 — or 76.6 percent less than federal employees' salaries.

In New Jersey, a family with only one wage earner has to live on a median income of $53,557 a year, about 25 percent less than what the average federal employee grosses annually.

This recession has pushed almost 7.5 million into unemployment. That number continues to increase every month, and there is no end in sight to layoffs. The two million-plus federal workforce [the true size of the federal government is almost 15 million], however, is expanding and is receiving significant pay increases. Federal employees are not experiencing a recession; they are experiencing unprecedented growth and financial gains.

The tail is most certainly wagging the dog. Public servants are no longer servants by any understanding of the term. The average federal "public servant" earns more than those who pay that salary. While average taxpayers suffer, federal workers prosper. Those at the top of the federal food chain do even better.

At the beginning of this recession, only one Department of Transportation employee was receiving a salary of $170,000 or more; 18 months later, 1,690 are. The number of federal employees receiving salaries of $100,000 or more jumped from 14 percent to 19 percent of the federal workforce during the same period, not including overtime or bonuses.

Greater burden

Those in the private sector, being taxed to fund federal wages and benefits, are receiving little or no salary increases. Between 17 percent and 22 percent of the private workforce is unemployed, has stopped looking for work, or is involuntarily working less than 40 hours per week. The tail is most certainly wagging the dog.

The same is true at the state level. States large and small are paying state workers significantly more than their comparable private sector counterparts. For example, North Dakota's private sector work force has a mean annual salary and benefit package totaling $41,053 per year. State employees have an annual package totaling $51,948 — 26.5 percent more than their private sector neighbors whose taxes fund this package. It is likely we would find the same at the city and county levels.

When the dog finally realizes what is happening, it is likely to begin chasing the tail. When the tail is caught — and it will be — the consequences will be painful for everyone.

2011 Budget: 1.4% Civilian and Military Pay Raise

The Washington Post
February 1, 2010

Civilian federal employees and the military would get a 1.4 percent pay increase next year, according to President Obama's fiscal 2011 budget proposal.

That's much lower than the 2 percent civilian pay jump this year and the military's 3.4 percent increase. The proposed military pay bump is the smallest bump since 1973.
"It is lower than it has been in the past because inflation is lower than it has been in the past," Office of Management and Budget Director Peter Orszag said on Monday morning.

"Frankly, I think to a lot of Americans that sounds pretty good," he said.
The proposed increase means federal workers unions have successfully achieved pay parity, or the practice of giving military and civilian federal workers the same percentage pay increase.

Despite that achievement, Colleen M. Kelley, president of the National Treasury Employees Union, said the proposed raises are "very low."

William R. Dougan, national president of the National Federation of Federal Employees, called the increase "a modest adjustment," but acknowledged that "a modest increase is better than no increase at all."
"It’s a mixed bag," said John Gage, president of the American Federation of Government Employees, the nation's largest federal worker union. "I’ve certainly seen worse, and I certainly hope for better with the Obama administration, but I think we understand where the president is and I’m hoping that we will have an open door when we come in for adjustments in this budget on some of the key issues that affect federal employees."
Dougan, Gage and Kelley said their unions will work with the military and lawmakers to secure a higher pay raise.
“I believe that all federal employees, whether civilian or military, are deserving of a fair pay raise,” Kelley said.
Remember: Obama's proposal is just that -- a proposal -- so both civilians and military personnel could eventually see a higher pay raise.

Bill with 1.4 Percent Federal Pay Raise for 2011 Clears Senate Committee

Government Executive
July 30, 2010

An appropriations bill including a 1.4 percent raise for civilian federal employees cleared the Senate Appropriations Committee on July 29, 2010.

The Fiscal 2011 Financial Services and General Government spending bill includes a 1.4 percent increase for federal employees, the figure President Obama requested.

When Obama proposed a 1.4 percent pay raise for civilian and military employees in February's fiscal 2011 budget request, Office of Management and Budget Director Peter R. Orszag said the proposed increase was smaller than previous requests because inflation has not been as high.

He also tried to head off potential complaints by saying, given the economy, even a minor increase "to a lot of Americans sounds pretty good."

Nevertheless, a 1.4 percent raise would be below the 2 percent raise civilian workers received in fiscal 2010. So far, few, if any, lawmakers have come out in favor of a larger raise in federal pay. In fact, there have been repeated attempts during the past few months to freeze federal pay.

When the president's request was announced, federal employees unions were not thrilled, but tempered their criticism, given economic realities.

The House Appropriations Defense Subcommittee has marked up a version of the Defense appropriations bill, which also includes a 1.4 percent pay raise for service members. In late May, the House passed its Defense authorization bill with a 1.9 percent fiscal 2011 pay raise for service members. An authorization bill represents what Congress intends to spend, but appropriators hold the actual purse strings and allocate funds.

If Congress approved a 1.4 percent pay raise for the military, it would be the smallest increase since 1973. In fiscal 2010, the president requested a 2.9 percent raise for military personnel and Congress bumped it up to 3.4 percent.

Federal Employees Earn 2% Pay Raise for 2010

The Washington Post
December 8, 2009

Congressional appropriators agreed Tuesday night to give civilian federal employees a 2 percent pay increase -- which includes a locality pay increase President Obama didn't want.

Government workers will get a 1.5 percent nationwide increase in base pay and a 0.5 percent average increase in locality pay. The final agreement goes against the wishes of Obama, who called for a flat 2 percent jump and no locality increase.

Locality pay helps address the gaps between federal pay and private sector wages in high-cost areas of the country. The Federal Salary Council estimates the current private-public gap is about 26 percent, on average. Locality increases mean a federal worker in Cincinnati might get a smaller increase than a worker in Washington, D.C., because of local costs of living.

Barack Obama Seeks Cap on Federal Pay Raises

October 6, 2009

ABC News - President Obama urged Congress Monday to limit cost-of-living pay raises to 2% for 1.3 million federal employees in 2010, extending an income squeeze that has hit private workers and threatens Social Security recipients and even 401(k) investors.

Obama's proposal, outlined without fanfare in a letter to congressional leaders, would leave federal workers with their lowest COLA in two decades. Presidents Bill Clinton and George W. Bush proposed lesser increases three times. Congress, which must approve the plan, has not granted less than 2% since 1988.

The president's action comes when consumer prices have fallen 2.1% in the 12 months ending in July, because of a massive drop in energy prices. The recession has taken an even tougher toll on private-sector wages, which rose only 1.5% for the year ended in June — the lowest increase since the government started keeping track in 1980. Private-sector workers also have been subject to widespread layoffs and furloughs.

Why Do Federal Employees, Mostly Highly Paid, Get a 2% Pay Increase and Social Security Recipients, Most of Whom Receive Less Than $20,000 Annually from All Sources, Get Zero Cents?

I don't like the semantic trickery of calling Social Security an "entitlement" and its payments "benefits." It makes it sound like something unearned. After seeing FICA deductions on almost every pay stub for the past 46 years, the word I'd use is "repayment." - John Serfustini, Social Security Not Entitlement, September 28, 2010

Imagine you were 22 when you started working back in 1978. Do you know how much money you would have if, instead of paying in the maximum Social Security tax over the last 30 years, you were allowed to keep it? It’s probably more than you think. If you could have kept the maximum amount withheld for Social Security over the last 30 years and invested it at a 10% ROR it would have grown to over $418,000. Of course I used straight-line appreciation, so the actual amount would be quite different, but this will work for comparison’s sake. Using forward-looking numbers, adjusting for inflation, and assumimg a more conservative 8% ROR minus a 3% inflation rate — if the money were yours to do with as you please — you could have over $789,000 by age 62. A 4% withdrawal rate would give you a first-year income of over $31,584 or $2,632 per month. (I left out the employer’s portion of the Social Security tax, which is equal to the amount the employee pays. When the employer’s portion is factored in, it really makes Social Security security look bad.) - How Could You Have If Social Security Was Your Money?, May 16, 2008

The federal government does not create a traditional sellable product and thus produces no revenue outside of what it collects from taxpayers. As of 2008, the average federal salary was $119,982, compared with $59,909 for the average private sector employee. In other words, the average federal bureaucrat makes twice as much as the average working taxpayer. Add the value of benefits like health care and pensions, and the gap grows even bigger. The average federal employee’s benefits add $40,785 to his annual total compensation, whereas the average working taxpayer’s benefits increase his total compensation by only $9,881. In other words, federal workers are paid on average salaries that are twice as generous as those in the private sector, and they receive benefits that are four times greater. - Brandon Greife, The Public Sector Weight Around Taxpayers’ Necks, RedStates.com, May 4, 2010

When I am eligible to receive repayments from Social Security, a system which I am forced to pay into during my working years, will I get my fair share? No, I will get only a fraction of what I and my employers paid into the system. And now the government wants to again freeze Social Security repayments to senior citizens while, at the same time, giving raises to federal employees. I say, freeze and then reduce federal salaries so that they are comparable to the private sector (as they were prior to 2000) and use the money saved on federal wages for Social Security benefits to every American who paid into the system and to anyone who is now eligible to be reimbursed (and stop raising the age for eligibility, which forces people to work well into their senior years and which means that we'll receive benefits only during the last few years of life).

Federal Employees Database of Salaries

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