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Monday, January 27, 2014

Thievery: How Congress Keeps Stealing From Our Retirement Benefits and Social Safety Net

Military pensions, unemployment, disability and Social Security are all targets.
Congress has a nasty habit that’s not going away. It has been stealing a few billion here and a few billion there from earned retirement and safety net payments, overlooking whether those benefits have been promised or are even sufficient.

As the House and Senate passed its $1.012 trillion 2014 budget this month, veterans were blindsided when they learned that Congress had cut cost-of-living increases for retiree pensions by 1 percent. A master sergeant who served 20 years could lose $80,000 in his lifetime, said Col. Mike Barron of the Military Officers Association of America. 

The cuts will affect 1.1 million retirees, 400,000 of whom retired after 9/11, and save an estimated $6 billion. “It’s deferred compensation,” Barron said. “You are changing the rules of the game in the middle of the game. It’s very unfair. It’s a clear breach of faith with us.”

But it’s not just military retirees who are prey to Congress’s petty thievery. In the Senate, there are competing Democratic and Republican proposals to extend unemployment insurance (UI) for 1.3 million longterm jobless people. Unemployment is another earned benefit that people pay into from years of work. The UI extension would be funded by taking money that now goes to Social Security disability recipients, so someone could not receive both unemployment and disability. 

The GOP plan, proposed by Ohio Sen. Rob Portman, cuts off all disability benefits—so there is no so-called double-dipping. The Democratic plan, from Majority Leader Harry Reid, cuts back disability payments dollar for dollar, deducting whatever amount is received in unemployment. Eleven million Americans received disability benefits in December.

This Hunger Games mentality of playing off groups of deserving people against each other for earned social insurance is part of Congress’ nasty habit. The other nasty piece is what Congress has been doing since the 1980s with Social Security cost-of-living formulas: chipping away at yearly increases. 

Going after promised pensions, or shaving back retirement benefits, or tinkering with cost-of-living formulas is hardly confined to Congress. It’s become a budget-balancing tactic that shadows government employees nationwide, and has equivalents in the private sector as workers pay more for their benefits.

In terms of magnitude, the several billion dollars involved in the military pensions and disability cuts pale compared to what’s at stake when tinkering with Social Security’s inflation formula.

When President Obama presents his 2015 federal budget next month, one of the biggest questions is will he again propose using a stingy cost-of-living increase formula for future Social Security payments, known as the chained CPI (consumer price index). That tool would shave off about a third of a percent a year from annual cost-of-living increases. Like the military pensions cuts, it adds up over time—think of it as the magic of compounded interest in reverse.

The National Women’s Law Center analyzed the impact of chained CPI and found that it would result in a 6.5 percent cut in Social Security benefits paid over 20 years, and a 9.2 percent cut over 30 years. For an 85-year-old single woman receiving a $1,100 monthly check, NWLC estimated that would translate to 16 weeks of “food lost."

Senate Democrats seem to be taking different stances when different benefit cuts are on the table. On Social Security and the chained CPI, there’s a campaign to push Obama to drop the idea in his 2015 budget. But all the Democrats voted yes for the 2014 budget that cut military retiree pensions. Since that vote, more than a dozen new bills have been introduced to reverse the pension cut. 

Pragmatists will say this is the untidy way Congress works. But as progressive economist Dean Baker has pointed out, Social Security has been pared back by more than 20 percent since the 1980s by using intentionally stingy cost-of-living formulas. Similarly, Social Security disability benefits have also been cut back recently, due to the federal budget sequester, making it harder for eligible people to qualify and then to get annual increases.   

“They’re always looking to hit at vulnerable groups,” said Baker, who is co-director of the Center for Economic and Policy Research. He said current House GOP inquiries into disability benefit fraud are having the result of creating bad press for the program instead of focusing on rooting out a few bad actors—which any big system serving millions will generate.

“The big picture is we are making cuts,” he said. “We don’t need to make these cuts.”

When senators and congressman take the floor and start making speeches in coming days about treating military retirees fairly, just stop and substitute public employees, teachers and everyone else who has spent a lifetime paying into Social Security and Medicare. And then ask yourself, what aren’t they discussing America’s retirement security crisis this way?

Steven Rosenfeld covers democracy issues for AlterNet and is the author of "Count My Vote: A Citizen's Guide to Voting" (AlterNet Books, 2008).