Time to Nip the Next Example of Income Inequality in the Bud

December 05, 2013

For Immediate Release

Ending Attacks on Federal Workers’ Pensions is a Good Place to Start Restoring the Middle-Class

Washington, DC – With the Budget Conference Committee, set up to resolve differences in House and Senate spending plans, preparing to meet next week, Reps. Jim Bridenstine  (R-OK) and Doug Lamborn (R-CO) have proposed increasing federal employees' contribution toward their retirement program from 0.8 percent to 2.0 percent of pay over three years. Their plan would also eliminate the Federal Employee Retirement System Annuity Supplement for new employees and provide a more conservative formula, the chained CPI, for the calculation of inflation-adjusted retirement benefits.

In short, the two are proposing to more than triple what federal employees pay for their pension. This would amount to taking $20 billion from federal workers.

Congress can and should end the Sequester by capping contractor pay and closing the tax loopholes for big corporations that ship jobs overseas or park hundreds of billions of dollars in foreign bank accounts. Middle income federal employees have already paid their fair share many times over.

Already, the federal workforce has contributed $114 billion toward deficit reduction and economic recovery - far more than any other group in America has been asked to sacrifice.

Promised pension benefits are being cut across the country. In Michigan, a judge ruled this week that Detroit, as part of its bankruptcy proceedings, can cut monthly pension benefits that have been promised to the city's retirees.

The ruling will allow the city to reduce pensions for retired city workers in spite of protections in the state constitution.

Public-sector union leaders around the country are watching the developments in Detroit closely, as the case could be a bellwether for other municipal bankruptcy cases.

According to Emmanuel Saez, Professor of Economics and Director of the Center for Equitable Growth at the University of California Berkeley, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%.

“We cannot have a race to the bottom, where 99% of the population accepts benefit cuts so that the wealthiest 1% can buy an extra yacht,” said Richard Fiesta, Executive Director of the Alliance for Retired Americans.

“Many middle-class retirees in the U.S. are exasperated at the growing income inequality in our country, and economists are searching for ways to address the problem,” said Fiesta.

“A good place to start will be rejecting attempts to force federal workers to pay 5.5 percent more for retirement. We need to nip these cuts in the bud now, before income inequality becomes even more severe.”


Contact: David Blank – 202/637-5275 or dblank@retiredamericans.org

Download a printable version