The pension time bomb - unethically high pensions of government employees

Washington Monthly, Jan-Feb, 1995 by Gareth G. Cook

Despite the feds' genetic resistance to change, there has been some reform. Starting in 1986, new federal employees are entered into the Federal Employee Retirement System, which requires more employee contributions and cuts back on the guaranteed pension. Around the same time, the military retirement system made 20-year retirements a little less lucrative.

One of the most obvious reforms for both civil servants and for the military--and one that has not been seriously addressed--is later retirement ages. When the current standards were set, people did not live as long. With modern medicine, we can no longer afford to let civil servants go at 55. The same is true for the military. In earlier eras, officers and enlisted men were justified in being let go at 44 after a dangerous and physically demanding career. Today, there are plenty of jobs in the services that don't require you to be in top physical shape (and in fact, virtually all of the 40-year-olds in the military now are in assignments that they could easily perform at age 55). It is time to raise the civil service retirement age to 65, the military's to 55, and, while we are at it, the Social Security age to 70, as the Bipartisan Commission on Entitlement and Tax Reform recommended in December.

The government can also not afford to keep paying out across-the-board COLAs regardless of the recipient's financial status. $50,000-a-year pensions do not need the same protection that $10,000-a-year pensions do. Right now, the bill for federal COLAs falls on the shoulders of a middle class that, broadly speaking, will have to make ends meet without inflation bonuses.

Above all, whatever the details of reform, the principle must be full financing. The bill for all governmental pension promises--local, state, and federal--must be paid as they are made, just as prudent private companies do. Otherwise, the average citizen does not have a say in deciding where the line between fair and luxurious is crossed. The work is done and then the younger generation is left to pay for the contract.

Now the budget shortfall stands at about $1 billion for every word in this article. Either retirement payments have to be docked, or, notes EBRI's Salisbury, "we'll have to raise $1.5 trillion in taxes, borrow the money, or cut back federal benefits to other sectors of society." In December, President Clinton foolishly appeared to rule out reform of federal pension benefits, including the establishment of a later retirement age for civil servants. (This despite the fact that, in 1993, raising the civil service age to 65 came within six votes of passing the House.) But it is still possible for the Republicans now running Congress-and their Democratic colleagues-to demonstrate seriousness about pension reform. As a start, they could vow not to accept any COLAs on the already generous pensions that they will collect from Uncle Sam. Now that would be leadership.