Monday, October 18, 2004

Most people, even the majority of Washington wonks, don’t spend a lot of time worrying about the debt ceiling.

The ceiling is hard to understand, and there isn’t much ordinary folks can do about the amount the government is allowed to borrow.

But there is a cottage industry that, for whatever reason, loves to scare the liver out of federal workers. Anytime Congress goes into recess without raising the federal debt limit — which it has just done — is a happy time for the doom-spreaders. Their favorite target is the millions of federal workers and military personnel who are invested in the G Fund (Treasury securities) of the Thrift Savings Plan, which is Uncle Sam’s in-house 401(k) plan.

When the government bumps up against the debt ceiling and Congress fails to raise it (it will when it returns in November), the pre-Halloween ghouls love to frighten G Fund investors by saying they somehow will lose money. Not true.

Legislation creating the TSP, in which members of Congress also invest, contains a “make whole” provision for situations like this. Bottom line: Nobody loses a nickel because the G Fund isn’t invested in Treasury securities during the period when the debt ceiling hits its legal limit and Congress raises it. The Congressional Research Service and the Government Accountability Office have confirmed this. You can confirm this by going to the TSP Web site at

So if you are looking for something to worry about, return to acid rain, global warming or the poor performance of Metro after Redskins games.

Open season

The TSP open season runs through Dec. 31. This is the time to change your contributions to conform with the higher limits that go into effect in 2005. Next year, the amount people can invest in their 401(k) plans goes to $14,000, up from $13,000 this year.

The contribution for feds under the Federal Employees Retirement System amount goes up to 15 percent, subject to the Internal Revenue Service limit. For feds under the old Civil Service Retirement System and military personnel, that limit goes to 10 percent, up to the IRS limit.

Feds and military personnel who are 50 or older — or hit 50 anytime next year — are allowed to make catch-up contributions that are in addition to all the other limits. For 2005, that catch-up amount goes to $4,000. So that means the maximum contribution eligibles can make next year is a total of $18,000.

So, if you are looking for something to worry about, return to acid rain, global warming or the poor performance of Metro after Redskins games.

COLAs vs. pay raises

Federal and military retirees, and people who receive Social Security benefits will get a 2.6 percent cost-of-living adjustment (COLA). That is official. The indexed-to-inflation raise is automatic.

But for feds — who get pay raises, not COLAs — the situation is different. They are assured a 1.5 percent pay raise from the White House, but the 2 percent that Congress plans to add is not official. The extra pay raise (which would give civilian feds the same 3.5 percent as military personnel) could be cleared by the lame-duck Congress next month, or it could go over into next year.

Junkyard dog tax collectors

Congress has cleared legislation that will permit private debt collectors to go after billions of dollars owed Uncle Sam. The collectors will get to keep 25 percent of whatever they collect. That is a real incentive to twist some reluctant, and maybe innocent, arms.

Many IRS workers say they could do the job if Congress would let the agency hire more people. Prediction: The privatized tax collectors were tried, then dropped, during the Clinton administration, because they play real hardball. The first time one of them accidentally leans on a relative of a high-placed politician, Congress is likely to revisit the program, pronto.

• Mike Causey, senior editor at, can be reached at 202/895-5132 or

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