- The Washington Times - Monday, April 20, 2009

Federal, military and Social Security retirees, who got a 5.8 percent inflation adjustment in January, won’t like what’s not coming up in 2010. According to the numbers crunchers, the retirees may not get any cost-of-living adjustment next January.

That group of retirees represents about one in every six Americans. And it takes in a huge chunk of the Washington area, which is home sweet home to hundreds of thousands of federal and military retirees, as well as millions who get monthly Social Security benefits. For every retiree who heads to Florida or Arizona, a much larger number stay in the area because of friends, family or medical services and numerous tax-free commissary outlets.

Benefits paid to members of the federal family and people who draw Social Security are linked to the rise in inflation as measured by the Consumer Price Index (CPI). That’s a very good deal considering that most American retirees don’t get company pensions and that those who do never get a cost-of-living adjustment.

Last year higher oil prices led to the biggest inflation catch-up for retirees since the mid-1980s.

But now plummeting oil prices and the ripple effects of the recession have turned inflation into deflation.



Retiree cost-of-living adjustments by law are based on the rise in the Labor Department’s CPI from the third quarter of this year (comprising the months of July, August and September) over the same time period in the previous year.

Living costs actually declined last October, November and December. And they rose only slightly in January, February and March. That means that halfway through the cost of living countdown, the CPI that triggers raises is lower than it was this time last year.

If that trend — either deflation or modest inflation — continues, experts say it is very possible that federal/military/Social Security retirees will not get any inflation adjustment in January.

The silver lining is that benefits are guaranteed even if living costs continue to drop. Congress wrote the law so that the retirees would get catch-up with inflation adjustments when appropriate but that nobody’s benefits will be cut if there is no inflation.

Detroit we’re not

Many American communities are being hammered by the recession, layoffs and foreclosures. But because of the huge federal presence here — including civilian, military and contractors — Washington is a relative land of milk and honey. And as things get tougher beyond the Beltway, they could get better here.

The Obama administration has promised to return to government thousands of jobs that were farmed out to the private sector during the Clinton and Bush administrations.

President Clinton trimmed the federal payroll by an estimated 350,000 jobs. Many services once performed in-house were either contracted out or consolidated. People who held those “overhead jobs” in finance, payroll, human resources and contracting were offered buyouts worth $25,000 before deductions. Most of those took place in 1993-94, when $25,000 was worth a lot more than it is today.

The Bush administration continued the contracting-out push, especially in the areas of defense and homeland security.

But now the White House believes the government needs to beef up and regain some of its institutional memory. Defense has announced plans to hire 13,000 new federal employees within the next five months. The jobs will be all over the country, from San Antonio to Seattle. A few thousand will also be added here.

Defense has announced plans to drastically reduce the number of contract-support employees and replace them with about 30,000 new federal workers over the next five years. Some of them will be former civil service and military personnel rehired because of their special skills. Others will be contract employees — most of whom already have security clearances — who will bring their expertise inside government.

Given the state of the outside job market, and a new appreciation of lifetime civil service benefits such as inflation-indexed annuities and lifetime health insurance, many contractors will be happy to make the change.

Tobacco bill

Whether they smoke or not, federal workers need to keep their eye on the so-called Tobacco Bill that sailed through the House before the long Easter-Passover recess started. It is the vehicle carrying a number of goodies for both active and retired government workers.

The bill, by Rep. Henry A. Waxman, California Democrat, would give the Food and Drug Administration control over tobacco products. Backers claim it would save the government millions in reduced health costs. Opponents say it would mean billions of dollars in lost tax revenue to state and local government.

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