Jamie Dupree - WSB Radio

Senators chafe at military retirement plan in budget deal

Tucked into a bipartisan budget deal that was unveiled last week, a provision dealing with yearly cost of living adjustments for military retirement pay has proven to be the most controversial part of a deal that’s ready for final Senate approval on Wednesday.

“I’m told by Pentagon officials that this provision basically came out of nowhere,” said Sen. Saxby Chambliss (R-GA), who despite his opposition to the provision, plans to vote for the overall bill.

“There’s a lot in this proposal to like; there’s a lot in this proposal to dislike,” Chambliss said on the Senate floor.

Earlier in the day, veterans groups had rallied against the plan on Capitol Hill, as they implored Senators to revisit the issue early next year.

“We’re probably going to lose this fight, but we are going to win this war,” predicted Sen. Lindsey Graham (R-SC).

The plan was one of several provisions that limited the cost of retirement payments for Uncle Sam – the military provision reduces the COLA (Cost of Living Adjustment) by 1 percent, saving $6.2 billion over ten years.

That military retirement pay provision does not hit anyone age 62 or older, and does not take effect until 2015.

Under the budget deal, federal workers would have to chip in more to pay for their future retirement benefits, increasing their contributions by 1.3 percent of their pay for workers who get a job with Uncle Sam after January 1, 2014.

That provision, plus one affecting workers in the Foreign Service (State Department), would save just over $6 billion as well – but federal workers would be impacted immediately, while the military retirement pay provision doesn’t kick in for almost two years.

Already several plans have been floated to replace the military retirement pay plan, like one from Sen. Jeanne Shaheen (D-NH) that would substitute $6.6 billion in new revenues by eliminating a “tax loophole for offshore corporations.”

“We ought to replace the cost of living adjustment reductions for military retirees in the budget deal and the plan I’m introducing is a common-sense way to do it,” Shaheen said, as she introduced her proposal on Tuesday.

Federal worker unions have also complained about the hit their members are taking in the deal, but those arguments haven’t seemed to garner as much attention as the military retirement issue.

“This is simply unacceptable,” said a statement issued last week by a coalition of federal and postal worker unions. “No other group of Americans has contributed to deficit reduction the way federal employees have.”

The military retirement COLA provision is interesting on one level, because it is much like the “chained-CPI” that was proposed by President Obama, which would slightly reduce yearly increases in benefit payments for Social Security – meaning cost-savings over time.

If you consider the outcry on the military provision in this bill, just think of what the political response might be if you lowered the COLA on Social Security benefits.

The military retirement COLA plan nets the government $6 billion over ten years – “chained CPI” applied to Social Security benefits would save $225 billion in the same period.

It is a reminder that there is no free lunch when it comes to dealing with the budget – just about every plan that reins in spending will draw opposition.