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NARFE Expresses Disappointment in President Obama’s FY14 Budget, Which Undermines the Value of Public Service

FOR IMMEDIATE RELEASE   Contact: Jessica Klement
April 10, 2013 703-838-7760

Alexandria, VA – With the release today of President Obama’s fiscal year 2014 budget, America’s federal workforce finds itself the target of $53 billion in cuts to earned pay and benefits, as well as significant reductions over time to federal retirement and disability programs, including Social Security.

“For the third year in a row, the President’s budget blueprint disproportionately takes aim at federal employees in an effort to balance the budget,” commented Joseph A. Beaudoin, President of the National Active and Retired Federal Employees Association (NARFE). “Federal employees who are currently enduring a three-year pay freeze have already sacrificed $114 billion from their pocketbooks for U.S. budget savings over the next decade. Enough is enough!”

In addition to the direct cuts to federal employee pay and benefits, the President also proposed a switch to the chained consumer price index (chained CPI). Currently, cost-of-living adjustments (COLAs) to federal civilian and military retirement annuities, as well as Social Security, veterans’ and disability insurance benefits are determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Using the chained CPI instead of the CPI-W would reduce COLAs by an estimated 0.3 percent per year. Because this difference would compound over time, it would result in estimated yearly benefits 3 percent lower after 10 years, 6.2 percent lower after 20 years and 9.4 percent lower after 30 years.

“Don’t be fooled by economists and politicians who claim that switching to the chained CPI formula for Social Security benefits, retirement annuities and disability insurance is 'painless.' While the short-term reduction in benefits may be modest, the long-term reduction will be substantial,” continued Beaudoin.

A switch to the chained CPI is flawed policy for several reasons:

First, both the current index and the chained CPI fail to accurately reflect the costs most seniors face. Notably, they do not account for how much more seniors spend on health care. Americans age 65 and older spend roughly 13 percent of income on health care compared to 5 percent spent by those under that age.

“Any measure of inflation should take into account the costs incurred specifically by seniors, including higher health care costs,” Beaudoin stated. “But measures that take this into account, including the CPI-E, would result in higher cost-of-living adjustments. This is a clear sign that moving to the chained CPI is going in the wrong direction.”

Second, the chained CPI formula assumes that consumers substitute one item when the price of another item increases; for example, switching from steak to chicken when the price of steak rises. Accounting for this type of substitution, however, fails to measure lower standards of living that result from substituting a less desirable alternative. Seniors, in particular, as a result of living on a fixed income, often find such substitution impracticable, as they are already purchasing lower-priced goods.

“While all retirees and those receiving disability benefits will be adversely affected by the chained CPI, due to its snowballing nature, those who retire at a younger age (the military), those who receive disability benefits, those who are the poorest and those who live the longest will be hit the hardest. The average annual Social Security benefit is only $15,000; how much more can these seniors afford to give?” Beaudoin stated.

 “Pay freezes, furloughs, sequestration, understaffing and the stress of a looming government shutdown are exacting a heavy toll from the nation’s 4.6 million active and retired federal employees. Committed and talented people are needed in federal jobs. However, budgets like the one released today by the White House could make federal jobs dangerously noncompetitive,” concluded Beaudoin.


National Active and Retired Federal Employees Association
NARFE (National Active and Retired Federal Employees Association)
606 N. Washington St., Alexandria, VA 22314, Phone: (703) 838-7760, Fax: (703) 838-7785.

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