The generous pension system enjoyed by millions of federal workers from clerks to senators and judges has emerged as a key target in negotiations between Vice President Biden and congressional leaders looking to restrain the growing national debt.
Republicans have proposed saving more than $120 billion over the next decade by requiring the civilian workforce to contribute more toward retirement — a plan that would effectively impose an immediate 5 percent pay cut on more than 2 million federal employees. President Obama’s bipartisan fiscal commission has also endorsed the idea, calling the federal system “out of line” with the private sector.
Now, administration officials have expressed interest in raising the amount that employees contribute to their pensions — though probably not as high as the GOP proposal, definitely not as fast and possibly not for all workers, according to people in both parties familiar with the discussions.
If adopted as part of a compromise plan to control federal borrowing, the proposal promises to test the resolve of local lawmakers — particularly Democrats — by forcing them to choose between the lofty goal of debt reduction and the interests of public-sector workers, who have come under fire from Republicans in Washington and several state capitals.
Rep. Chris Van Hollen (D-Md.) may be the first to face that dilemma. One of only six lawmakers at the table in the Biden talks, Van Hollen represents a suburban Washington district that is home to one of the nation’s largest concentrations of federal employees.
Van Hollen has vocally opposed the GOP pension proposal, which was included in the budget blueprint that passed the House last month. He declined to comment on the closed-door talks at Blair House, which have already set off alarm bells among union leaders.
“We’re very concerned,” said Maureen Gilman, legislative and political director for the National Treasury Employees Union, noting that federal workers were hit in January with a two-year pay freeze.
“These are difficult times, and federal employees understand this,” Gilman said. “But we’d like to see some other people in the shared pot for sacrifice before anybody comes back to us for seconds.”
Hard road ahead
The proposal to change pension funding represents one of the plumpest pots of potential savings under discussion by the Biden group. The White House has not previously endorsed the idea, and a White House spokeswoman declined to comment, citing the private nature of the talks.
The issue illustrates the hard road ahead for policymakers trying to rebalance the federal budget. Participants in the Biden talks have temporarily set aside the most ideologically divisive issues, such as raising taxes and cutting entitlement benefits. But while the remaining targets are smaller, they are also guarded by a thicket of lobbyists and interest groups.
Since May 5, negotiators have focused on a list of proposed reductions to “mandatory” programs, which are financed outside the annual appropriations process. The Republican-controlled House’s budget blueprint includes $715 billion in such savings through 2021; Obama has offered $290 billion.
Negotiators have identified areas of overlap that could save as much as $200 billion over the next decade, sources familiar with the talks said, though that figure is expected to shrink as the two sides hash out details.
“We just tasked the staff with about 10 things we all agree that we had to go back and look at, things that we weren’t crazy about looking at and a lot of things they weren’t crazy about looking at,” Biden told reporters Thursday after the most recent meeting.
The potential savings include as much as $30 billion in farm subsidies, nearly $20 billion from making graduate students pay interest on college loans while still in school and $16 billion in higher premiums for private pensions insured by the federal Pension Benefit Guaranty Corp.
Airlines could face higher security fees. TV stations could be encouraged to sell under-used airwaves. And both sides want to save money by overhauling mortgage giants Fannie Mae and Freddie Mac.
Virtually every idea has a ready stable of opponents: The National Association of Broadcasters opposes voluntary broadcast spectrum sales, fearing that small stations could be pressured by deep-pocket wireless providers. Big business and organized labor both oppose higher PBGC premiums. And rural conservatives in the Senate have long protected the nation’s farmers.
Changing the federal pension system is no exception. Worker advocates vow a fierce fight, arguing that the idea is driven more by partisan ideology than fiscal responsibility.