It's Debt Ceiling Day, and We're Having a Pension-Cutting Party

Weigel
Reporting on Politics and Policy.
May 16 2011 8:04 AM

It's Debt Ceiling Day, and We're Having a Pension-Cutting Party

Get your air horn and cowboy hat ready. At some point today, the United States hits the $14.3 trillion debt ceiling. After that happens, the horse-trading begins in earnest for a compromise to raise the ceiling by mid-summer.

"Hold on," you're saying. "If we're already hitting the ceiling, why hasn't America collapsed?"

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics

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Geithner, who has already suspended a program that helps state and local government manage their finances, will begin to borrow from retirement funds for federal workers. The measure won’t have an impact on retirees because the Treasury is legally required to reimburse the program.

It won't have an impact on retirees... except, as Lori Montgomery reports , Republicans (and some Democrats) want to make sure that the pensions are reformed and trimmed as part of a debt deal.

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.

Federal workers pay only $1 of payroll for every $15 in their plans. This is being traded away as part of a debt deal, starting today.

David Weigel is a reporter for Bloomberg Politics

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