Impacts Of Obama's Deficit Reduction

Federal Workers Would Pay More Into Retirement Under Obama's Plan

President Obama's deficit reduction proposal has dominated discourse this week, namely, how it might affect the political climate and the country's bottom line. In addition, there are elements of the plan would directly affect federal workers and contractors. Tom Shoop, Editor-in-Chief of Government Executive Magazine, speaks with WAMU Morning Edition host Matt McCleskey about those impacts.

The president's proposal would increase what government employees pay into pension plans. The amount federal workers contribute to their own retirement benefits would increase 0.4% per year for the next 3 years for a total of 1.2 percent.

One reason is to fight "a perception that federal retirement benefits are more generous than those that are offered in the private sector," Shoop says. "They want to get them more in line with what private sector offers. 

Should the president's proposal -- or some alternative -- not be agreed upon by the Congressional super committee tasked with reaching a deficit reduction deal, across-the-board cuts would instead go into effect. That wouldn't necessarily ease the minds of federal employees, however. 

Such a scenario would create a sequestering of funds for federal employee benefits, meaning they couldn't be touched. "So there is a situation in which people might be rooting for that to happen so their ben wouldn't be affected," Shoop says. "But on the other hand, such a move could mean widespread furloughs or layoffs, which could be even worse for a lot of employees.

The President's proposal would also lower the cap on the amount of contractor executive compensation that's reimbursable by the government, something that hasn't gone over too well with federal contractors. Under Obama's plan, reimbursement for contractor compensation would be capped at $200,000 per year, similar to the highest level of federal government executive compensation; currently, contractors can be reimbursed for executive salaries of up to $700,000.

"They're not happy about it," Shoop says of federal contractors. "They say it's unfair to make that kind of comparison, and they think there's already a fair comparison in place to guarantee that government is not paying contractor executives more than they would be paid by other clients."