Veterans, the 1% COLA cut, longterm impact – Yes, we have a problem

If you are a military veteran under the age of 62 you undoubtedly believe that the recent congressional budget accord reached by Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA), and approved overwhelmingly by the House is a really, incredibly bad deal.

Part of the deal is funded by realigning the pension plans of almost every federal recipient with a pension under the age of 62.

Mea Culpa: I criticized the reaction of some veterans groups which played up the cuts as if military veterans were getting gored and carrying the budget debt burden almost on their own — certainly there was no mention of the more significant impacts on other parts of the federal government. I also criticized the huge numbers being thrown out and challenged them to do the math. I want to admit that my own math had issues. The math of the veterans groups is essentially correct, albeit without some important context provided to their audience.

Math, Options and the Need for Balancing the Federal Books

I am one of those veterans that will take cuts to my retired paycheck.

Veteran Group Math: My challenge to veterans groups is that I wanted to see the math. A conversation broke out and an interactive spreadsheet (Excel required) was sent to me that shows how the math worked. If you are a veteran you can enter your current monthly retirement pay in the green spreadsheet cell, press your return key, and a calculation across 24 years will automatically be done. The spreadsheet assumes that COLA/CPI increases an average of 2.5% each year.

My Math: Actual COLA/CPI can shift radically from year to year as economic conditions change. I tested the 2.5% average COLA, adjusted it down to 1.5% average per year (the new REDUX solution by Ryan/Murray), and contrasted it against historical COLA/CPI rates for the last 22 years — which is the time period that Ryan/Murray used to achieve their numbers.

I provide my math as a PDF spreadsheet that lets you see all the numbers together on one page. My example retiree is an E-7 with 20 years of service.

Short version of the results:

  • Using 2.5% as an average annual baseline COLA/CPI rate tracks relatively well with the results of using actual COLA/CPI rates across time.
  • Due to the magic of compounding interest, even at 1% of the annual COLA/CPI rate, there are significant longterm impacts on the veteran retiree paychecks.
  • An E-7 with 20 years of services would take home approximately $7,070 less per year by my calculation in their 22nd retirement year, and $10,750 per the 2.5% average COLA/CPI calculation.

Over 22 years the example E-7 will lose enough money to put several kids through a state university plus probably buy a new car. That is a significant impact.

Unhappy? Sure. However,  if we want this fixed then we need to offer up some options.

We need folks to step forward and to do more than just decry cuts to their pensions and to their programs. We need a bigger conversation about federal funding of budgets, programs and promises.

If we want our pay restored then we need to do more than to focus on ‘me’. We need options and solutions that address how the federal government itself is funded.

Yes, military retirees were asked to give up 1% of their annual COLA/CPI adjustment — which is what their annual pay increase is based upon, and not based upon the pay raise given to the active military.

However, MANY federal employees are being asked to now pay an additional 4.4% of their full pay into their pension fund — which is the equivalent of the military being asked to pay 8.8% instead of just 1% of COLA/CPI.

I do not want to be an apologist for what is a hurtful policy. Yet our nation is facing an unparalleled financial challenge and as long as a majority of Americans and/or their congressional representatives refuse to raise taxes to pay our nation’s debts and promises then the only other alternative is to make cuts.

Veterans have powerful lobbyists working in their behalf. The cuts do not go into effect until 2015. We have time yet to achieve some different outcome. Yet every other group that also got hit will also be scrambling to get their cuts fixed too. If veterans and veterans groups want an equitable outcome then we need to offer up options and to put those options on the table. One of the reasons that we are in our situation is that we want without also wanting to pay for the benefits.

Brainstorming Time

We need to be creative. Every problem needs a solution, a menu of options. We, and veterans groups and all special interest groups, need to do more than just decry hurtful decisions. We/they need to step forward and to also offer policy options.

I look forward to hearing your options proposals. I will cheerfully help get out the word and work for change.

Please keep in mind that they cuts were based upon each of the 12 federal budgets taking cuts in proportion to their size within the overall federal funding schema. So to restore military veteran pay the BIG QUESTION remains: are you asking that Americans pay higher taxes, OR what military programs would you cut, OR what military efficiencies would you demand to pay for restoring the cuts?

The cuts were balanced proportionately.  It will not work to in these challenging times to demand that the others that took cuts also give up more to pay for restoring our cuts without their concerns also being remedied.

Best regards,
Bill G.
WGolden@Bill4Dogcatcher.com

One thought on “Veterans, the 1% COLA cut, longterm impact – Yes, we have a problem”

  1. It is what it is. Now that we have a deal, everyone is saying, “but not me”. I’ve felt the effects in small ways (a program I used at Belvoir was cut), but just consider it the price of getting the Government back on track, if even just a little bit.

    Leaders in DC will have to ignore all of the “but not me” pleas and get on with the deal. I’ll accept whatever hand they deal me.

    I expect to see more cuts everywhere. There is no other choice, really. It’s a math problem, and the math they have been using simply doesn’t work.

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