Thursday, January 6, 2011

No Cost Of Living Adjustment for Federal Retirees

I just sent the following memo to Senator Bill Nelson (D-FL) regarding the lack of a cost of living adjustment for Federal retirees for the second year in a row. Nothing will happen because I don't contribute mega dollars to his re-election campaign. However given that he's a Democrat he might at least give it some lip service.

Dear Senator Nelson

I am a Federal retiree having spent my entire 31 year career with the US Fish and Wildlife Service. I retired in Washington DC in late February 2008 and moved the next day to Florida. I have been living on my Federal annuity ever since.

Federal law dictates that Federal retirees are to receive cost of living adjustments that are commensurate with the current rate of inflation. During 2009 and 2010 the national inflation rate was flat and accordingly we received no cost of living adjustment.

That flat rate did not take into account increases in our health insurance premiums (mine has gone up each year), rising costs of rent and food, the sky-rocketing cost of gasoline (it was $2.50 a gallon in Sarasota in October and is $3.16 a gallon today), the rising cost of cable television and internet connectivity (Comcast) or even the rising cost of a bottle of beer.

All of that has occurred yet Federal retirees have received no increase in our annuity despite those obvious and documentable increases in costs.

At the same Federal retirees have not received a penny in annuity cost adjustments the Congress of the United States saw fit to pass legislation giving the top two percent of salary earners in the country more tax breaks. Bill Gates and Warren Buffett and Congressman Vern Buchanan (R-FL) do not need more money in their bank accounts. I do and so do millions of other Federal retirees.

The President made a huge deal out of his agreement with the Republicans that gave Warren Buffett more millions of dollars this year. He failed to mention that the new tax law has ZERO benefit in it for Federal retirees living on an annuity.

I feel like I have been hosed while Warren Buffett dines on caviar from his new tax breaks.

What do you propose should be done to fix this horrific inequity toward Federal retirees? Retirement is a growth industry in this state so you more than most Senators should be keenly aware of the effects of actions on retirees. Its bad enough that active Federal employees have to deal with no salary increase this year. At least they can still get step increases if they are eligible. Federal retirees don't have that luxury.

Should you decide to write back on this issue I would appreciate a letter telling me how you feel and what you plan to do about this inequity. I do not want to receive a form letter prepared by one of your interns or a Legislative Aide.

Thank you.


  1. Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...(one of the guys could have been your uncle Buck)

    If they paid their bill the way we pay our taxes, it would go something like this...


    The first four men (the poorest) would pay nothing.
    The fifth would pay $1.
    The sixth would pay $3.
    The seventh would pay $7..
    The eighth would pay $12.
    The ninth would pay $18.
    The tenth man (the richest) would pay $59.

    So, that's what they decided to do..

    The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball.. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

    The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?

    They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

    So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
    And so the fifth man, like the first four, now paid nothing (100% saving).

    The sixth now paid $2 instead of $3 (33% saving).
    The seventh now paid $5 instead of $7 (28% saving).
    The eighth now paid $9 instead of $12 (25% saving).
    The ninth now paid $14 instead of $18 (22% saving).
    The tenth now paid $49 instead of $59 (16% saving).

    Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

    "I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $10!"
    "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"
    "That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"
    "Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"
    The nine men surrounded the tenth and beat him up.

    The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

    And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

    David R. Kamerschen, Ph.D.
    Professor of Economics.

    For those who understand, no explanation is needed.
    For those who do not understand, no explanation is possible

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