Federal worker’s ‘tax’

Introduction: the proposed federal budget deficit cut

In view of the ever increasing budget deficits, the federal government has developed an ambitious 10-year plan to help reduce government expenditure on welfare. This plan mostly targets federal employees, who will be required to double their contribution towards pension and retirement healthcare policy.

Within the plan, the federal government is asking federal employees to more than double their contributions towards their pensions, by about 1.8%. This will make them pay 2% of their annual salaries towards their retirement benefits.

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If this plan is implemented, then the federal government will trim deficits amounting to $21 billion dollars by the year 2023. Debate on the proposed budget deficit reduction plan is taking a political perspective especially by those affected. this is a plausible idea which will not only help cut budget deficits but will also help to distribute the cost of funding retirement evenly between the government and its workforce.

Amidst the debate, this plan has been interpreted differently especially by federal employees who see it as a means to increase their tax (Liberto, 2011).

Interpretation and Political ramification

The federal government plan to reduce budget deficits by $3 trillion in the next ten years starting from 2013. While most of these cuts are targeting federal employees, the plan has also elicited mixed reactions from various quarters.

Employees from the private sector feel that federal employees should contribute more towards their retirement benefits scheme without complaining since federal employment attracts other benefits such as 30 day paid annual leave, early retirement among others, and should therefore, like every body else more towards their own retirement. This category of electorate interprets the proposed plan as the right political move towards righting the wrongs made by the previous governments.

However, federal employees do not share the same thoughts. While the federal workforce welcomes the move to reduce budget deficits, they oppose the increment of their pension contribution. An average federal employee earns about $47,500, meaning that the 2% is a reduction of $570 in annual earnings.

Therefore, federal employees think that the 10-year project is not a genuinely designed to reduce budget deficits but part of the protracted but concealed efforts to reduce benefits to federal employees. Suffice to say that there has not been any pay rise for the last two years that president Obama has been in office. Additionally, the plan is seen as indirect tax increase for federal employees. Coming at a time when elections are within the next one year, this move is likely to influence its outcome.

The proposed budget deficit cuts will be funded by federal employees in the armed forces, the postal corporations and other government departments. The funding will be attained through reducing government contribution to the cost of benefits accrued by federal employees.

This means that federal employees have to increase their contribution towards such benefits as the new annual $200 for families of retired military officers.

However, the comments by Richard DeNoyer, who commands more than 2 million members of the United States Veterans of Foreign Wars that such the plan “breaks the faith of the same employees who have sacrificed their lives serving the nation”, represents the general feeling within the federal workforce (Liberto, 2011).

Again, coming close to the next general elections, it implies that the deficit cuts will be one of the most effective swing vote issues. Cutting budget deficit by $3 Trillion is a positive move. However, the political ramifications might be grave for the incumbent.

Reference

Liberto, J. (2011). Obama’s federal worker ‘tax’. CNNMoney. Retrieved 21, September 2011 from http://money.cnn.com/2011/09/20/news/economy/obama_federal_ workers_retirement/?hpt=po_bn1

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