Monday, February 22, 2016

Phony Progressive Fairness

Even though Hillary Clinton eked out a victory over Senator Bernie Sanders in the Nevada Democrat primary, I think that Sanders would still be a stronger candidate this November. Although 74 years old, Sanders exhibits a youthful energy and enthusiasm so lacking in Mrs. Clinton who appears as an old school marm totally lacking in charisma. Moreover, Sanders has touched on a couple of issues that have a great appeal to younger voters. One of these is "fairness."

In his speech following his primary victory in New Hampshire, Sanders claimed that America was all about "fairness", and that his revolutionary agenda was also about fairness. For example, he thought it was unfair to require people to pay for their own college education, or have to take out loans to complete their education. I wonder if he thinks it unfair for people to have to take out mortgages in order to buy their homes?

Nevertheless, when politicians like Sanders speak about fairness, they usually overlook the special privileges and benefits that they enjoy. Does Sanders really think it fair for him and his family to retain his Federal medical insurance program even though everyone else has been forced into Obamacare? Members of Congress were supposed to be covered under the Affordable Care Act but then somehow got exempted. Even though ordinary people who liked their medical insurance plans were not allowed to keep them, Senators like Sanders as well as most other Federal employees were allowed to keep their plans.

Moreover, Members of Congress get a substantial subsidy to cover the cost of their Federal medical insurance plan. They make at least $175000 per year and still get a subsidy even though ordinary people making $75000 per year do not qualify for a subsidy. Is that fair?

Also, the pension plans that cover Members of Congress and other Federal employees provide far greater lifetime retirement benefits than the Social Security system that covers the rest of us.                                          

The maximum Social Security benefit for someone retiring today at age 67 is about $2500 per month or $30000 per year. The Social Security benefit formula is based on a worker’s average pay over 30 years. There is also a cap on Social Security benefits. Even if someone earns over $100000 per year, his or her Social Security benefit can only be based on the first $100000 of earnings. In other words, if someone makes $200000 per year, only the first $100000 will count in the computation.

Using a 30-year average benefit formula, and putting a cap on benefits were sensible, practical features that have been part of Social Security from the beginning. It was always expected that people would have to supplement their Social Security retirement benefits with their own personal savings. To assist in saving for retirement Congress over the years has allowed workers to utilize a variety of tax-sheltered retirement plans like 401ks and IRAs.

It is shocking to compare the system that our elected representatives have created for us to the one they have created for themselves. Members of Congress now participate in social Security just like the rest of us. However, they also participate in FERS (Federal Employees Retirement System). In addition to Social Security they only have to work for 5 years to be eligible for another pension. If they serve in Congress or another branch of government for 20 years, this additional benefit will be based on the average of their highest 3 years salary, not the highest 20 or 30 years. This pension benefit can be as high as 80% of the average of their highest three years pay. Ordinary members of Congress now make about $175000 per year. For example, members of Congress with only 20 years of service will receive 34% of pay or about $60000 per year in addition to their maximum Social Security benefit. For this extra pension they contribute about 1.5% of salary. What a bargain!

Members of Congress, however, seem like pikers compared to many state and municipal employees. State employees in Connecticut can retire as early as age 60 on 75% of the average of their highest three years pay. In California many municipal employees can retire as early as age 50 on 80 to 90% of the average of their last two or three years pay.

I wonder if Senator Sanders thinks these public service pension benefits meet the fairness test?


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