NCPA - National Center for Policy Analysis

Cost Of Living Adjustments Overcompensate

July 17, 2001

Former Rep. Hastings Keith (R-Mass.) says cost-of-living adjustments (COLAs) in federal pensions and Social Security overcompensate for inflation, giving retired federal workers an unwarranted raise at the expense of taxpayers, the majority of whom have no pensions.

Keith, chairman of the National Committee on Public Employee Pensions, uses his own generous public pensions as an example:

  • After just 14 years in the House, his congressional pension started in 1972, paying $1,560 that first month.
  • Fully adjusted for inflation it should pay $6,184 today, but he gets $7,172, an extra $988, or an increase of 16 percent beyond the increased cost of living.
  • His monthly Social Security check, which started in 1980 at $620, should pay $1,324; but Keith gets $1,421, an extra $97, or 7.3 percent.

He also receives a widower's pension because his first wife worked for the Central Intelligence Agency for 25 years.

  • That federal pension was $620 a month in 1989, when she died, and should pay $880, adjusted for inflation; instead he receives $934, an extra $54 or 6 percent.
  • Only his military pension falls short -- it started at $550 a month in 1976, when he was 60, and now pays $1,660, shy of the $1,701 needed to adjust fully for inflation.

Still, his pensions add up to $134,244 a year. Keith, a former life insurance and annuity salesman, figures he contributed less than $34,000 for these benefits during his working life, much of it in Social Security taxes. Thus he gets back each year nearly four times what he paid over a lifetime.

Excessive COLAs add up to billions of dollars when all retired federal workers are counted.

Source: David Cay Johnston, "Ex-Congressman Fights the Hand That Overfeeds Him," New York Times, July 14, 2001.


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