Lawmakers Debate How to Offset COLA Repeal

Every lawmaker in the House and Senate seems to favor repealing the onerous law that will begin capping retirement pay increases of military retirees beginning in fiscal 2016.

But the focus on a bill out of the House and the ongoing debate on the Senate floor is on how to pay for the additional $6 billion in spending over 10 years that repeal will bring about and whether taxpayers, future retirees, corporations or undocumented workers should pay for it.

A House-passed bill to repeal COLA cap law is not being greeted well by veterans groups who say they were surprised by the Tuesday vote that now shifts the cap on future troops.

"It penalizes tomorrow's retirees, which we are against. Full repeal means eliminating the penalty for all," Veterans of Foreign Wars national spokesman Joe Davis said.

Louis Celli, legislative director of the Legion, agreed, but added that the House bill, on its face, doesn't seem to save the kinds of money for which the COLA cap was intended when it was passed as part of a December budget deal. That cap is intended to save $6 billion over 10 years.

The House legislation would not affect anyone until the first people who enter the military in 2014 begin retiring at about 2034, Celli said.

"So I'm confused about any perceived savings that may arise from this," he said.

If the COLA provision is not repealed, working age retirees will begin seeing the cost of living adjustments capped at one percentage point below the annual federal cost of living increase until they hit age 62. No other federal employees or Social Security recipients are affected by the so-called "COLA-minus-one" provision.

Rep. Tulsi Gabbard, D-Hawaii, said she voted for the House measure but would have preferred a COLA repeal bill that she had co-sponsored. The Military Retirement Restoration Act would have offset the $6 billion needed to fully fund future COLAs by barring American-managed and controlled companies from avoiding U.S. taxes by incorporating overseas.

But to offset or not to offset -- and how -- has been the subject of two days of debate in the Senate.

There, Democrats are pushing for a bill introduced by Sen. Mark Pryor, D-Ark., that simply repeals the COLA cap law, while Republicans are promoting an amendment that, like Gabbard's preferred House bill, would make up for the $6 billion by changing U.S. tax law.

In the Senate amendment being offered by Sen. Kelly Ayotte, R-NH., the change is aimed at undocumented aliens who are listing non-existent or non-resident children on returns in order to get refund checks.

In a series of floor speeches on Tuesday, Senate Democrats portrayed the amendment drafted by Ayotte as pitting military retirees against children, including so-called "Dreamers" -- young people brought to the U.S. by their parents and who are hoping for a path to citizenship.

Independent Sen. Bernie Sanders, chairman of the Senate Veterans Affairs Committee, offered his own bill -- comprehensive veterans' legislation that included COLA repeal with offsets as well as other provisions that he said have the backing of veterans groups and military associations.

Sanders proposal was neither championed nor criticized by lawmakers on the Senate floor Tuesday. It was ignored.

Like Ayotte's bill, Sanders' Comprehensive Veterans Health and Benefits and Military Retirement Pay Restoration Act would pay for repealing the COLA cuts, but would do so by taking the money from the Overseas Contingency Operations Fund, the Pentagon war chest that is exempt from Congress' spending caps.

Sanders said the administration and the Pentagon have projected that war spending will go down as the country ends combat operations in Afghanistan and radically reduces the number of troops there. His bill, he said, would lock in the savings by establishing new spending caps on the contingency fund and using the savings to cover the cost of the comprehensive legislation.

Sanders bill would also continue and even expand upon other veterans programs and services, including job training, health care and more.

But over the course of the day Senate debate focused exclusively on the Pryor bill and Ayotte's proposed amendment.

Ayotte said her amendment would recoup the $6 billion in additional COLA spending by ending some $4 billion in annual tax fraud. She said the change, requiring a Social Security number for any dependent listed on a return as an additional child tax credit, would save $20 billion over 10 years.

Ayotte said the fraud was uncovered by U.S. Treasury Department investigators in the first years of the Obama administration, yet there has been no effort by the administration to crack down on it. In one case, she said, four undocumented workers living at a single location fraudulently listed 20 children and got a check from the government for more than $29,000.

"All we're saying with this amendment is if you can put a Social Security number with the child you are claiming credit for, you can get the credit -- that's all it is," Ayotte said. "The filer can be an undocumented worker and have a child that legitimately has a Social Security number and get the credit." Ayotte said she included the last part in the amendment to directly address that issue.

Ayotte was joined on the floor by Sen. Lindsey Graham, R-SC, a co-sponsor of her amendment, who said that senators from both parties agreed back in December that they would fix the military retirement COLA problem, and pay for it with offsets, later.

But the Democrat bill, he said, "would do it in a fashion that would break the budget agreement. I don't think that should be our choice ... To help the veterans they [will] turn around and screw the future generations by adding $6 billion of debt on top of $17 trillion."

Using a refrain begun during the Monday debate, Democrats maintained on Tuesday that the COLA repeal bill does not need a "pay for" provision because the recipients have already paid for it.

"They paid by volunteering to serve this country and risk their lives," said Sen. Dick Durbin, D-Ill. "I don't think we should come up with a ‘pay for' for something these veterans have already paid for."

Durbin said Ayotte's amendment, if enacted, would adversely affect children who are in the country at no fault of their own. This includes about 1.6 million children who would qualify for a path to U.S. citizenship under the proposed "Dream Act" that Durbin first introduced to the Senate 13 years ago.