Three Takeaways From Fed Chair Powell Following July Hike Decision

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Roughly every six weeks Federal Reserve Chair Jerome Powell delivers a report card that rates the economy’s future performance. This comes along with each decision the central bank makes on interest rates.

The latest move — to raise interest rates by a quarter point — came on Wednesday. That followed the Fed’s decision to hold rates steady at its June meeting for the first time since it began its rate-hiking campaign to tame inflation in March 2022.

Wednesday’s report card likely won’t sway the economic outlook’s “grade point average” for the whole year. That is to say, it wasn’t vastly different from the prior report cards Powell delivered after the other meetings this year. But there were some notable takeaways.

A recession isn’t in the cards for now

Powell still believes the Fed can achieve what’s known as a “soft landing.” He said on Wednesday, “given the resilience of the economy recently [Fed staffers] are no longer forecasting a recession.”

That would mean that the central bank could get inflation down to its 2% target causing minimal damage to the economy. That’s generally been difficult because the higher interest rates go, the higher the unemployment rate goes, which increases the likelihood of a recession.

That’s why many economists, including some at the Fed, were predicting we’d be in a recession around this time last year. Powell doesn’t agree, however – although he said Fed staff are predicting “a noticeable slowdown in growth starting later this year.” Click HERE to read more.

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Senate Bill Touted as Step Toward Streamlining Agencies

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A report on a bill (S-666) now ready for Senate voting touts the measure as a step toward streamlining agencies by targeting redundant programs as the GAO has recommended for many years.

The “Identifying and Eliminating Wasteful Programs Act,” would require the CIO of each agency – under guidance to be issued by the OMB – to compile a list of “unnecessary, defunct, or duplicative programs; programs that could be performed more effectively by a different agency; and programs that could operate more effectively if consolidated with other programs,” says the report from the Homeland Security and Governmental Affairs Committee, which approved it.

The agency would have to include that list in its annual budget justification to Congress along with proposed legislative language to eliminate or consolidate them.

The report says the bill “presents a pathway for realizing these cost saving opportunities by assisting Congress, the Government Accountability Office, and other transparency and accountability actors, in the identification of unnecessary, defunct, or duplicative federal programs . . . Once these programs have been identified, Congress can craft legislation to rescind statutory authorization for these programs and realize any accompanying cost savings.”

It says the bill would build on “previous efforts to inventory federal programs to provide greater transparency and track costs and performance” including the Government Performance and Results Act Modernization Act, which requires agencies compile and present to Congress lists of duplicative or outdated reports they are required by law to submit.

Citation: FEDweek

Published: July 7, 2023

OPM’s Backlog Of Pending Federal Retirement Cases Hits Record Low

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Pending retirement cases at the Office of Personnel Management hit the lowest point in at least two years last month, though the average retiree still needs to wait upward of two months for an application to clear.

OPM’s inventory has fallen steadily for five straight months following a surge in retirements cases in January. Still, the agency is about 3,000 cases above its target goal of 13,000 cases pending at any given time.

The office has maintained momentum after the annual spikes in retirements that occur at the beginning of each year, indicating that the tiger teams and use of overtime that OPM leveraged in recent months may be working to cut down a backlog that rose to more than 36,000 cases last year. Click HERE to read more.

Citation: Federal Times, Molly Weisner

Published, 7/6/23

Ideas For AI in Government are There. The People Aren’t, Experts Say

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Job competition and recruitment concept, Robots waiting in line together with humans for vacant job competition of people and robots for jobs vector illustration. (Getty Images.)

The federal government has put forward a number of policy blueprints to ensure ethical and transparent use of artificial intelligence in government. They mean little if agencies lack the leadership and workers to enforce them, which they currently do, tech experts said before Senate lawmakers on Tuesday.

AI has been gaining popularity over time as agencies have been attracted to the idea of automating rote processes. The concern is that without an expert workforce to guide its trajectory, AI could lead to situation where agencies are riding without training wheels, causing harm to themselves and others, experts said before the Senate Committee on Homeland Security & Government Affairs on May 16.

Consider: there is a vacancy for the director of the National Artificial Intelligence Initiative Office within the White House — a role that is key to coordinating AI policy and research across government. There are agencies who’ve yet to install a chief AI officer. There are some 40,000 cybersecurity jobs to fill in the public sector to support government’s approach to ethical, safe AI use. During a separate hearing the CEO of ChatGPT himself urged government intervention as necessary to mitigate risks of powerful AI systems.

Such leadership holes make it difficult for agencies to craft and curb the technology, said Lynne Parker, a professor at the University of Tennessee and the former director of NAIIO. Experts urged specific guardrails for automated technology that at its most extreme can formulaically cut subsistence funding for Medicaid beneficiaries without so much as a review by a benefits officer — an example given by a witness attorney for the American Civil Liberties Union. Click HERE to learn more.

 

Saving For Retirement In Your TSP With A Federal Annuity: How Much Is Enough?

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Planning for retirement with a federal pension is different from planning for retirement without one.

As you surely know, one of the most valuable benefits of federal employment is the prospect of a guaranteed stream of income in retirement. That is, a pension (annuity). At the same time, you might suspect that your pension alone will not be adequate to fund the retirement lifestyle that you desire. And so, you also regularly invest through your TSP account. But how much is enough?

Likely you have heard of the 4% rule. While the word “rule” is a bit of an overstatement, the general idea is that when an imminent retiree observes their nest egg, there is an amount that they can withdraw each year and, assuming common investment return assumptions, not run out of money before they die. That amount is 4% (adjusted for inflation).

This rule of thumb is based on 1994 research by Bill Bengen. While it has been poked and prodded over the years — at various times, commentators have suggested 3%, others 5% in some circumstances — there really hasn’t been a substantial deviation from the original figure.

Although not always obviously so, this “rule” underpins many popular online retirement calculators that illustrate how much you need to save each year during your working career to fund a comfortable retirement. The most simplistic “plug and play” calculators assume that your retirement will be funded by a combination of Social Security and your accumulated savings. For federal retirees, this poses something of a (good) problem. With a pension in the mix, surely it should be the case that you can save less in your TSP than the 4% rule assumes. How do you put a number on that?

In fact, we can employ the handy “4% rule” to back-of-the-envelope our way to a result. If your projected annuity is $40,000 a year, the “rule” tells you that you need to save $1,000,000 to achieve the same result. ($1,000,000 x 4% = $40,000) So you might then say, “Well, as I do have an annuity, I can plan to save $1 million less in my TSP than recommended by the simple calculators.” (Or you may be more conservative, and reduce your goal by, say, $750,000.)

That’s not a bad approach, but it does feel a bit…simplistic. A serious downfall of that method — and the 4% rule in general — is that it treats all your retirement spending as being equally important.

At some point, you may have completed an exercise to determine how much you will likely spend in retirement. Or you may have settled on the other common retirement assumption that your expenses in retirement will be 80% of what you spent while working. But if your analysis stops there, I’m afraid that you have only done half the work. And this brings us back to how planning for retirement with a federal pension is different from planning without.  Click HERE to read more