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Federal Pay Freeze: Obama Administration Announces Plan To Freeze Salaries Of Federal Employees

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The Obama administration announced on Monday an ambitious plan to freeze the salaries of federal employees for two years in an effort to address massive deficits and get a handle on the country's unsustainable fiscal path.

The proposal calls for a two-year pay freeze that would save the country $28 billion in the next five years and $60 billion over the coming decade. It would be applied to all civilian federal employees, including those at the Pentagon, but not to military personnel

"Clearly this is a difficult decision," said Office of Management and Budget Deputy Director for Management Jeffrey Zients. "Today, the president is clearly asking [federal employees] to make a sacrifice. We believe it is the first of many difficult steps ahead that we will be taking in the upcoming budget to put our nation on sound fiscal footing."

The announcement comes amid an intensifying political focus on ways for the government to scale back spending and close the deficit. It is the second time in as many weeks that the president has found himself reading from the same "fiscal responsibility" script as his Republican critics. Last week, the White House and congressional Republicans both reiterated their support for a moratorium on earmarks -- the pork-barrel projects that are a tiny portion of federal spending but serve as an invitation for influence peddling.

Last week, likewise, the two chairs of the president's deficit commission proposed a three-year cross-agency freeze on federal pay as part of their plan to reduce government expenditures. Former Sen. Alan Simpson (R-WY) and former White House Chief of Staff Erskin Bowles also recommended that the government eliminate 200,000 federal jobs over the next decade in addition to cutting 250,000 non-defense private contracting positions.

The utility of skimming the fat off federal payrolls, however, is contested. While the money saved presents a notable figure -- and has been cited as an important symbolic gesture towards fiscal sanity -- there is concern that it's a disincentive for talented workers to pursue government jobs. That may be offset by the fact that inflation is low, noted Rob Shapiro, a former Clinton Commerce official.

"But it's not a policy about how best to run and manage the federal government: It's a symbolic gesture to communicate that the president's on the side of those intent on cutting government -- another olive branch to independents and the GOP."

According to USA Today, the number of federal employees who make more than $150,000 a year has grown ten-fold in the past five years and doubled since Obama was inaugurated. A good chunk of that, however, are doctors at veterans hospitals whose workload has increased due to two ongoing wars.

Similar plans have been tried during previous economic slumps, with not much success. In 1933, President Franklin D. Roosevelt introduced an economic bill that slashed government spending by $500 million, largely by reducing scheduled payments to federal employees and veterans. The results, economist argue, prolonged the depression rather than shortening it.

"One has to ask why Obama would do this right now," said Dean Baker, a progressive economist and co-director of the Center for Economic and Policy Research. "Is this supposed somehow be good for the economy? Is there a business anywhere in America that is going to create even a single job because a federal employee didn't get a pay increase they had coming? I would love to see the economic theory that shows this."

Acknowledging that there are "undoubtedly" federal workers who are overpaid, Baker added: "This would be a clear case of Obama abandoning principle to beat up on relatively powerless people, backing down before the moneyed interests. It would be nice if he could show the same vigor going after Wall Street, the insurance industry or the pharmaceutical companies."

The Obama administration's proposal is not a fait accompli. Communications Director Dan Pfeiffer acknowledged that it would require the approval of Congress, though he challenged Republicans to oppose the idea after having championed it (in the context of deficit reductions) for months. As for the broader political calculations, those appear hazy. The administration did not say that they would tie freezing federal payments to passing unemployment benefits or a deal on extending the Bush tax cuts.

"This is about finding ways to deal with the deficit and cut spending," said Pfeiffer. "I don't view this as part of or especially connected to the tax cut debate."

As for Shapiro's concerns that a pay freeze might dissuade talented applicants from seeking government jobs, Zients said: "We do need to continue to recruit the best and brightest to federal service... I'm confident that we have a overall value proposition for employment that is quite strong and that a lot of people do want to serve and that this freeze would not get in the way of our efforts to bring in the best and brightest."

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