Obama Proposes Federal Worker Pay Freeze in Effort to Help Rein in Deficit

President Barack Obama yesterday proposed freezing the pay of about 2 million federal workers this fiscal year and next as a step toward reining in the U.S. budget deficit.

The freeze, which requires congressional approval, would save more than $5 billion over the next two fiscal years ending Sept. 30, 2012. The administration has forecast the deficit will total $2.3 trillion over that time.

“Getting this deficit under control is going to require broad sacrifice,” Obama said in Washington. “And that sacrifice must be shared by the employees of the federal government.”

Obama made the announcement on the eve of his meeting today with congressional leaders about his legislative agenda and two days before a commission he created to offer deficit-cutting recommendations is scheduled to deliver its final report. The panel’s chairmen have proposed a three-year freeze on federal salaries and a 10 percent cut in the government workforce.

“A federal pay freeze was inevitable given the politics of the deficit and the limited pay increases that private sector workers are receiving,” said Stan Collender, a former congressional budget aide who’s now managing director of Qorvis Communications in Washington. “Anyone who thinks federal workers will be the only ones to feel the impact of deficit reductions is seriously misreading the budget tea leaves.”

Republican Support

Republican lawmakers have indicated that would back holding the line on federal salaries. Representative John Boehner of Ohio, who is poised to be the House speaker in January when Republicans take control of the chamber, called for the government to freeze hiring and pay last month.

“Without a hiring freeze, a pay freeze won’t do much to rein in a federal bureaucracy that added hundreds of thousands of employees to its payroll over the last two years while the private sector shed millions of jobs,” Boehner said in a statement yesterday.

The freeze would hit all civilian workers in the government, including those at the Department of Defense. Military personnel wouldn’t be affected. The move would save about $2 billion for the rest of fiscal 2011, which ends Sept. 30, with cumulative savings of about $60 billion over the next decade, according to a White House fact sheet.

The government is projected to spend $457 billion on personnel costs in the 2011 fiscal year, according to the Congressional Research Service. That’s up from $447 billion spent in 2010.

Federal Salaries

Federal civil service pay rose 2 percent in 2010 after rising 3.9 percent in 2009 and by 3.5 percent in 2008, the research service said. The average annual salary for full-time federal workers in occupational categories ranging from nursing assistant to economist to attorney was $74,403 in 2009, according to data compiled by the Bureau of Labor Statistics.

The head of the government’s largest employee’s union, which represents 600,000 federal workers, denounced Obama’s proposal.

“A federal pay freeze saves peanuts at best,” John Gage, president of the American Federation of Government Employees, said in a statement. “The American people didn’t vote to stick it to a Veterans Administration nursing assistant making $28,000 a year or a border patrol agent earning $34,000 per year.”

Jeffrey Zients, deputy director of the Office of Management and Budget, said asking the federal workforce to forego pay raises was “a difficult decision”

‘More With Less’

“It’s the first of many difficult steps” to be taken by the administration “to cut costs and do more with less,” he said on a conference call.

Deficit reduction will dominate budget negotiations over the next two years. Republicans won control of the House in the Nov. 2 elections and narrowed the Democratic majority in the Senate in part by campaigning on a pledge to reduce the size of government and cut the budget.

Obama previously proposed postponing raises for senior government officials in his budget for fiscal year 2011, which began Oct. 1. He’s also suspended bonuses, cash awards and other discretionary compensation for political appointees through the end of this fiscal year.

The administration already has ordered a three-year freeze in non-defense and national security programs in Obama’s budget released Feb. 1, and ordered some agencies to reduce their 2012 budget requests by 5 percent.

The deficit commission co-chairmen, former Republican Senator Alan Simpson of Wyoming and former Clinton administration chief of staff Erskine Bowles, earlier this month proposed a $3.8 trillion deficit-cutting plan that would trim Social Security and Medicare, reduce income-tax rates and eliminate tax breaks including the mortgage-interest deduction.

Their plan also would raise the gas tax, slash defense spending and farm subsidies and bring down health-care costs by clamping down on medical malpractice suits. The Social Security retirement age would rise to 68 in about 2050 and 69 in about 2075.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Nicholas Johnston in Washington at njohnston3@bloomberg.net;

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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