On Monday, President Obama announced that he will propose freezing the salaries of non-military federal workers “for two years to help cut federal spending.” In making his announcement, Obama pointed to the sacrifices made by Americans who serve in the military and said federal workers have to be able to make similar sacrifices by accepting a pay freeze. “These are also times where all of us are called on to make some sacrifices,” he said. “And I’m asking civil servants to do what they always do and play their part.” While streamlining the operations of the federal government and cutting back on wasteful spending is a key progressive goal, the pay freeze is the wrong way to accomplish it. A freeze on federal workers’ pay would have little impact on the budget deficit, discourage talented workers from staying in the federal workforce, harm the economy, fail to win over desired political support from conservatives, and bolster the conservative philosophy that unfairly blames the modest pay of public sector workers for a deficit caused by disastrous wars, tax cuts for the rich, exploding health care costs, and a recession spurred by Wall Street’s misdeeds. As an alternative to the freeze, public officials should champion bold progressive ways to cut the deficit that would both lower U.S. debt and protect spending on programs that grow the economy and invest in America.
POOR POLICY: Obama’s non-military federal pay freeze is projected to “save $2 billion for the remainder of the 2011 fiscal year, $28 billion over the next five years and more than $60 billion over the next 10 years.” This spending is relatively minuscule compared to Obama’s FY 2011 budget request, which is $3.83 trillion, meaning that it would do very little to actually save the taxpayers any money. As the Center for American Progress’s Michael Linden notes, the freeze would be a blunt instrument “for reducing the deficit that [doesn’t] reduce the deficit very much.” “In the context of the deficit, Obama will get chump change from freezing federal pay,” writes Economic Policy Institute president Larry Mishel. Additionally, the New York Times reports that the pay freeze will “reduce the amount of money that federal employees have to spend by $2 billion in 2011 and by $5 billion in 2012.” Using this data, Center for Economic and Policy Research co-director Dean Baker uses the Romer-Bernstein Obama transition team paper’s economic model to predict the loss of 7,000 private sector jobs in 2011 and 18,000 jobs in 2012 as a direct result of the freeze. Additionally, the federal government is currently in the process of implementing the health care and financial regulatory laws passed this year, and it is simply the wrong time to discourage talented individuals from serving in the government; discouraging talented doctors from working at Veterans Administration hospitals or skilled inspectors from working to ensure safe offshore drilling would be disastrous. Yet, advocates for the freeze may argue that while it does little to reduce the deficit and may harm the employment rate, it is symbolically important for federal workers to cut back just as the public has been forced to. But this simply perpetuates the myth that federal workers are overpaid and underworked at the expense of the taxpayer. According to data from the U.S. Office of Personnel Management, federal workers actually earn 22 percent less than their counterparts in the private sector. As CAP’s Lauren Smith points out, conservative studies that claim federal workers are overpaid compared to their private sector counterparts often purposely do not compare workers of similar educational and age backgrounds. Once you account for those factors, public sector workers tend to make less. For example, a federal engineer makes $90,180 on average, while a private sector engineer working at the same level takes home $111,794.
POOR POLITICS: Some advocates for the pay freeze may admit that it is a flawed policy and even that it advances right-wing philosophy, but that it will help win over conservative support for more progressive policies. Yet, the response from leading conservatives so far has ranged from tepid to disdainful. Rep. Darrell Issa (R-CA) complained that it would save too little money, stating that the “Obama administration says this two-year pay freeze will save $2 billion, however, just last week, OMB released a report revealing that the federal government’s improper payments for FY 2010 totaled $125 billion, $15 billion higher than the previous year.” While incoming House Speaker Rep. John Boehner (R-OH) said he agreed with the freeze, he immediately said in a statement that “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.” The conservative Washington Examiner blasted the freeze as “an empty gesture,” citing its “minute impact on the budget deficit.” And as Talking Points Memo notes, the “White House secured no parallel commitments from the GOP,” meaning that Obama is effectively granting conservatives a policy and philosophical victory without getting anything in return.
A BETTER WAY: The deficit is not the most immediate problem facing America; reducing unemployment and restoring robust growth are far more immediate concerns. As the latest CBS poll on the issue finds, only 4 percent of Americans list the deficit as the greatest problem facing the country. Yet, that doesn’t mean that we shouldn’t be taking smart, progressive steps to reduce the U.S. budget deficit, because there is never a bad time for the government to not waste money and get frivolous spending under control. While freezing the pay or hiring of federal employees would be the wrong approach to take, there are efficiencies to be found in the way the government operates. The CAP paper “Education Transformation: Doing What Works in Education Reform” outlines inefficiencies in how the federal government handles its education funding and lays out ways we can save nearly $100 million simply by streamlining the process, money that could either be used for deficit reduction or reinvested into education. And in another report, “A $400 Billion Opportunity,” CAP expert Raj Sharma lays out ways that we could save, on average, $400 billion every ten years simply by developing a more streamlined, efficient, transparent, and accountable federal procurement process. For one example of why reforming the procurement process is so important, see CAP Senior Fellow’s Scott Lilly’s paper “Getting Rich On Uncle Sucker.” Lilly documents how pharmaceutical company Emergent BioSolutions Inc. developed a drug for $46 million but was able to sell it to the government for $217 million, a markup of 300 percent; over “the past decade, the government forked over more than $1.3 billion for doses of the vaccine, which had cost the company only about a quarter billion dollars to manufacture — leaving more than a billion dollar difference between revenues and the cost of product sales.” Yet another place to look for savings would be the bloated defense budget. CAP Senior Fellow Lawrence Korb and CAP researcher Laura Conley released a report last September laying out $108 billion in defense cuts in the current 2015 budget forecast. The government also has currently set up a network of tax expenditures and other subsidies to Big Oil that cost the American taxpayer billions of dollars every year. Ending these subsidies would save an estimated $45 billion over ten years. Ending the Bush tax cuts for the richest 2 percent of Americans would increase revenues by $690 billion over the next ten years. Through these policies we can take sensible steps to reduce the deficit while promoting policies that invest in America and do not preemptively appease misguided right-wing philosophy.
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