Obama's Pay Freeze Proposal: Placating The Public And Perpetuating The Problem

The President’s recent call to freeze worker pay will hurt us precisely because it is meant to appear to be a step in the right direction. As the media broadcasts this symbolic political gesture, many will be inclined to think that something is actually being done about the grave issue of overspending on public center employees and representatives, and that means that we now may or may not see an actual improvement. For proponents of fiscal responsibility, this attempt to placate the public in order to sweep the issue under the rug poses yet another dimension to a persisting problem.

Let’s start with the details of this crafty political ploy. Obama announced the two-year pay freeze today, which will apply to civilian employees, but not to postal workers, government contractors, federal court judges and workers, or the members and staff of Congress. If approved, the freeze would take effect on the 1st of January as part of the 2012 budget proposals, according to the writers of the Washington Post blog, the Federal Eye.

While the Obama is labeling this act as a broad sacrifice in a bipartisan effort to increase fiscal responsibility in government, this doesn’t actually appear to be very broad. According to the writers of the Washington Post blog, the Federal Eye, the two-year pay freeze announced today, which, if approved, would take effect on January 1st as part of the 2012 budget proposals, will apply to civilian employees, but not to postal workers, government contractors, federal court judges and workers, or Congressional members and staff.

It also isn’t much of a sacrifice. Julie Pace of the Associated Press reported that, “The savings from the pay freeze make only a small dent in the nation's $1 trillion-plus budget deficit. But with voters voicing their anger over Washington's spending during the midterm elections, even a symbolic gesture would show the White House got the message.”

In addition, the freeze will not affect bonuses or promotions for federal employees to higher levels of pay. It will simply limit one method of increased payments, annual raises. Indeed, earlier today, Ed Morrissey posted on True North and Hot Air that “Gabriel Malor received an official explanation given to federal employees today, which assured them that the freeze ‘will not impact step increases or bonuses for federal workers.’ It applies to cost-of-living increases, mainly. If an agency wants to give a worker an increase, they just need to increase their pay grade or boost their bonuses to make it happen.”

And as far as bipartisanship goes, the main agreement we can see between the parties appears to rest in the shared opposition of Mr. Obama’s proposal. According to the Federal Eye (link), President of the American Federation of Government Employees John Gage criticized the announcement as being “a superficial, panicked reaction to the deficit commission report,” while also suggesting that certain government personnel including nurses and border patrol agents are being targeted for Democratic election losses. He said that this pay freeze “amounts to nothing more than political public relations.”
Two aspects of this proposal were acknowledged by the Heritage Foundation (http://blog.heritage.org/2010/11/29/after-the-freeze-real-reforms-toward-fair-federal-pay/) as being a step in the right direction: the fact that federal workers are paid more than private sector counterparts, even when considering skills and education, and that our federal deficits are driven by issues in spending. Senior Labor Analyst James Sherk (http://www.heritage.org/Research/Reports/2010/07/Inflated-Federal-Pay-How-Americans-Are-Overtaxed-to-Overpay-the-Civil-Service) acknowledged that not all government employees are overpaid and that determining comparative salaries requires accounting for differences in skill levels as well. However, what he found was that, even when adjusting for skill levels, salaries and benefits are “30 to 40% higher in the federal government than in the private sector.” He also explained that federal employees can rarely be fired, regardless of performance, unlike private sector workers.

His detailed analysis shows that:
• The federal pay system gives the average federal employee hourly cash earnings 22 percent above the average private worker’s, controlling for observable skills and characteristics.
• Including non-cash benefits adds to this disparity. The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee.
• Overall, controlling for other factors, federal employees earn approximately 30 percent to 40 percent more in total compensation (wages and benefits) than comparable private-sector workers.
• Federal employees enjoy job security irrespective of the state of the economy. Since the recession began, federal employment has risen by 240,000—12 percent. The unemployment rate for federal employees has only slightly risen from 2.0 percent to 2.9 percent between 2007 and 2009.
• Federal employees demonstrate with their actions that they receive better compensation in the public sector than in the private sector: They quit their jobs at one-third the rate of the private employees.
• Bringing federal compensation in line with private-sector compensation would save taxpayers approximately $47 billion in 2011.

Sherk concluded that, “Congress should not overtax all Americans to overpay the privileged workers in the federal civil service. Aligning federal compensation with market rates would save taxpayers between $40 billion and $50 billion a year. Congress should immediately act to bring equity to federal pay. Congress should abolish the General Schedule and implement performance-based pay, require federal agencies to compete with the private sector, and bring the benefits to market levels.”

Aside from implementing performance-based pay, hiring more private contractors to get task and services accomplished at a more competitive rate while also stimulating the economy, and reducing federal benefits, Sherk also proposed that dismissal restrictions be lifted in order to keep government employees more accountable to their job performance.

This is fairly consistent with the reported statement (http://politics.blogs.foxnews.com/2010/11/29/reaction-president-obamas-federal-pay-freeze-plan) issued by Republican Speaker-designate John Boehner:
"I welcome President Obama's announcement, and hope he will build on it by embracing much-needed steps to reduce both the size and the cost of government, including the net federal hiring freeze Republicans propose in our Pledge to America. 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.
"Today's action is a clear indication that the Pledge to America, which lays out concrete steps to cut spending and reduce the size of government, is the right plan to address the people's priorities. Republicans and Democrats don't have to wait until January to cut spending and stop all the tax hikes. We can - and should - start right now."

Representative Darrell Issa (R-CA) of the House Committee on Oversight and Government reform stated that:
"At a time when our nation's seniors have been denied a cost-of-living-increase and private sector hiring is stagnant, it is both necessary and quite frankly, long over-due to institute a pay-freeze for the federal workforce. As Republicans outlined in our Pledge to America there are a number of actions the President and Congress should immediately act on to demonstrate a real commitment to reigning in the excessive growth and spending of the federal government.
"To put this in perspective, 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. It is unthinkable that we have come to accept having a bureaucracy that has institutionalized waste, fraud and abuse to the point where $125 billion in improper payments were made last year. The first place we should look to make progress on higher costs, increased debt and a stagnant economy is look inward at how taxpayer dollars are being spent and doing more to ensure that tens of billions of dollars are no longer erroneously paid out."

Clearly the President’s proposal leaves much to be desired in actually solving issues in government spending and growth which are causing this deficit, as the problems lie not only in the increasing expenditures in the specific area of annual raises for certain employees, but in the general overspending and misuses of taxpayer’s money across various levels of this ever-growing bureaucracy. Caution should be taken therefore, in crediting this as a “step in the right direction.” While this proposal appears to be incapable of producing significant improvements, its tag line may yet convince many that it is indeed providing some relief to the fiscal irresponsibility we have been seeing, and therefore weaken the efforts to bring about true remedies to these economic concerns.

Cross-posted at True North and Ladies Logic.