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Wednesday, December 1, 2010

 

Why Does Barack Obama Want to Cut the Salaries of Federal Employees?

Why Does Barack Obama Want to Cut the Salaries of Federal Employees?

Ben Adler
Newsweek
November 29, 2010

 

President Obama is often blamed for not reaching out to Republicans. In truth, as Monday morning's announcement that Obama wants to cut the pay of all federal employees illustrates, he has the opposite problem. Obama frequently proposes essentially Republican policies, which makes it impossible for him to use those ideas to buy Republican votes for bipartisan legislation.

When legislation to limit greenhouse gas emissions was being negotiated in the Senate Obama undermined the bargaining process by simply unilaterally opening up new areas for offshore oil drilling. Increased drilling was supposed to be one of the things Democrats gave to Republicans in a comprehensive energy reform bill as an inducement to vote for it. Republicans hardly applauded Obama for the move, and the average swing voter seems not to have given the Democrats any credit for it in the recent election. In fact, the BP oil spill turned the drilling decision into a potential liability for Democrats.

This was be a textbook lose-lose, and so is the federal employee pay cut. Just a few months ago Republicans were proposing the same thing, and Democrats, including even moderate deficit hawks like Sen. Max Baucus (D-MT), were criticizing it. Democrats opposed to the idea of a two year pay freeze for federal employees, which is really a pay cut if there is any inflation, because it would be counter-productive to the economic recovery. If there is one thing that any economist from across the political spectrum will tell you it is that the government should currently be pumping money into the economy, rather than removing it. You can do that through a mix of immediate tax breaks for working families and infusions of investment in economically productive programs such as education and transportation infrastructure, as Democrats tend to favor, or you can do it less effectively through tax breaks for the wealthy as Republicans advocate. But the one thing you ought not to do is take money out of the economy. But that is precisely what this proposal would do, in the name of deficit reduction. How much deficit reduction? Not much, just an estimated $60 billion over 10 years, which is less than one-tenth of what the government will save if it allows the Bush tax cuts for the wealthiest two percent of Americans to expire.

The other reason many liberals are opposed to cutting pay for federal employees is that the argument for such a cut is based on the suspect premise that federal civil servants are highly paid. Many federal employees do indeed make more than the average American, but that's because of the type of work they do and their qualifications. Cabinet departments and law enforcement agencies are filled with lawyers, holders of advanced degrees, and other experts. Compared to the economy as a whole there are relatively few high school drop outs doing low-paid menial work for the federal government. So, in fact, it turns out that federal employees actually make less than private sector employees with comparable jobs. A report by the U.S. Office of Personnel Office for Fiscal Year 2011 found that federal employees' average 22.13 percent less (the disparity is bigger or smaller depending on where in the country). "In the context of the overall deficit problem Obama will get chump change from this policy and will only enlarge the degree to which Federal pay lags behind that of the private sector," says Lawrence Mishel, president of the left-leaning Economic Policy Institute.

Even liberal economists who think some federal workers are overpaid say this approach -- punishing the underpaid and the overpaid, the effective and the ineffective, alike -- is bad policy. "There are undoubtedly federal workers who are overpaid. Why doesn't [Obama] find them and cut their pay?" says Dean Baker of the Center for Economic Policy Research. 

Nonetheless, if you are a liberal who is committed to deficit reduction then you would probably be wise to accept this relatively small sacrifice as part of a bipartisan deal to reduce the long term deficit and debt. Any such deal will require sacrfices from all quarters. But that makes it all the more confounding that Obama chose to hand Republicans this potential bargaining chip in exchange for nothing just two days before the President's Fiscal Commission makes its next announcement. It seems Obama is undermining the work of his commissioners and his allies in Congress by taking a chip that could be coupled with a similar measure that Republicans would only reluctantly support, such as eliminating a tax deduction or a reduction in military spending. "Why he would offer to do such a thing without getting something from the Republicans in return is mindboggling," says Mishel.

Other liberal economic wonks reacted with similar disgust, dismissing it as motivated by political triangulation rather than legitimate policy considerations. "It's a cheap stunt," James K. Galbraith of the University of Texas says, "It's depressing that this is being offered as policy, when it's nothing but a gesture -- and a dishonorable one."

Meanwhile the Republicans who Obama seeks to curry favor with were notably silent on the President's announcement. House Republican leaders John Boehner of Ohio and Eric Cantor of Virginia, who have been advocating this policy, did not issue the kind of statement that Obama did in support of the congressional Republicans' proposed earmark ban. Republican Senate Leader Mitch McConnell of Kentucky did not a return a request for comment from NEWSWEEK.

Conservative fiscal responsibility groups have not issued statements applauding Obama either but they readily praise his move when asked. Phil Kerpen, vice-president for policy at Americans for Prosperity calls it "a very small step in the right direction," and Adam Brandon, spokesman for Freedom Works agrees that it's "a great start."

The White House did not respond to a request for comment on their motivations or strategic rationale. Ezra Klein suggests one possible policy justification: it's "a smart way to protect the federal workforce." Congressional Republicans have been signaling that they will go after the federal workforce as a place to find budget cuts. By heading them off preemptively and grabbing a share of the budgetary high-ground Obama may diminish the momentum for a more drastic move, such as cutting the federal workforce, which Boehner has advocated.

Politically, Brandon suggests that Obama may have been motivated by a recent widely circulated USA Today article which reported that the average federal employee's compensation package is twice that of the average American worker. Even though that is an apples to oranges comparison, it fed a growing public perception that civil servants have been lavished with unaffordable generosity. "Federal workers earning double their private counterparts," is, as Brandon notes, "a pretty <snip>ing headline if you’ve got the American people hurting and 10 percent unemployment." Unfortunately, this reaction won't do anything to solve those problems.


Comments:
as long as he hurts the rich too with no extended tax breaks,he'll get our votes!
I think it's bs the federal worker makes a moderate wage and this will keep less money out the market.There better not be an extended tax break for the rich.When they don't want to give the working people unemployment.
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