Obama Proposes to Freeze Federal Wages, but Why?


President Obama has proposed to freeze federal wages for the next two years, in response to growing concerns about consecutive trillion-dollar deficits blowing up our debt level. As a matter of policy, it's middling. As a matter of politics, it's muddy. That doesn't make it bad; just insignificant.

As many people have pointed out, and will continue to point out, this is not serious deficit reduction. It's 10 percent spending snips, and 90 percent theater. Denying a 1.4 percent raise to civilian workers for two years will save $28 billion over five years. By comparison, we are projected to add more than $2 trillion to the debt in the same time because of low tax revenue and high government spending in response to the crisis.

Since it is an act of theater, let's think about the desired audience. The president is not courting liberal groups, who just today published a deficit reduction plan that rejects any overall spending cuts until unemployment hits 6 percent. The president is not courting conservative groups, where his popularity has lingered in the single digits. So this must be a play for moderate voters. Indeed, the chairmen of the president's deficit commission proposed a similar federal wage freeze for three years, and moderate Republicans have suggested a similar freeze.

If you want to know how a symbolic spending freeze like this might play with the public, just look at the last time the president proposed one. Ten months ago, the president suggested freezing non-security discretionary spending -- domestic spending on departments like Education and Health and Human Services, but not security departments like the Pentagon, Homeland Security, and entitlements like Medicare, Medicaid and Social Security. That plan would shave about $250 billion off the debt over 10 years.

But Americans didn't applaud the move. One month after the president's moderate freeze proposal, a Washington Post/ABC poll found that 56 percent of the country disapproved of the president's handling of the deficit.

A few months ago, key Democrats rejected a call by the GOP to freeze federal wages, as Brian Beutler reports:

On the Senate floor in June, now-retired Sen. Ted Kaufman (D-DE) whacked a Republican amendment that would have frozen federal pay as an "assault" against "those who choose to serve."

"Now is not the time to talk about laying off federal workers, or freezing their pay," he said.

The same week, Senate Finance Committee chairman Max Baucus (D-MT) called the GOP proposal "arbitrary and restrictive."

The concern among Democrats is that a freeze will save money at the cost of discouraging talent from joining the government. It's widely acknowledged that although the federal government probably overpays low-level employees compared to the wages they would fetch in the private sector, the government significantly underpays for high-level regulatory positions where applicants could land higher salaries in finance or legal firms.

But ultimately, this is a small proposal that will draw small criticism. A federal freeze won't save much money, but I can't imagine a 1.4 percent salary adjustment will discourage scores of high-level applicants, who probably aren't looking to get into government for the plush salaries anyway.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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