Americans don't agree on much when it comes to fixing the budget, but they agree on this: They're paying government workers too much money.
In an October Washington Post poll, the only major deficit-busting proposal called "totally acceptable" by a majority of respondents was to freeze the salaries of public sector employees. The president must have been reading the Post that day, because Obama's latest concession to conservatives on the deficit was a two-year pay freeze for government workers.
If the president's plan gave Americans the idea that cutting public sector pay was worthwhile, conservative politicians have piled on to make the idea look utterly necessary. Governors with national appeal, from Democrat Andrew Cuomo to Republican Tim Pawlenty, have put public sector union pay on the chopping block with state deficits yawning into 2011.
There are two questions here. The first is whether public sector employees -- at the federal, state and local level -- are being overpaid. The second is whether states and local governments have any choice but to cut their employees benefits.
The debate over public sector compensation is fierce and complicated, but here's a snapshot. Conservatives point out that at the federal level, workers obviously earn more in benefits and income than the private sector; and at the state and local level, they take home defined benefit retirement packages that promise plush rewards no matter how the market fares (unlike the private sector, where 401(k) plans take a hit when stocks and bonds pay poor returns). Oh, and let's not forget that public sector employees enjoy remarkable job security on top of these benefits.
The left pushes back, saying the public sector tends to higher more qualified workers who deserve higher pay and benefits. If you account for education, age, and other relevant characteristics, federal government employees earn 12 percent less than comparable non-government workers, and state employees earn about 7 percent less, according to a nonpartisan study. What's more, they point out, competitive pay is key to providing effective governance. Better to overpay for talented representatives and regulators than to underpay for incompetence.
Regardless of who is right, one thing is certain: public pensions are in trouble. States and cities have guaranteed retirement payments to public sector employees at a level they simply cannot afford with low tax revenue and investment losses. That's why even Democratic mayors and governors are not only talking about reforming pensions, but actually doing it.
In a conversation with the Mayor Michael Coleman of Columbus, Ohio, he told me the city stands to save more than $100 million over the next ten years by asking city employees to pay more into their pensions and take out less. Closing the bridge from both sides is a logical and practical compromise for state and cities to make, because they cannot legally print money or run deficits.
The federal government is another story. Washington can print money, and Washington can run deficits. That's one reason why liberals are furious that the president has offered to freeze federal salaries at a cost of $60 billion to federal workers, at a time of low demand, high uncertainty, and easy money.
It's no surprise the American public thinks Washington, which spends a trillion dollars more than it earns every year these days, is paying itself too much. But the president should acknowledge that he's feeding this impression, right or wrong, by putting public sector salaries first up on the chopping block.
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