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What’s the Truth About the Obama Pay-Freeze Plan?

The campaign to paper over President Barack Obamas big government tax-and-spend record with symbolic political triangulation has begun.

Yesterday, ahead of todays meeting with House and Senate Republicans, President Obama attempted to preempt conservative calls for smaller government by announcing a Federal Employee Pay Freeze, which the White House says would save $2 billion over the rest of this fiscal year and $28 billion in cumulative savings over the next five years.

While the Presidents political motivations are transparent to all, he should be congratulated on policy grounds for making two key concessions to reality: (1) that, as Heritage research has definitively shown, federal workers are paid more than their private sector counterparts even after accounting for skills and education; and (2) that our federal budget deficits are driven by a spending problem, not a revenue problem. That said, however, conservatives should be vigilant to make sure that the Presidents federal pay proposals serve only as the beginning of negotiations and not as a false solution that prevents real federal pay reform next year.

A fact underreported by most newspapers today is that President Obama cannot freeze federal pay unilaterally. He is going to need Congress to act on his proposal, which calls for the freeze to begin effective January 1. This simply is not going to happen. Democrats still control both chambers of Congress, and the Democratic Party is controlled by government unions, which uniformly blasted the plan yesterday. With just one month left on the calendar to go, taking money away from the Democratic Partys most powerful special interest group is just not going to make it onto an already very busy lame duck agenda.

Furthermore, President Obamas freeze is really just a partial freeze that applies only to 2011 and 2012 cost of living increases. Most federal employees will still receive seniority-based pay increases over the next two years, and no ones federal benefits will be affected. And those federal benefits are a big reason why federal worker compensation is so out of whack with private sector reality. As The Heritage Foundations James Sherk has extensively detailed, federal pay gives the average federal employee 3040 percent greater total compensation (wages and benefits) than a comparable private sector worker. Worse, the current federal pay system does little to reward performance. As a result, the federal government is both overpaying underperforming workers and underpaying the most skilled federal employees.

A much more fundamental reform of federal compensation practices is needed. Congress should replace the General Schedule with pay-for-performance systems tied to market compensation, federal benefits should be brought in line with private sector norms, and the federal retirement age should be raised from 56 to the Social Security retirement age. These reforms would bring real savings to the American taxpayer. President Obamas partial pay freeze would save only $28 billion over five years. Sherks federal pay reforms would save taxpayers $47 billion every year. Which alternative do you think the American people voted for this November?

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