News Cut: November 29, 2010 Archive

Pay freeze?

Posted at 11:45 AM on November 29, 2010 by Bob Collins (9 Comments)
Filed under: Economy, Politics

President Obama today proposed a pay freeze for federal employees for the next two years. It's a pre-emptive strike in advance of Republicans taking control of Congress. Many in the GOP have vowed to reduce the federal workforce by 10 percent.

Obama says his move will save $5 billion over the next two years. The pay freeze will not apply to the military.

There are about 2.1 million federal employees (including the military). The number has grown in recent years. Nextgov.com analyzed why:

There were fewer federal workers in 2009 than in 1990, 1980 and 1970. Now take a closer look at the OPM table. Much of the growth, understandably, occurred in Homeland Security agencies, increasing from 70,000 to 180,000 - a jump of 110,000. Justice Department jobs went from 98,000 to 113,000 -- more than 15,000 new jobs added. (Again, crime and more Homeland Security related.) Jobs at the Veterans Department increased from 220,000 to 297,000 -- that's 77,000 more federal workers. Again, a result of Homeland Security, or rather staffing up to take care of thousands of veterans coming home from two wars. And there's a lot of information technology jobs in there.

Almost all of the new jobs created were as a result of 9/11, the analysis said. Compared to the 1980s, federal jobs in agriculture, education, and the Treasury have all declined.

But back to the freeze. Will it work? Here's some napkin math:

There are (and this is debatable) 1.43 million federal workers.

A savings of $5 billion per year is the goal.

The average amount being forfeited by a federal worker is $3,496.

The current deficit is about $1 trillion.

On a per-dollar basis, the president's move cuts one-half cent for every dollar of the federal deficit. That doesn't quite reach the level of a drop in the bucket. It also assumes that the cost of benefits doesn't rise.

Would the Republican plan do much more? The average federal salary is about $68,000. Annual benefits, reportedly, cost $40,785 (this may include benefits under the GI Bill). The total saving from cutting 10 percent of the civilian workforce would be $15.5 billion or a penny and a half per dollar of the deficit. That, however, doesn't factor in the cost of lost income taxes and the cost of firing employees.

What else needs to be cut?

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