Keep the Federal Pay Freeze

The Washington Post is reporting that the Obama administration will propose a 0.5 percent cost-of-living pay increase for federal workers in its upcoming budget. The paper says that “the modest cost of living increase in federal compensation would be the first pay jump for federal workers since before President Obama ordered a two-year freeze in late 2010.”

That’s not quite accurate. USA Today recently reported that average federal worker wages rose 1.3 percent in 2011, or slightly more than the 1.2 percent increase in average private wages. The federal increase, while modest, occurred despite the pay “freeze” because increases from “longevity, merit, and promotions” were not covered, the paper noted.

I fear that as the economy gains strength and starts expanding, policymakers will forget that we’ve still got a $1 trillion budget deficit. Even with growth, we’re still heading for a Greek-style debt crisis unless we pursue major spending cuts. So Congress should decline Obama’s request and retain the federal pay freeze for a few more years. At the same time, policymakers should pursue cuts to excessively generous federal worker benefits.

Controlling federal worker costs is only part of the budget solution, but it does make economic sense because pay and benefits have risen so rapidly over the last decade.