Government Dependency

Flashback: Obama Seeks Cap on Federal Pay Raises

Obama Urges Congress to Limit Cost-of-Living Federal Raises to 2 Percent

October 6, 2010

USA TODAY - President Obama urged Congress Monday to limit cost-of-living pay raises to 2% for 1.3 million federal employees in 2010, extending an income squeeze that has hit private workers and threatens Social Security recipients and even 401(k) investors.

Obama's proposal, outlined without fanfare in a letter to congressional leaders, would leave federal workers with their lowest COLA in two decades. Presidents Bill Clinton and George W. Bush proposed lesser increases three times. Congress, which must approve the plan, has not granted less than 2% since 1988.

The president's action comes when consumer prices have fallen 2.1% in the 12 months ending in July, because of a massive drop in energy prices. The recession has taken an even tougher toll on private-sector wages, which rose only 1.5% for the year ended in June — the lowest increase since the government started keeping track in 1980. Private-sector workers also have been subject to widespread layoffs and furloughs.

"With unemployment at 9.5% in June, to cite just one economic indicator, few would disagree that our country is facing serious economic conditions," Obama said. "The growth in federal requirements is straining the federal budget."

Obama's effort to reduce wage increases would save about $20 billion next year, the White House said. Under an automatic formula, workers are set to get a 2.4% increase, and those in some areas could get nearly 19% to keep pace with private-sector employees.

The move would put federal workers between two other groups: military forces and retirees. The military cost-of-living increase for 2010 is projected at 2.9%. Social Security recipients aren't likely to see any increase next year or in 2011 — the first time that's happened since 1975.

Whether the vise on income extends to 401(k) contributions remains unclear: the Internal Revenue Service will set maximum contribution levels, which are tied to inflation, next month.

Federal union officials weren't surprised by the president's action, which must be made by Aug. 31 each year under a 1990 law.

John Gage, president of the American Federation of Government Employees, the largest federal workers' union, said it "will continue to work toward full parity with the military" through Congress.

Some analysts said federal workers continue to fare much better than their counterparts in the private sector.

"I would question why federal workers should be getting any increase," said Chris Edwards of the conservative Cato Institute, who has written studies comparing federal and private compensation. "It sounds like he's being frugal, but really it's not very frugal … I'd like to see wages frozen for a year or two."

Flashback: U.S. Personal Income Increased in January 2009?

March 4, 2009

Despite the deepening recession, soaring unemployment and that nationwide "ugh" feeling, personal income in the U.S. rose by $44.8 billion and disposable personal income -- the amount of money available to be spent or saved after taxes -- jumped by $183.0 billion during January 2009, according to the Bureau of Economic Analysis (BEA).

This, after all three economic indicators had fallen during December 2008.

Why? Mainly, says the BEA, because of annual pay raises and cost of living increases for federal government employees.

"Pay raises for civilian and military personnel added $9.7 billion to government payrolls in January," BEA reported. "Government wage and salary disbursements increased $12.9 billion in January, compared with an increase of $1.4 billion in December."

In the private sector, things were not so rosy, as wage and salary payments decreased by $25.8 billion in January and by $27.0 billion in December.

Yet, even excluding those federal raises, nationwide personal income increased $24.2 billion in January, after decreasing $31.4 billion in December.

And this comes as U.S. Economy Guide Kimberly Amadeo reports that in the 4th quarter of 2008, the U.S. suffered its worst quarterly decline in gross domestic product (GDP) since the 1982 recession.

Editor's Note: Federal employees need to be reminded of the obvious: without the private sector there is no federal revenue with which to pay the salaries and benefits of the public servants (in the past, public sector employees chose government service fully expecting to earn less than their counterparts in the private sector, yet they knew they would enjoy very good peripheral benefits such as those for health, disability, sick leave, life insurance, pension and job security). The comments to these articles posted by federal employees are shocking. They believe they are paid significantly less than the private sector (when in reality they are paid significantly more and with better benefits); and, even though the country is in the crapper, they feel they are entitled to pay increases. Here is a rebuttal from one poster:

The apologias from the government employees in these comments disgust me. Most of the workforce is in the private sector, and most of us see you in government as parasites (and yes that includes you). No doubt you will all argue that your work is so important, who would do what, blah,blah,blah. EVERYONE who works for the government should be ashamed as they are effectively on welfare.

If the past is indeed prologue to the future, federal employees won't be asked to sacrifice after all with next year's paycheck. Federal employees advocates in Congress and federal employee unions are already looking closely at the issue and asking that federal civilian employees under the general schedule get an average 3.4% pay raise next year as well by arguing that "pay parity" should be given to federal civilian employees. That would follow an average pay raise of 3.9% in 2009 and 3.5% in 2008. With an unemployment rate of about 10% in the United States, the combination of job security with a pay raise in 2010 makes a federal job look pretty good. - Ralph Smith, Forget the Sacrifice: Bumping Up the 2010 Pay Raise, June 30, 2009

Obama Opposes 1.9 Percent Pay Boost for Military Personnel

May 28, 2010

nextgov.com - President Obama on Thursday voiced his opposition to authorizing a 1.9 percent pay raise for military members in the fiscal 2011 Defense authorization bill. In a statement of administration policy, the president stood by his February budget request of a 1.4 percent increase for military personnel. Obama's support for a 1.4 percent military pay raise could have implications for the 2011 federal pay raise, as the president promised in late 2009 to ensure pay parity between military members and federal civilians in 2011.

"The President's proposed 1.4 percent pay increase is appropriate in light of other benefits and other forms of compensation, is targeted to avoid hindering the Department's ability to focus on recruiting or retaining for key skills, and will ensure the availability of financial resources needed to sustain our combat power at a time of war," the president wrote.

The move comes as the Senate voted 53-45 to table an amendment that would have frozen federal salaries to help cover the costs of the wars in Afghanistan and Iraq. It also comes as House Minority Whip Eric Cantor, R-Va., and Rep. Michele Bachmann, R-Minn., plan to unveil legislation that would cancel the proposed 1.4 percent pay raise for federal workers next year as part of the new YouCut initiative.