Despite massive federal deficits and a ballooning national debt, the impending White House budget proposal for fiscal year 2013 is expected to include a 0.5 percent pay increase for civilian federal workers.
The proposed raise comes despite a recent study by the non-partisan Congressional Budget Office finding that federal workers are significantly better compensated than their private-sector peers. The study, commissioned by Sen. Jeff Sessions (R-Ala.), found that federal civilian employees enjoy a total compensation premium of 16 percent, which includes a 2 percent advantage with respect to cash wages and a 48 percent advantage in benefits.
The disparity is especially pronounced among employees with no more than a high school education, the study found. These federal employees earn about 21 percent more in pay and receive average benefits that are 72 percent more generous for a total compensation premium of 36 percent.
"While millions of Americans continue to struggle with stagnant wages and high unemployment, government bureaucrats in Washington continue to enjoy significant advantages over those whose tax dollars finance their compensation," House Budget Committee chairman Paul Ryan’s office wrote in response to the CBO report.
The findings echo those of a 2011 study by Andrew G. Biggs of the American Enterprise Institute and Jason Richwine of the Heritage Foundation, which found an even greater disparity between federal workers and private-sector employees. The authors concluded that along with advantages in salary (14 percent) and benefits (63 percent), federal workers enjoy a "job security" benefit worth nearly 20 percent of pay on average.
President Obama has sought to give the appearance that he is taking action to confront this disparity. In 2010, following his party’s defeat in the mid-term elections, he proposed a two-year pay "freeze" for federal workers. While congressional Republicans were happy to oblige him, public-sector unions (a key Democratic constituency) were less thrilled.
Biggs says that while the across the board pay freeze would have some effect in terms of bringing federal compensation in line with the private sector, a "one-size-fits-all approach is not the way to go about doing it."
"You really need to have a flexible approach from a person by person job by job basis," he says. "Federal pay needs much larger reforms than just a pay freeze or pay increase."
Despite the president’s "freeze," federal compensation has grown considerably during the past three years.
In 2011, more than 20 percent of the federal workforce earned at least $100,000, almost twice the amount earning that five years ago. Since Obama took office, the number of federal employees earning at least $150,000 a year has more than doubled.
The issue of federal employee compensation could provoke the first congressional showdown of 2012, as Republicans seek to continue the existing pay freeze and tie it to a long-term extension of the payroll tax holiday, a top legislative priority for the White House. Last week, the House approved a measure introduced by freshman Rep. Sean Duffy (R-Wis.) to extend the pay freeze for another year.
In the Senate, Sen. Dean Heller (R-Nev.) recently introduced a bill that would offset the cost of a long-term extension of the payroll tax holiday by, among other things, shrinking the size of the federal workforce and extending the existing pay freeze for another three years.
Apparently, House Democrats were so convinced that the CBO would conclude federal workers are underpaid, they commissioned a similar study on federal compensation before Sen. Sessions did, a source familiar with the CBO report tells the Washington Free Beacon. But, when the results came back as they did, the Democrats decided not to pursue the issue further.
Obama frequently invoked his two-year "freeze" as a sign of his newfound commitment to austerity and "living within our means," despite subsequently proposing a budget that would have added more than $26 trillion to the national debt over 10 years.
Republicans analysts with the Senate Budget Committee estimate that loopholes and exemptions contained in the president’s proposal have cost the federal government at least $1 billion a year. For example, most federal employees have continued to receive performance bonuses (totaling $408 million in 2009), as well as regularly scheduled "step increases" ranging from 2.6 percent to 3.3 percent of their salaries for the previous year. Additionally, many federal workers have continued to receive pay increases through promotions. Sessions, the ranking member on the Budget Committee, has proposed legislation to eliminate these loopholes in order to "make the pay freeze real."
The Obama administration’s lack of enthusiasm for closing the wage gap is not surprising when you consider federal employees’ generous financial support for Obama and the Democratic Party. For example, the American Federation of Government Employees, the nation’s largest federal union, has given more than $2.5 million in campaign contributions since 2008. Nearly all of that money has gone to Democrats.
AFGE’s union affiliate, the AFL-CIO, gave Obama and Democratic candidates more than $60 million in 2008. Obama’s reelection campaign has already raked in more than $213,000 from federal workers this cycle, outpacing the entire field of Republican nominees.
With Republicans poised to pick a fight over federal pay, President Obama should have ample opportunity to prove that his commitment to union interests trumps his commitment to fiscal restraint.
The administration estimates that the proposal pay increase for federal employees will cost taxpayers $800 million in 2013. The release of the White House budget proposal in February comes on the heels of the president’s request to increase the national debt limit to $16.4 trillion—more than 100 percent of U.S. gross domestic product. Respected economists Carmen Reinhart and Kenneth Rogoff have warned that such high debt levels tend to have profound economic consequences, including decreased economic growth.