Policy

Trump Wants to Freeze It. But Federal Pay Isn’t Driving Deficits

‘There’s a misconception that federal employees are all affluent,’ one advocate says

Rep. Barbara Comstock and other vulnerable House Republicans might have difficulty explaining a federal pay freeze to their constituents. (Bill Clark/CQ Roll Call file photo)

Federal worker compensation, repeatedly used as a piggy bank to fund other priorities earlier this decade, is once again in budget cutters’ crosshairs. The latest catalyst is President Donald Trump’s desire to shrink costs associated with the “administrative state,” both by freezing civil workers’ pay next year and making them contribute more to their pensions.

The pay freeze issue is coming to a head as soon as this month, when Congress decides whether to incorporate Trump’s proposal or allow a 1.9 percent boost to federal worker pay next year, as contained in a bipartisan Senate spending package approved on a 92-6 vote last month.

Meanwhile, uniformed military personnel are set to receive a 2.6 percent pay raise in fiscal 2019, courtesy of the defense authorization law Trump signed earlier this summer.

The clout of Washington-area lawmakers, who represent nearly one-fifth of the federal workforce, according to the Office of Management and Budget, is about to be severely tested when Congress takes up the roughly $154 billion spending package. Endangered House Republicans like Rep. Barbara Comstock of Virginia might have difficulty explaining why, should the White House position win out in conference, Congress agreed to such unequal treatment of military and civilian personnel.

Comstock voted for the House version of the spending bill in July, which would allow Trump’s pay freeze to take effect. But Comstock said Sept. 8 that she’d secured a commitment from the House Appropriations leadership to go along with the Senate position and include a pay raise in the final bill, and Trump himself indicated he might reconsider just a day after submitting the required letter to Congress on Aug. 30 announcing next year’s pay levels.

Conferees are expected to meet as early as Thursday to iron out final details, though Hurricane Florence could delay consideration. 

A relative pittance

Whether the ultimate raise for federal workers next year is zero or 1.9 percent is basically immaterial to government finances — roughly $2 billion saved out of a $4.1 trillion budget, though the savings would grow over time due to the reduced baseline.

According to a Roll Call analysis, the reduction would be the equivalent of just 1 percent of total projected spending on direct pay for civilian federal workers next year, and about 0.5 percent of total compensation for current and former employees, including health benefits and retiree pensions.

And if Congress doesn’t reduce discretionary spending caps at the same time, federal agencies would still have the extra money to spend — just not on salaries — so it wouldn’t actually “save” even that de minimis amount.

Targeting federal worker compensation remains popular with the conservative base, including the Heritage Foundation think tank that once employed James Sherk — now one of Trump’s top domestic policy aides and a longtime advocate of reining in the civilian bureaucracy.

Critics argue federal pay is out of whack with the private sector, and the structure of the General Schedule and other federal pay systems is too mechanical to allow for true “merit-based” pay. 

“Today’s federal personnel system is a relic of an earlier era,” according to Trump’s fiscal 2019 budget documents. “The competitive personnel system that Civil Service Commissioner Theodore Roosevelt envisioned to elevate the country has fallen into disrepute, criticized from most quarters as a compliance-oriented regime that ill-serves federal managers, employees, or the nation at large.” 

That such proposals are based more on ideology than budgetary math are borne out by a review of OMB data going back 30 years, which shows the cost of federal pay and benefits has remained largely constant, both as a share of total federal spending and of the broader U.S. economy.

The total cost of pay and benefits for current federal workers and retirees has hovered between 9 percent and 10 percent of annual spending since fiscal 1989, while as a share of gross domestic product it has held fast at around 2 percent. Contrast those figures with Medicare and Medicaid spending, which has more than doubled both as a share of the overall budget and of GDP over the last three decades.

Nor has the size of the civilian federal workforce itself been swelling. There are nearly 2.1 million full-time federal civilian workers this year, which is roughly where it was when President Ronald Reagan left office.

In fact, Trump wants to add about 10,000 civilian employees to the workforce next year, though that’s a net figure that includes 23,000 additional full-time workers at the departments of Homeland Security, Veterans Affairs and Defense, plus about 9,000 short-term assignments at the Commerce Department to help conduct the 2020 Census. 

Almost every other agency would see their workforces shrink, especially the Environmental Protection Agency, with a nearly 25 percent headcount reduction of about 3,800 workers, according to OMB estimates.

The figures suggest that the federal bureaucracy is not a driver of the growth in federal debt, unlike health care entitlements, for instance. And Democrats argue it is ludicrous for Trump to penalize federal workers in the name of deficit reduction after adding nearly $2 trillion to 10-year deficits with last year’s tax cuts.

“His tax bill exploded the deficit, and now he is trying to balance the budget on the backs of federal workers,” said Democratic Rep. Gerald E. Connolly of Virginia, who represents about 54,000 federal workers in his suburban Washington district.

No ‘cure-all’

Conservatives acknowledge a pay freeze does little to curb deficits. But they applaud the administration for trying to move away from automatic across-the-board pay raises toward a system of merit pay. 

“It’s not a cure-all by any means,” said Rachel Greszler, a research fellow at the Heritage Foundation who has co-authored studies with Sherk on the subject. Greszler calculated a pay freeze would result in a 0.3 percent reduction in next year’s projected deficit. “The fact that this doesn’t make a huge dent in the budget isn’t a reason not to do it,” she said. “It’s more about making each of the programs, each of the policies, work as they should and be as lean and efficient as they can be.”

It’s not the first time federal workers will have foregone raises, if Congress allows the freeze. President Barack Obama proposed and lawmakers went along with pay freezes for two years, in 2011 and 2012, and then Congress tacked on a third year in 2013, which Obama allowed.

Trump has also pushed to reduce federal pension costs since taking office, building off tweaks Congress passed and Obama signed into law in 2012 and 2013. His budget calls for increasing employee contributions to the Federal Employees Retirement System by 1 percentage point per year until most employees contribute 7 percent of their before-tax pay. Currently, employees contribute no more than 4.9 percent. Increasing that contribution level would generate $109 billion in extra federal revenue over a decade, the CBO said.

Those provisions are going nowhere on Capitol Hill for now, but could resurface next year if Republicans hang on to their fragile majorities.

But federal workers have already watched their standard of living decline after the Obama-era changes, said Jacqueline Simon, policy director for the American Federation of Government Employees, which represents about 700,000 federal workers.

“There’s a misconception that federal employees are all affluent and all professionals,” said Simon, who estimated the average annual salary of her members to be about $50,000. A scheduled pay increase, she said, is “a modest cost, but it makes a big difference in the lives of federal employees.”

Kellie Mejdrich and Peter Cohn contributed to this report.

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