Potential Pitfalls in Obama’s Federal Pay Freeze

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As Scherer writes, President Obama announced plans for a two-year pay freeze for non-military federal workers today. The gesture is largely symbolic — nixing scheduled raises would take a relatively small nibble out of the budget ($2 billion in FY 2011) — but in addition to stepping on the base, it might tell us something about how he’ll handle the coming deficit battle and a GOP-controlled House.

The timing is notable: It’s a conservative deficit reduction proposal one day before his sit-down with congressional Republicans and two days before the Bowles-Simpson deficit commission report is due out. With no effort to win concessions in return, it seems the move is a gesture of good faith to the GOP. Liberals of all stripes, many of whom feel that Obama has been a weak negotiator, will throw their hands up in frustration at yet another unconditional offering to a party that has spent the last two years moving the goal posts. And labor, notably the big public sector unions, are incensed. (AFL-CIO chief Rich Trumka very publicly panned the plan as “bad for the middle class, bad for the economy and bad for business.”) But the White House is not just offering an olive branch to Republicans — the White House fact sheet’s opening line blames the deficit on Republicans — and the real question is whether or not the freeze can be a way for Obama to co-opt the federal workforce issue without giving away the farm.

There’s been a flare up of populist outrage over government pay since USA Today reported earlier this month that the number of federal workers making $150,000 has skyrocketed in recent years and that there’s a major compensation gap between the public and private sectors. The freeze might well be a policy (with minimal real effect on the federal workforce) that polls well and burnishes an image of Deficit Reduction Seriousness. And while Republicans have pointed to pay as evidence of a bloated bureaucracy, their real goal is a federal hiring freeze like the one proposed in the House GOP’s Pledge to America. The problem that remains for Obama is that he has been unable to capitalize on this co-opt/preempt maneuver in the past. As far as gaining the upper hand on Republicans, he’s said himself that taking the first step hasn’t worked. From an October chat with Peter Baker:

Obama told me he had no regrets about the broad direction of his presidency. But he did identify what he called “tactical lessons.” ….Perhaps he should not have proposed tax breaks as part of his stimulus and instead “let the Republicans insist on the tax cuts” so it could be seen as a bipartisan compromise.

And as for scoring points with the public, Derek Thompson points out that the needle of public opinion moved not at all after Obama’s non-defense discretionary spending freeze theatrics at the beginning of the year. There’s also the fact that this will be a particularly bitter pill for some Democrats to swallow. Here’s House Majority Leader Steny Hoyer on a federal pay freeze in June: “We need to reject this cynical ploy to make federal employees a scapegoat for spending.”

One other point: As I wrote in July, filling out personnel in the new financial regulatory regime created by Dodd-Frank is crucial to the efficacy of law. While the freeze might not have a huge effect on all public sector hiring, the paygap between Wall Street and agencies such as the SEC, FDIC, Fed, etc. is astronomic. Attracting talent to new government jobs will be all the harder if raises are off the table.