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Will a Federal Pay Freeze Solve Anything?

Will a Federal Pay Freeze Solve Anything?

President Obama has made a move towards austerity and belt-tightening this week, by declaring a two year long pay freeze for all federal workers. But does freezing federal employees’ pay make a difference budget-wise, or is it really more of a symbolic gesture? Washington Post notes:

Bashing federal workers as overpaid and underemployed is a favorite political sport. This broad depiction is neither fair nor accurate, and going after the federal workforce is more of a symbolic move than a real answer to deficit reduction. Slashing the number of federal employees risks leaving government without enough workers to do the job. It could end up costing more as tasks are outsourced to the private sector. Meantime, comparisons between average federal and private-sector pay can be tricky. Federal workers earned an average $123,000 in 2009, compared with $61,000 for private-sector employees, but this gap does not reflect differences in the composition of the two workforces; the federal workforce is heavily white-collar. The Federal Salary Council, a government entity that studies private- and public-sector pay in comparable jobs, pegs the differential at 24 percent – in the other direction, with public employees underpaid in this analysis. The reality is probably more complex than either assessment. Federally employed lawyers and doctors could probably do better in the private sector. Clerical and blue-collar workers tend to make more in federal government jobs.

As a symbolic “we’re all in this together” move, it could prove popular with some, as long as they don’t delve too closely into the real costs.  Ezra Klein writes:

There’s no doubt that this decision polls well. And it may indeed forestall much more damaging cuts to the federal workforce down the line (it is a shorter pay freeze than what the Simpson-Bowles report recommended, and it’s neither a hiring freeze, like many Republicans want, nor a pay cut, as Mitch Daniels has suggested). But Obama just affirmed two Republican arguments that his White House believes to be factually wrong: First, that government workers are overpaid, and second, that deficit reduction should start immediately. And the fact remains that his administration’s initiatives require a talented and motivated federal workforce if they’re to succeed, and now they’re that much less likely to get it.

Put it this way: If you’re an able regulator in the health care or financial field, you’ve got a lot of other job opportunities, all of which pay you much more than you’re making right now. You may have resisted those offers because the pay difference wasn’t that big, or because you believe in public service. But if the pay difference gets bigger, and your president seems to be giving in to the politicians who denigrate your work and usefulness rather than defending you, how much longer will you resist for?

And even the President’s own party is concerned about the proposal.  Via the Wall Street Journal:

“By focusing exclusively on federal employees, the administration runs the risk of reinforcing the myth, pushed by some for politically convenient but cynical reasons, that America suffers from a federal government comprised of unproductive and overpaid civil servants,” [Maryland Democratic Congressman Chris] Van Hollen said. “Nothing could be further from the truth.”

He goes on to point out that the federal workforce last year wasn’t as big as it was in 1968 and cites Bureau of Labor Statistics figures that federal workers make 24% less than their private-sector counterparts.

“I agree with the president that we must have a serious national debate about how to reduce the deficit and tackle the national debt,” Mr. Van Hollen said. “But rather than taking this kind of piecemeal approach, I would prefer to address our budget challenges in a thorough, comprehensive way.”

Meanwhile, Republicans are still pushing for an extension of taxcuts for the wealthiest Americans.  Someday maybe the belt-tightening might get more evenly distributed.

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208 comments

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11:53AM PST on Feb 14, 2011

Michael, the distinction that the law makes is when you have income on which you've NOT paid SS taxes. FERS are federal workers, and do NOT get their SS benefits reduced.

Again, being a federal worker is NOT the criteria for getting one's SS benefits reduced. The criteria for the reduction is earning wages, and NOT paying SS taxes on them.

3:39PM PST on Feb 11, 2011

Charles the law makes no distinction. The mere fact that you ARE a federal employee WILL result in a reduction!

12:45PM PST on Feb 7, 2011

@Michael: "WEP applies only to FERS!"

No, WEP only applies to CSRS (not FERS):

http://ssa.gov/pubs/10045.html

"The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit.

"For example, this provision affects Social Security ­benefits when any part of a person’s federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes ARE WITHHELD (Federal Employees’ Retirement System) will not reduce your Social Security benefit amounts."

Federal CSRS employees are NOT being treated as less than full citizens. WEP applies to ANYONE who chooses to pay into a retirement system instead of SS. Teachers in the Chicago Public School System do not pay into SS, and are also subject to WEP. Any SS benefits they qualify for will also be lowered by 2/3 of their pension, just like yours. It's not who you worked for, it's whether or not you paid into SS on all income. You are not being discriminated against for being a federal employee.

12:10PM PST on Feb 7, 2011

@Michael: "So in your example I received $320 LESS.

Not only that! Near as I can remember my CSRS contribution was never less than 7%. So there were periods of time that the difference was greater."

Basically, as a CSRS employee, you chose to pay into your retirement system INSTEAD OF SS. So you are not entitled to get both. Had you paid both, you would be entitled to both. To get the full SS benefits, SS contributions must be made for ALL of your income. Any income that you make, for which you do NOT pay 6.2% into SS, will result in a lowering of your SS benefits.

"Further if one does not have SS wages it does not get reported to SS. Therefore not even in the formula!"

That is false, Michael. All income that you make is reported to SS. If those wages are exempt from SS, then the 6.2% is not taken out. BUT those wages ARE, in fact, figured into the formula, by lowering any SS benefits (since you did not pay for SS benefits on those wages). The only way you can get both full benefits from SS and full benefits from your retirement system is to pay for BOTH.

11:24AM PST on Feb 7, 2011

@Michael: "You are making an unwarranted ASSUMPTION! Where do you get the idea that a CSRS employee that did not contribute to the SS retirement did not contribute to their CSRS retirement?
CSRS retirement plan required a payment of 7% of salary!!!!!!"

I made no such assumption. In fact, I paid BOTH 6.2% into SS and 6.5% into my Texas Employee Retirement System. That's why I get both. Had you paid your 7% PLUS 6.2% into SS, then you would not be getting your SS reduced.

5:03AM PST on Feb 7, 2011

"Windfall Elimination Provision (WEP)."

Change the argument again.

WEP applies only to FERS!

And just goes to show that Federall employees have been determined to be less than full citizens. Paid less from a program that is deemed inviolable by huge portions of the population, because of whom they chose to work for.

4:59AM PST on Feb 7, 2011

So in your example I received $320 LESS.

Not only that! Near as I can remember my CSRS contribution was never less than 7%. So there were periods of time that the difference was greater.

Further if one does not have SS wages it does not get reported to SS. Therefore not even in the formula!

4:54AM PST on Feb 7, 2011

"If your gross pay was $40,000/yr, your net pay was $2480/yr more than an FERS employee whose gross pay was $40,000/yr, since the 6.2% SS contribution was not taken out of your paycheck. "

You are making an unwarranted ASSUMPTION! Where do you get the idea that a CSRS employee that did not contribute to the SS retirement did not contribute to their CSRS retirement?
CSRS retirement plan required a payment of 7% of salary!!!!!!

This is what i mean by saying you are here telling me, and others, that I have no idea what the components of MY paycheck were! He11 there was a time I paid both!

8:50PM PST on Feb 6, 2011

@Michael: "Apparently then I must be incapable of reading my pay stub! You probably would still insist that I am incapable of knowing how my pay check is paid and deducted even if I gave you a copy!"

If you've got pay stubs showing that ALL your Federal employment had 6.2% of your gross salary deducted for O.A.S.D.I. taxes, my advice is to go to the SS Administration and contest the reduction for the Windfall Elimination Provision (WEP). But if you have enough CSRS service to qualify for a CSRS pension, WHATEVER SS you qualify for will be reduced by 2/3 of that pension, to make up for all those years that you were NOT paying into SS. The extra 6.2% net pay that you received over those years would be a "windfall" for you, without the reduction.

"Even when in Federal service that did not pay SS I did not get paid 6.2% more than a FERS I was paid .8% less!"

A CSRS employee whose gross pay was $40,000/yr would take home $2480/yr more than an FERS employee whose gross pay was $40,000/yr. That's the 6.2% SS contribution that would be deducted from the FERS employee that would NOT be deducted from the CSRS employee. Over 25 years, that's $60,000 that the FERS employee would NOT receive. The WEP that deducts 2/3 of his pension from his SS benefits, offsets that $60,000 "windfall".

7:55PM PST on Feb 6, 2011

Even when in Federal service that did not pay SS I did not get paid 6.2% more than a FERS I was paid .8% less!

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