On a conference call just now, White House Communications Director Dan Pfeiffer and U.S. Chief Performance Officer and the Office of Management and Budget’s Deputy Director for Management Jeffrey Zients defended the White House’s proposed pay freeze for federal employees from the charge that this will drive talented workers out of government as they see no prospects for individual advancement. Seeking a better return on their talent, the theory goes, they would move to the private sector, probably a government contractor, where their services can be “rented” from the government at a higher rate. If the government has the same amount of services to deliver and less skilled know-how at their disposal, they would need to draw upon that from somewhere. So under this scenario, government would end up paying more for the same pool of talent, despite freezing salaries.
Zients disputed the notion that this pay freeze will lead to a dissolution of talent. “On recruitment and retention, we believe that people come to government service for range of reasons…. We feel comfortable that we have a strong value proposition and can retain the best and brightest.” Given this, Zients didn’t feel that there would be an expanded reliance on government contracting as a result of this decision. They believe they can wring enough out of federal contracting to save $40 billion dollars, in fact.
But others aren’t so sure. Larry Mishel at the Economic Policy Institute notes that federal worker pay already lags the private sector by a tremendous amount – 22%, according to the federal pay agent’s report – and this freeze could represent a tipping point. And if anything, the federal workload is increasing, not decreasing, so somebody with the proper skills must do that work.
As for the politics, I don’t know how you can posit that this maneuver will strengthen Obama’s hand in any debate with Republicans over the deficit. It may strengthen his answer in a 2012 debate (“in fact, my Administration froze the salaries of federal employees,”) but the predictable reaction from Republicans has been a welcoming of the President to their idea and a demand for more. Indeed, given the White House’s tendency to self-compromise, all Republicans have to do is stay in place and they’ll eventually get rewarded even more. As Mishel says, “This is another example of the administration’s tendency to bargain with itself rather than Republicans, and in the process reinforces conservative myths, in this case the myth that federal workers are overpaid.”
But I think the Administration gives their intentions away right at the beginning of their white paper announcing this policy. “Because of the irresponsibility of the last decade,” says the lede. You see, to the Obama Administration and the economic team, the worst thing in the world is being seen as irresponsible.
UPDATE: Other progressives were similarly unimpressed.