Skip to main content

NEW YORK (MainStreet) – President Obama proposed a two-year salary freeze for more than 2 million federal workers Monday, a move he said was motivated by a need to decrease the nation’s deficit.

“The hard truth is that getting this deficit under control is going to require broad sacrifice,” Obama said at a White House press conference. “And that sacrifice must be shared by the employees of the federal government.”

The President’s proposal, which will need approval from Congress if it is to go into effect Jan. 1, 2011, would freeze pay for two years for all civilian federal employees on the executive branch payroll. It would not, however, include military personnel. It also would not affect members of Congress (who separately took measures to freeze their own salaries in April) or their staff, defense contractors, postal workers or federal court judges and workers.

According to the administration, this pay freeze would save $2 billion in 2011, $28 billion through the next five years and more than $60 billion during the next 10 years. Of course, that’s a drop in the bucket of the national debt, which now stands at $13.8 trillion.

The proposal, which came ahead of today’s meeting with Republican and Democratic leaders and Wednesday’s deadline for recommendations from Obama’s deficit-reduction commission, appears to be an attempt to get a jump on Republican plans to propose federal pay cuts and the elimination of certain government positions.

Federal workers have become the go-to target for spending cuts, since they have experienced fewer layoffs and receive continued annual pay increases, according to the Associated Press.

Scroll to Continue

TheStreet Recommends

As reported, the average salary of federal employees is now about twice the amount that those in the private sector earn. As of 2009, federal workers earned an average of $123,049 annually, while private workers earned just $61,051.

If the proposal is not passed, federal employees would automatically get a 0.9% wage increase under the formula set by a 1990 law. In 2010, they received a 1.9% pay increase.
“Going forward, we’re going to have to make some additional very tough decisions that this town has put off for a very long time,” Obama said. “That’s what this upcoming week is really about.  My hope is that, starting today, we can begin a bipartisan conversation about our future, because we face challenges that will require the cooperation of Democrats, Republicans and Independents.”

Republicans, thus far, seem to be on board with the president’s latest proposal. House Republican leader John Boehner (R-Ohio) said in a statement that he supported the president’s proposal, adding that "Republicans and Democrats don't have to wait until January to cut spending and stop all the tax hikes. We can — and should — start right now."

Other politicians are also in favor of more drastic efforts to cut back on the government payroll. Republican Alan Simpson and Democrat Erskine Bowles, the co-chairs of Obama's bipartisan deficit commission, have already proposed a three-year freeze in pay for most federal employees as part of their plan to reduce the federal budget deficit.

Obama, for his part, is no stranger to stopping federal pay raises. Upon taking office, the president froze salaries for all senior White House officials and, in last year’s budget, he eliminated bonuses for all political appointees. Regardless of these actions though, White House employees earned a combined salary of $38.7 million in 2009.

The president indicated that he plans on taking additional steps to reduce the deficit this year. In addition to the two-year wage freeze, the president has suggested a three-year freeze on all non-defense discretionary spending, a reduction in improper payments (when the funds go to the wrong recipient, the recipient receives the incorrect amount of funds or the recipient uses the funds in an improper manner) by $50 billion, saving $40 billion in contracting and the sale of $8 billion of federal land and buildings.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at