When President Obama proposed to freeze Federal Government pay for two years I thought he was taunting us with an April Fool's joke in November. I mean really. Is the public supposed to take the President seriously after he signed off on a 3.9% 2009 pay hike when Armageddon hit in 2008 while attacking the private sector for getting paid too much? Not only did all Federal Government employees get a 3.9% pay hike in 2009, they also got another 2.9% pay hike in 2010! In other words, while practically all of America suffered through the financial crisis with pay cuts and job losses, Federal Government employees raked it in! We're talking the percentage of Federal Government employees making over $100,000 jumping from 14% to 19% during the meltdown. Sweet!
If President Obama listened to the hoards of people who implored him to reign in spending and treat people equally, perhaps he wouldn't have lost many of his key staff as well as lose his party's mid-term November elections by a landslide. But, what's done is done and it's important to realize that change in the government is on its way.
Hypocrisy is bad. The government can't raise taxes on people in a recession and avoid paying taxes like Tim Geithner did. Shame on the government for telling people and organizations they make too much when the government themselves keep giving themselves raises and providing massive pensions to boot. The Dow Jones was down 150 points before Obama's announcement, and rallied to close down only 39 points after his speech. See what happens when we begin to eradicate double standards?
OUTLOOK JUST GOT BRIGHTER
I'm starting to believe very strongly that 2011 is going to be a wonderful year for the US economy. Corporate earnings are picking up, which will ultimately lead to increased hiring. But, what's most encouraging is the fact that the American Government is returning to honesty and equality! Anti-business policies have just paralyzed small business owners who employ 90%+ of all Americans. When you think your taxes are going up, you don't expand because you aren't sure what your costs will be. An unclear regulatory environment is a DISASTER for employment.
President Obama has finally come to admit that he can't tell others to cut costs without setting an example himself, simply because nobody will listen. It is wonderful that the government is finally trying to set a good example for the citizens it governs. An honest American government is great for the economy. Maybe miracles do happen!
Readers, how encouraged are you that the government will actually start leading by example? What more can the government do to show they aren't just selfish politicians who are only looking out for themselves? Why do people continue to let things slide with government officials who serve us?
Notes: The pay freeze does not affect Congress or their staffs, defense contractors, postal workers or federal court judges and workers. The reason? They are more special.
Extending the tax cuts for the middle class will cost ~$3 trillion over 10 years compared to ~$500-700 billion in cost if extended for the top income earners.
Advice to President Obama & Congressional Leadership: Compromise and raise the income limit for tax increases to $1,000,000. There is no way any millionaire will complain (publicly at least) about a 4% income tax hike. Furthermore, nobody, Republicans included will feel sorry for millionaires and find the tax hike unreasonable. Remember, someone making $300,000 in Manhattan is like making $100,000 in Iowa who would not face tax increases under President Obama's existing $250,000 threshold. Different parts of the country have different costs of living, surprise!
Best,
Sam
I just want to point out that many of the people hit by the wage freeze will be the innovators and scientists that spent many years making very little money and have been forced to relocate to God-forsaken parts of the country for the sake a creating a brighter future for this country. Additionally, many of these have not received compensation increases for years. Furthermore, it is unclear that how much of the deficit will be affected – somewhere between nothing to maybe one percent, but the long term cost of failing to foster and support innovation and technology in this country means that long term the deficit will grow and America will continue to decline.
You believe many Federal government works are innovators and scientists? I’m curious to see any statistics backing this up. Thnx.
The national laboratories are staffed with innovators and scientists who have all had their salaries frozen.
coming in late, but wanted to weigh in. why is it that everyone thinks that the wealthy won’t care to give up some of their money…in most all cases the wealthy are wealthy because they worked hard and out of anyone they deserve to keep their money because it was not handed to them.
That’s a good point that we’ve failed to address! Perhaps it’s notfair to assume that all people are opposed to getting taxed more, and would welcome more taxation for whatever reason.
The thought is basically whether you or someone else is better at handout your own money.
I work for the local government and we did not have any increases. In fact we had pay cuts and layoffs. I was outraged by the fed gov pay raises. In the times like this, with the deficit growing and budget in a hole, how do you justify the increases? Pay freeze is long overdue.
@Jennifer
Are your “customers” able to easily switch providers? … Didn’t think so. :P Whatever you get from the government, you should be happy for it, since it’s really coming from the taxpayers.
I am a little shocked by some of your responses. I am a government employee and highly disagree with you all. Government workers are generally unpaid compared to the private sector. In the past the trade off was the retirement benefits were better, but does that truly hold true anymore, I am not certain. The majority of government employees are hard working people trying to make ends meet for their families. If for one second I thought cutting my pay for 2 years would truly help us get out of debt I would gladly, but regrettfully accept the pay freeze, but in this case it doesn’t even make sense. Get rid of Obamacare and then eventually we will build ourselves out of debt. A pay freeze just hurts the average american. Not a smart idea.
We’re an exciting bunch of commenters! The private sector got blown out and got massive pay cuts. Isn’t a freeze kind of the bare minimum since we should all be in this together? United we stand!
Agreed. You public sector guys get more than us private sector guys on average.
Sure, less of you get filthy rich, but you chose to have the govt pay you. Count your blessings that you’re paid so much more than most of the rest of the USA.
I’ve heard that this “freeze” ONLY applies to the civilian subcontractors hired by the Federal government. Is that true? I wouldn’t be surprised …
No, I think the freeze applies to all Federal workers i.e. Obama and all his staff, foreign service, etc.
It looks like it’s falling apart. Cue Gomer Pyle voice: “Surprise, surprise, surprise!”
Headline — Despite Obama pay freeze, federal workers to receive $2.5 billion in raises
https://www.federaltimes.com/article/20101206/BENEFITS01/12060301/1001
Sweet! The public is hoodwinked again :)
Did you notice how much money the pay freeze will save? It’s a fraction of the cost of budget shortfalls created by extending tax cuts to the top 2%. That’s what makes it such a hypocritical savings measure, and that’s part of a larger cycle. Every few years people declare that federal workers are overpaid and that we can’t afford it, despite the fact that when viewed on a qualifications level, the more qualified the individual, the more they’re underpaid. They have more generous future benefits to compensate but with NJ as an example, the favorite “balancing” measure of governments is to stop paying pension contributions.
The government starts off by shedding employees (like its done all year) and then eventually calls for a wage freeze, what’s happening right now. Eventually thing come to a head, and occasionally the government gets sued or people strike and an arbitrator forces a wage increase because they’re being paid so much under the market rate. At this point normally we’ve contracted out all of the lower skilled labor to private companies who are benefiting wildly by underpaying their employees. This in turn means that only the management and skilled employees are on the government payroll leading to a higher average pay than the private sector and the calls for pay cuts etc increase again.
In summary I don’t believe that anything will get done. I believe that this is just another sign that Obama will infuriate his base until its at the point were his own party will refuse to work with him and we’ll be in limbo for another year. By going for the low hanging fruit but most likely to anger his own base measures first, he’s making sure nothing gets done. It’s a part of a larger picture where for years the US has managed it budget by refusing to deal with core revenue and spending issues and instead opted to forgo “optional” payments like returning social security money, pensions, and fixing roads.
@LifeAndMyFinances
Actually the cuts are not on the over paid people on the hill, it is on everyone else.
3.9% and 2.9% ?
Coincidence, or did some a PR consultant provide some sound advice on using retail marketing techniques?
I was also happy with the President’s announcement. As you know Sam, California state employees have already been sacrificing with unpaid furlough days. It’s about time the Feds stepped up to the plate.
I agree the benefit package is superior to ours; I was once a Federal employee.
It’s amazing that the wage freeze is just happening now and there are no cuts. Talk about red tape slow ! State employees have seriously been affected left and right for years now!
A pay freeze? Where are the pay cuts? At the very least, public sector employees should not have a better deal than the people in the private sector who feed them.
A freeze is the ridiculous bare minimum.
Obama should be a real leader and announce that he is taking a 50% pay cut. He would expect that people below him take less, maybe much less, but it would set the proper tone.
In most organizations salaries are set by the most senior person, the government is no exception. By taking a pay cut he would create pressure to create cuts down the system.
It is also about leadership. As CEO of a small company when times were tough in early 2009 I took a 30% pay cut and asked my direct reports to take a 15% pay cut, managers took a 10% cut and staff people took 5%. Hourly people had a salary freeze.
Too bad Obama is a weak leader and an empty suit. It’s better than putting out a raise but for sure he would be crucified if he tried something like this.
Remember Obama and Biden are very pro-union. And why should government workers even have a union? They have never been exploited by their employer, have they?
-Mike
California employees have been hit with salary reduction and furloughs because of the budget deficits. I wonder if the federal will soon follow? It’s about time that they stop those salary increase while the rest are struggling
@Romeo
I lost my last post! Oh, well.
Correction: “We’ll all just pay each other’s salaries”
What’s all this complaining about pay raises for federal workers? Just about anyone can become a federal worker either through the military, or any of the other massive departments. We’ll all just pay each other’s taxes. It’ll be one great big ponzie scheme, like social security :)
Whenever I hear of a salary freeze or even a pay reduction, I always think of all the people without jobs. A freeze or reduced salary is clearly the lesser of two evils, even if this specific freeze is mostly symbolic.
I’ve never heard of mass layoffs by federal government employees, had you? Kinda strange IMO since they are funded by us (taxes).
The debt commission recommended laying off 200,000 federal employees over the next few years.
Yep…I’m a gov’t employee and many of us are over paid…but not all of us. Good luck at the Social Security Administration, IRS, DOT, etc…there will be lots of disgruntled folks around.
Well, I do applaud the pay freeze. But government needs to cull the herd seriously. Major headcount reductions are needed, kind of what like what was recommended in the initial deficit reduction plan.
It will be impossible for the government to cut stuff. They protect their own, and will likely at the very worst keep staff stable. When was the last time you heard of mass firings in the Federal Government? Never.
Yep…and now those lousey employees…whom you cannot fire…are going to be pissed.
I’m a tad pessimistic regarding your comment “Corporate earnings are picking up, which will ultimately lead to increased hiring.” From my experience, corporations are earning more because of productivity I.E. slavery. Why would they hire more if they can make more money with less people?
Because there will be a breaking point for employees where you can only squeeze so much productivity before they quit or burn out. That time is in the next 6 months, which is why hiring will pick up.
I have to agree with Amber, Bush gave way better increases than Obama is, but yet he will get blamed for anything and everything from spending to the Yankees losing to the Rangers. This country is becoming one of finger pointing than problem solving. Congress needs a serious pay reduction and need to be forced to do hard labor like the people they represent.
I agree!
Now if we could just get congress included in the pay freezes, in addition to having huge spending cuts across the board – we’d be in business. It’s so funny to me how we keep talking about how tax cuts will “cost us” so much money if they pass. I think we need to remember that it is the deficit spending that’s causing the problems, not the tax cuts.
GWB had the power, but didn’t use it. Obama is methodically slow, but he has used the power.
However… any scheming employee knows that the workaround for a pay freeze is to convince the boss to give you a promotion. You’ll see a lot of scheming in the ranks now instead of employees settling for COLAs… won’t lead to better government since the good employees will be wasting time lobbying against the schemers.
As a federal employee, I have no beef with the salary freeze. The timing is funny, as others have mentioned. Why it wasn’t froze two years ago and last year is beyond me. The only potentially frustrating thing I see with the freeze is the fact that congress (who ultimately decides federal raises) will be exempt from the freeze. It doesn’t say much when the freeze 2 million fed employee’s salaries, but get a raise themselves. It will be interesting to see how it pans out.
This sounds like a change from your previous stance. In the past you’ve stated that you think the “rich” shouldn’t have to pay more taxes, and now you think a 4% tax for only the rich is fair? What happened to the flat tax rate? Do you prefer this method now??
A flat tax above a certain income level of around $30,000 for a single, and $60,000 for a couple/family is the ideal solution.
However, a flat tax is never going to fly because politicians NEED power and a way to reward and punish Americans. Hence, the ultimate compromise to to raise the income limit.