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Pay freeze is opening bid in fight over taxes, debt

WASHINGTON — President Barack Obama announced Monday a two-year pay freeze for civilian federal workers as he sought to address concerns over high annual deficits and appealed to Republicans to find a common approach to restoring the nation's economic and fiscal health.

"The hard truth is that getting this deficit under control is going to require some broad sacrifice, and that sacrifice must be shared by employees of the federal government," Obama told reporters.

He called federal workers "patriots who love their country" but added, "I'm asking civil servants to do what they've always done" for the nation.

The freeze, which must be approved by Congress, applies to all executive branch workers — including civilian employees of the Defense Department, but does not apply to military personnel, government contractors, postal workers, members of Congress, congressional staffers, or federal court judges and workers.

The pay freeze amounts to an opening bid as the president and Republican congressional leaders begin jousting in earnest over tax and spending policy. It also illustrates how Obama can use his executive power on occasion to get ahead of newly elected Republicans; they have been talking about making such a move when they assume control of the House and additional Senate seats in January.

But while the move represents a gesture toward public anger over the anemic economic recovery and rising national debt, the $5 billion to be saved over two years will barely dent a deficit that has exceeded $1 trillion for the past two years. And even those savings would be swamped by the multi-trillion-dollar costs of the bigger issue dividing Obama and the Republicans — what parts of the Bush-era tax cuts to extend beyond their Dec. 31 expiration, and for how long.

That issue and others will be on the agenda today when Obama hosts the House and Senate leaders of each party at the White House for the first time since midterm elections.

Today will also be the last day for emergency federal assistance for about 2 million Americans who have been unemployed for long periods, and Friday a temporary measure providing money for government operations will run out. The two parties are at odds over both matters, with many Republicans opposed to additional unemployment aid and demanding more cuts from domestic spending for the fiscal year that began in October.

As Obama made his comments at the announcement of the federal pay freeze, the bipartisan commission he established in February to propose ways to reduce the growth of the national debt entered a final two days of negotiations over various combinations of spending cuts and revenue increases. In a sign of the struggle to find a compromise that could attract Democratic and Republicans votes, the commission chairmen — Alan Simpson, a former Senate Republican leader, and Erskine Bowles, a chief of staff to President Bill Clinton — decided to meet privately with members one at a time Monday and today.

The Republicans on the panel are generally opposed to raising taxes and the Democrats to big changes in Medicare, Medicaid and Social Security.

Bowles and Simpson revised their draft debt-reduction package during the Thanksgiving holiday break to reflect members' criticisms. Their goal is to reduce projected deficits by nearly $4 trillion over the coming decade. That is roughly the same amount that would be added to the national debt by extending the Bush-era tax rates — a juxtaposition that underscores the contradictory impulses of elected officials as constituents demand both smaller deficits and low taxes.

The pay freeze Obama announced wiped out plans for a 1.4 percent across-the-board raise in 2011 for 2.1 million federal civilian employees, and it would mean no raise in 2012. Workers who are promoted would still receive the higher pay that comes with the higher grade or position.

The move would save $2 billion in fiscal 2011, which ends Sept. 30, and $5 billion by the end of two fiscal years. Over 10 years, it would save $60 billion, according to Jeffrey Zients, deputy director of the Office of Management and Budget and the government's chief performance officer.

The federal work force is an obvious first target, if one fraught with political risk for a president who relies on union support. Opponents of big government have been trying to build a political case that federal employees are being overpaid. In a report in June, Chris Edwards of the Cato Institute, a libertarian research organization in Washington, found that federal civilian workers had an average annual wage of $81,258 in 2009, compared with $50,464 for nation's private-sector workers. Average federal salaries rose 58 percent from 2000 to 2009, compared with 30 percent in the private sector.

Union leaders, though, cited other data showing that federal workers were paid 24 percent less than their private sector counterparts, and they accused Obama of playing politics.

"Sticking it to a VA nurse and a Social Security worker is not the way to go," John Gage, president of the 600,000-member American Federation of Government Employees, said in an interview.

Federal workers

in Tampa Bay area*

Hillsborough

13,843

Pasco

853

Pinellas

6,818

*As of 2008; this includes some workers who will not be affected by the freeze. Does not include military.

What has happened to employees

who work for bay area governments?

Florida state employees have had their pay frozen for four years because of budget shortfalls. State lawmakers attempted to cut salaries by 2 percent in 2009, but Gov. Charlie Crist vetoed the proposal. This did not block pay reductions for the entire workforce. Court personnel — judges, state attorneys, public defenders and others whose pay is set by separate statute — had a 2 percent pay cut in 2009. And legislators adopted a similar salary reduction for themselves.

This year, Crist vetoed a bill that would have cut the interest rate applied to retirement benefits for state employees.

State pay is expected to be debated again during the annual spring legislative session. Republican Gov.-elect Rick Scott campaigned on a pledge to cut the state workforce by 5 percent, about 6,000 jobs, and supports changes that would require public employees to contribute to their pensions.

In the city of Tampa, no one got pay raises last year, either merit or cost of living. In fiscal year 2011, though, workers covered by union contracts received merit raises, but no cost-of-living raises.

Hillsborough County government employees by and large have had their wages frozen for the current fiscal year, which began Oct. 1, and the last one. Last year they also were required to take five unpaid furlough days. The interim Hillsborough County administrator, Mike Merrill, recommended and commissioners approved doing away with furlough days this year.

Pinellas County government employees have worked under a wage freeze since 2009 because of the massive decline in property tax revenue during the recession, though some cities and fire districts increased pay as part of negotiations with unions.

Facing budget cuts, the city of St. Petersburg also froze pay in 2009 for nonunion workers making more than $50,000 a year. The city of St. Petersburg budget also says they extended the wage freeze to all nonunion employees this year.

This text has been revised to reflect a clarification that appeared on Dec. 2, 2010 in the Times regarding state pay changes.

Pay freeze is opening bid in fight over taxes, debt 11/29/10 [Last modified: Wednesday, December 1, 2010 6:07pm]
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