Pay freeze won’t save money, cut debt or deficit

Monday’s proposal by President Obama to freeze Federal pay for two years has been subject number one on the last several days. Former Office of Management and Budget official Robert Shea, now with Grant Thornton, was involved with setting the White House’s pay recommendation during his time at OMB. He told me what his role was, and how the White House looks at Federal pay several times a year.

I asked Robert if a pay freeze was discussed at any time during the discussions of pay in the Bush administration. “Every time,” he told me. “And my argument against it was, Congress is not going to go along with a pay freeze – remember, we were not in the economic turmoil we are today – so agencies are going to have to eat the cost of a higher pay raise. A pay freeze does not save money, so they were pursuing a lot of heartache without a lot of real concrete benefit.”

Robert added that “the consistent concern among agencies was that Congress would enact a higher pay raise than that proposed by the President, and that more importantly, they wouldn’t fund it. They wouldn’t give agencies the additional monies needed to pay employees that pay raise, and so they’d have to take it out of [general funds].”

“The President has changed his mind from what he proposed in the budget, and proposes instead a pay freeze,” Robert told me. “That won’t save any money. Debt reduction won’t be served by this decision. Agencies will have additional money to use for some other purpose.”


Robert explained the budgeting reasons that a pay freeze won’t contribute to helping the deficit. You can hear the details by clicking on the audio link.