Pres. Obama Proposes Federal Worker Pay Freeze

WASHINGTON Nov. 29, 2010— -- President Obama proposed a two-year pay freeze for federal civilian employees on Monday. The announcement is the latest move intended to demonstrate the administration's commitment to reduce the soaring deficit.

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

"Small businesses and families are tightening their belts," the president added. "Their government should too."

If Congress approves, the freeze would do away with a 1.4 percent pay raise in 2011 for all civilian federal government employees. The freeze does not apply to the armed forces, though it does affect civilian employees of the Department of Defense. It also does not apply to congressional workers or members of Congress, who voted to freeze their own pay last April.

Monday's announcement is in line with the budget proposal released by the president's bipartisan deficit commission earlier this month. That proposal recommended a three-year freeze and included non-combat pay for members of the military.

"I think it is the right kind of thing, people are no longer denying that this enormous debt problem is out there," said Erskine Bowles, co-chair of the commission. "The federal government now realizes we have to take steps like this to bring this deficit down or we are going to face the most predictable economic crisis in history," he added.

The administration said the move, which would take effect Jan. 1, would save $2 billion over the rest of this fiscal year, and $28 billion in cumulative savings over the next five years. Those numbers, however, seem miniscule when compared to the national budget deficit which topped $1 trillion last year.

"A federal pay freeze saves peanuts at best and, while [Obama] may mean it as just a public relations gesture, this is no time for political scapegoating," the American Federation of Government Employees said in a statement Monday. "The American people didn't vote to stick it to a VA (Veterans Affairs) nursing assistant making $28,000 a year or a border patrol agent earning $34,000 per year."

Deficit commission co-chair Alan Simpson, however, said small savings add up over time, and added there are "more things to come."

"Everybody is going to take a chop here there'll be no stone unturned," Simpson said.

On an individual level, the president acknowledged that the cuts will create difficulties for workers.

"This is not just a line item on a federal ledger, these are people's lives," said Obama.

The president's announcement comes as something of a pre-emptive strike against congressional Republicans, who plan to cut federal pay and workforce next year. Republicans have pushed for a pay freeze in the past. Most recently, Senator-elect Rand Paul (R-Ky.) and Sen. Jim DeMint (R-S.C.) claimed federal employees make $120,000, double the average private sector employee. The six-figure salary appears to be inflated, though some experts maintain that on average, government workers are overpaid.

Demcratic Leader: Extend Pay Freeze to Some Military Personnel

Two prominent members of the House of Representatives praised the pay freeze, and called on President Obama and Congress to take additional steps to address the federal deficit.

"It is both necessary and quite frankly, long overdue to institute a pay-freeze for the federal workforce," Rep. Darrell Issa (R-Calif.) said.

Current House Majority Leader Steny Hoyer (D-Md.), whose district includes a large number of government workers, said that a freeze on federal employees does not solve the spending problem unless it's matched by a pay freeze on some personnel in the military.

"It would have produced significantly more savings had that sacrifice been shared between federal civilian and military personnel--with a strong exception for the members of our military and civilian employees risking their lives on our behalf in Afghanistan, Iraq, and anywhere else they are serving in harm's way," Hoyer said.

Mark Zandi, chief economist with Moody's Analytics, said the pay freeze is more symbolic than substantive. Given all the other cuts to come, said Zandi, Obama had to cut away at federal salaries.

"We are going to have spending cuts, social security and Medicare will be scaled back, and tax increases," Zandi said. "There is going to be a lot of financial pain and I don't think [Obama] could go to the American people and ask them to suffer all that finical hardship without asking federal employees first to go through that hardship."

This is not the first time President Obama has focused on federal pay to underline a political point. As he noted in Monday's announcement, he froze all pay for his own senior staff on his first day as president. This year, he extended the freeze to senior political appointees and eliminated their bonuses.

The pay freeze will affect more than two million federal civilian workers. Many experts agree that lower-skilled government employees enjoy a pay premium. However, according to the Bureau of Economic Analysis, the mix of jobs held by civilian federal government workers is weighted towards professional jobs. And highly-skilled government employees – such as doctors, scientists and other technical positions –make less than their peers in the private sector. The government is already at something of disadvantage when it comes to attracting star talent in certain industries. The National Federation of Federal Employees said the pay freeze will make the government even less competitve.

"[The policy] could diminish the government's ability to recruit and retain top talent at the federal agencies that protect our borders, care for our veterans, and support our armed forces abroad," the union group said in a statement.

Obama acknowledged the coming recruitment challenges in Monday's proposal, but maintained the sacrifices were necessary.

"In these challenging times we want the best and brightest to join and make a difference," the president said. "But these are also times where all of us are called on to make some sacrifices and I'm asking civil servants to do what they've always done: play their part."

ABC News' Audrey Taylor, Jake Tapper, Sunlen Miller and John Parkinson contributed to this report.