Though a recent development in 2010, the decision to freeze pay to all civilian federal employees, including those working at the Department of Defense (excluding military personnel), was an important and newsworthy development. Political leaders felt pressure from voters, many of whom are concerned about high unemployment and the growing budget deficit. Analysts predict that the freeze will save more than $5 billion over two years, $28 billion over five years and over $60 billion in the next 10 years.
Why it matters to the GovCon space?
Written by: Jeff White, Founder of govWin
The issue of the two-year pay freeze ties into the issue around “insourcing vs. outsourcing” as well as the budget deficit.
For starters, the Obama administration’s goal of adding jobs to the federal payroll seems to run counter to idea of reducing the federal budget and cutting costs. I think this sends a very mixed message to current federal employees and the private sector.
Secondly, the major driver for the federal pay freeze has been the growing realization in Congress and the administration that payments on debt servicing are growing and will far exceed budget outlays in the immediate future. See chart below.
The idea for the pay freeze is to try and save money on the federal budget. However, while it is a decision that may resonate with some voters, it is largely symbolic in nature. We are currently faced with budget deficits that are over $1 trillion annually. Saving $5 billion over two years does not seem like an effective solution to the serious budget challenges.
In my opinion, federal workers and government contractors would all benefit from a much more deliberative process where the administration, Congress and business leaders work together to identify the real areas of need in the government workforce and common areas for spending cuts. By starting out in that direction – some real progress can be made.
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