Senate Minority Leader Mitch McConnell, R-Ky., issued a statement rejecting a Democratic proposal to pay for the payroll tax cut extension with a 3.25 percent tax on millionaires. (Chip Somodevilla / Getty Images)
Experts say last week's Senate defeat of a proposed federal pay freeze and workforce cut did not kill it. It may come up again — and soon.
Particularly unnerving for some federal advocates was President Obama's silence on the proposals. A Dec. 1 White House statement opposing S 1931 — the Temporary Tax Holiday and Government Reduction Act — didn't threaten a veto nor mention the pay freeze as objectionable items.
The bill proposed cutting the federal workforce by 10 percent — or roughly 200,000 employees — and extending the federal pay freeze another three years, bringing it to five years total.
By declining to criticize Republicans for considering an extended pay freeze, Obama could be leaving himself political room to approve at least a one-year extension. Last December, the bipartisan Simpson-Bowles deficit reduction commission included a three-year pay freeze in its proposed plan for paring the deficit. And before Obama publicly proposed the two-year pay freeze federal employees are under, the White House was reportedly considering a three-year freeze.
"I'd like to know why [an opposition to a further pay freeze] wasn't included in the [White House] statement," said Julie Tagen, legislative director for the National Active and Retired Federal Employees Association. "That does concern me," she said, considering that the president froze pay before.
House Speaker John Boehner met with Republican lawmakers Dec. 2 to decide how to move forward with a payroll tax cut extension. As of press time, it was unclear whether House Republicans intended to pay for a payroll tax cut extension with a federal pay freeze and staffing cut.
"I don't think this fight's over," said John Gage, president of the American Federation of Government Employees, the largest federal union. "It's just starting. It's going to happen every time we have one of these pivot points, whether the payroll tax deadline, or the continuing resolution, or the budget. It's all going to have the same threat of whacking federal employee pay and jobs."
Threat of freeze remains
In a Nov. 30 statement announcing S 1931's introduction, Senate Minority Leader Mitch McConnell, R-Ky., and Sen. Dean Heller, R-Nev., rejected a Democratic proposal to pay for the payroll tax cut extension with a 3.25 percent tax on millionaires. McConnell and Heller said that tax would harm "job creators" and said extending the federal pay freeze is a more practical solution.
"This bill will provide some relief to struggling workers who continue to need it, but without raising taxes on job creators, which is what the Democrats' proposal would do," McConnell said.
Both the Democratic and Republican bills failed to garner the necessary 60 votes to overcome a filibuster and come up for a vote Dec. 1. S 1931 didn't even have the support of a majority of Republicans, and only received 20 votes.
But McConnell's strong support of a further pay freeze suggests it will return — if not as part of a payroll tax extension, then elsewhere.
When asked how it is fair to freeze federal pay while not asking millionaires to pay more, Heller's office cited the growth of the federal workforce in recent years.
"The federal government has grown exponentially under this administration," Heller spokesman Stewart Bybee said in an email. "At the same time, jobs in Nevada have continued to disappear. That is unfair. The payroll tax extension will provide much needed relief for many hard-working Americans struggling in the current economic environment."
The federal workforce has grown almost 10 percent, to more than 2.1 million employees, since President Obama took office. More than two-thirds of that growth was at the Defense, Justice, Homeland Security and Veterans Affairs departments.
S 1931 would allow agencies to hire only one new employee for every three who leave, until each agency cuts 10 percent from its workforce.
The bill would also freeze salaries for lawmakers and legislative branch employees through 2015.
Heller's office said in a statement that extending the pay freeze to five years was proposed in the Simpson-Bowles deficit reduction plan, but that is incorrect. Simpson-Bowles last year proposed a three-year pay freeze.
Warnings from employee advocates
Congressional Democrats, union leaders and federal management organizations denounced the proposal.
"Federal employees have already stepped up to the plate and are helping to put our nation on a sounder fiscal footing, accepting a two-year pay freeze which reduces the benefits they would have received by $60 billion over 10 years," House Minority Whip Steny Hoyer, D-Md., said. "It is not appropriate to once again call on federal employees to contribute while not asking everyone else to contribute their fair share."
National Federation of Federal Employees President William Dougan called the Republican proposal "absolutely unacceptable," and pledged to fight it. AFGE and the National Treasury Employees Union also criticized the plan.
"It is despicable that our elected representatives in Washington would propose taking thousands from the pockets of VA nurses, Border Patrol agents and food safety inspectors simply to protect a small group of millionaires and billionaires," Dougan said. "Congress shouldn't be talking about cutting hundreds of thousands of middle-class federal jobs while our economy is on the brink. They should be fighting to save every last one. Where are their priorities?"
Dougan said he's not worried that Obama's statement opposing the bill didn't explicitly denounce the further freeze.
"We're not reading anything more into the president's statement than what it plainly says," Dougan said. "President Obama offered a forceful opposition to a bill that would have done irreparable harm to the government's mission and the employees who carry it out, and we applaud him for it."
Gage said he's also giving Obama the benefit of the doubt this time, but is worried that Obama and other Democrats could yield to a further pay freeze.
"That's why we're not sitting back," Gage said. "I'm hoping the Democrats won't compromise and whack federal employees to get the payroll tax through. That would be completely wrong."
Gage said AFGE is planning a series of print ads, which it could publish as soon as this week, calling out lawmakers who want to freeze the pay of middle-class federal employees.
"We're going to go into districts and say, ‘Show me how cutting a VA nurse's salary in Little Rock, Ark., is going to create jobs and help the economy,'" Gage said. "We're going to go around the country and hit this. It just makes my blood boil, the complete hypocrisy of it. They won't look at millionaires at all — they're job creators — but they'll attack existing jobs that are there."
Jessica Klement, government and public affairs director for the Federal Managers Association, said Obama's silence makes her nervous.
"It would have been nice to have something more forceful from the White House," Klement said. "We've had no conversation with administration officials yet, but that will be forthcoming."
Klement also pointed out that the payroll tax holiday extension wouldn't benefit the government's roughly 600,000 Civil Service Retirement System employees, since they don't receive Social Security benefits and, as a result, don't pay into the program.
NTEU President Colleen Kelley called the proposal "disturbing."
"I would hope it's seen for what it is — a political move," Kelley said.
Kelley said a five-year pay freeze would devastate the federal workforce, and prompt many older workers to retire.
"I realize the people proposing this five-year freeze would love for that to happen," Kelley said.
Kelley said such a long pay freeze would also discourage younger people from considering public service as a career.
Kelley said NTEU planned to reach out to senators and push them to vote down the bill.
In a letter to senators last week, AFGE Legislative Director Beth Moten disputed claims that federal employees have been untouched by the recession.
"Similar to their private-sector counterparts, federal workers are confronting financial hardships due to unemployed spouses, major declines in the values of their homes, rising health care costs and general living expenses," Moten said. "Many are responsible for supporting their families on a single paycheck. During these tough economic times, when citizens are demanding more from the federal government, America cannot afford a second-class civil service."
Moten also called the across-the-board workforce cuts "arbitrary," and said they would lead the government to outsource more work at a higher cost.
The presidents of five associations representing federal managers signed a letter that said federal workforce cuts will not necessarily lead to reduced government spending. The Clinton administration ended up creating more government inefficiency when it cut nearly 400,000 jobs, the associations said.
"Just because a position is eliminated, does not mean the workload leaves with it," the Government Managers Coalition said. "Work still needed to be done and agencies had congressionally mandated missions to meet. Federal employees had to do jobs for which they were unqualified or lacked adequate training, and subsequently more contractors were hired without a strong cost-benefit analysis."
The coalitions also said agencies such as the IRS and Social Security Administration accrued large backlogs because of the workforce cuts.