President Obama and Vice President Joe Biden wave during a campaign event at the University of Iowa in Iowa City, Iowa, in September. (Saul Loeb / AFP via GettyImages)
President Obama’s victory in Tuesday’s election dramatically lessens the odds of any successful push for major reductions in federal pay and benefits. But in his second four-year term, the Democratic incumbent will confront a long-term budget outlook certain to keep a tight lid on employee compensation and agency spending, experts said.
Record deficits aren’t going away because of the election, said John Palguta, vice president for policy at Partnership for Public Service. “There’s going to be continued pressure to find cost savings.”
Tens of thousands of federal employees could face furloughs early next year, for example, if Congress and the White House don’t find a way to head off across-the-board budget cuts, known as sequestration, set to take effect Jan. 2. Even if the two sides come to an agreement to avert that crisis, the deal will likely entail major reductions to planned spending over the next decade.
“There’s going to be budget pressure on every agency,” agreed Scott Cameron, a former Interior Department chief human capital officer now at R3 Government Solutions, a Virginia-based consulting firm. As a result, Cameron expects the overall federal workforce to shrink as employees retire and hirings lag behind.
Indeed, Obama said in a recent interview with the Des Moines Register that he expects political leaders to reach a long-term deficit-reduction deal in the first six months of the next administration. That so-called “grand bargain” could include significant cuts to federal programs, staff and contracting.
In 2011 and 2012, Obama froze base federal pay, although employees could still receive promotion raises and step increases. After proposing a 0.5 percent General Schedule increase for fiscal 2013, Obama prevailed on lawmakers to delay it until a full-year budget is approved. Agencies are now working under a six-month continuing resolution, meaning that the raise probably won’t take effect until April at the earliest.
This past February, Obama signed into law an increase in the pension contribution rate for new federal employees hired after December from 0.8 percent of each paycheck to 3.1 percent.
“Federal employees have contributed more than $75 billion toward getting our country’s fiscal standing back on track,” Joseph Beaudoin, president of the National Active and Retired Federal Employees Association, said in a statement alluding to the long-term savings from the pay freeze and other belt-tightening moves. “We hope the president will defend federal workers and retirees from the waves of unfair attacks that incorrectly paint civil servants as the cause of our nation’s fiscal problems.”
But if Republican nominee Mitt Romney had won Tuesday, federal employees faced potentially much deeper compensation cuts. During the campaign, Romney argued that federal employees’ pay and benefits was excessive in comparison with the private sector and needed to be recalibrated.
And Romney’s running mate, Rep. Paul Ryan, R-Wis., was the chief sponsor of a House-passed bill to increase the basic FERS employee contribution rate from 0.8 percent of salary to 5.8 percent over five years. The Democratic-controlled Senate has not acted on the measure.
Indeed, federal employee unions cheered Obama’s win.
“This election was a momentous victory for federal employees,” said William Dougan, national president of the National Federation of Federal Employees, in a statement.
“For the past several years, Governor Romney and his Republican colleagues in the House and Senate have focused an organized smear campaign against federal employees. With Romney’s defeat, and key victories for Democrats in a number of closely contested Senate races, federal employees can breathe a big sigh of relief.”
J. David Cox Sr., national president of the American Federation of Government Employees, said in a statement that “we look forward to working with the president and our elected representatives in Congress to pursue a legislative agenda that protects and preserves our vital government services and programs and recognizes the substantial sacrifices that federal employees and agencies already have made toward reducing the deficit.”
But as Obama and congressional leaders turn their attention to striking a long-term deficit-reduction deal, federal pay and benefits and the size of the federal workforce appear likely to emerge again as vulnerable to cuts.
Obama himself proposed last year as part of a deficit-reduction plan eliminating a supplemental payment to retirees covered under the Federal Employees Retirement System who are not yet eligible for Social Security.
Unlike Romney, Obama made little mention of federal workforce issues during the campaign. So it came as a surprise last week when he revived plans for a sweeping government reorganization that would merge more than a half-dozen agencies and bureaus that handle business and trade functions. The proposed reorganization, which Obama first proposed last year, would combine much of the Commerce Department, along with the Small Business Administration, the Office of the U.S. Trade Representative and other agencies into a single unit.
“We should have one Secretary of Business, instead of nine different departments that are dealing with things like giving loans … or helping companies with exports,” he told MSNBC in an interview. “There should be a one-stop shop.”
The interview marked the first time in months that Obama had publicly referenced the plan. “That just astonished everybody because we thought it was DOA,” Bill Reinsch, president of the National Foreign Trade Council, said Tuesday. At the White House’s behest, Sen. Joe Lieberman, I-Conn., in February had introduced a bill to permit “fast track” congressional approval for the proposed reorganization.
But the White House has made little effort to push the measure, which has not moved out of the Senate Homeland and Governmental Affairs Committee chaired by Lieberman. Asked if he now expects Obama to pursue the plan, Reinsch said: “I’ve got no clue.”