Tightening Our Belts
As I wrote last week upon my return to the Office of Management and Budget, the fiscal and economic situation we face today is very different than the projected surpluses we left behind the last time I served as OMB Director in the 1990's. After years of fiscal irresponsibility, President Obama inherited a $1.3 trillion projected deficit and the worst economic downturn since the Great Depression.
The President and his economic team worked quickly to address the crisis, and we are seeing our economy recover – albeit more slowly than anyone would like. Families and businesses are still hurting, and too many who want to work are not able to find a job. Our top priority must be to do what we can to help boost economic growth and spur private sector job creation.
But to lay the foundation for long-term economic growth and to make our nation competitive for years to come, we must put the United States back on a sustainable fiscal course. And that’s going to require some tough choices.
Today, the President made one of those: proposing a two-year pay freeze for all civilian federal workers. This will save $2 billion over the remainder of this fiscal year, $28 billion in cumulative savings over the next five years, and more than $60 billion over the next 10 years. The freeze will apply to all civilian federal employees, including those in various alternative pay plans and those working at the Department of Defense – but not military personnel.
We are announcing this move today because tomorrow is the legal deadline to submit to Congress the President’s decision about locality pay, a key component of overall federal worker pay. In addition, we are in the midst of the 2012 budget process, and need to make a decision about pay to develop the 2012 budget. Simply, the time to decide about pay for those two years is now.
Make no mistake: this decision was not made lightly.
Like everyone honored to serve in the White House or the Cabinet, we work with extraordinarily talented public servants every day. Throughout my career in the Congress, at the State department, and here at OMB, I have met federal workers who have sacrificed more lucrative jobs and hours with their families - -and, in some cases, put their lives in harm’s way -- in order to serve their fellow Americans. Indeed, anyone who has flown safely, enjoyed our national parks, received a Pell grant to go to college, or relied on a Social Security check to retire in dignity has benefited from the service of federal workers.
This pay freeze is not a reflection on their fine work. It is a reflection of the fiscal reality that we face: just as families and businesses across the nation have tightened their belts, so must the federal government.
Already, the Administration has taken a number of steps in this regard as part of its Accountable Government Initiative from the President freezing the salaries for all senior White House officials and other top political appointees upon taking office to his efforts to get rid of $8 billion of excess federal real property over the next two years, reduce improper payments by $50 billion by the end of 2012, and freeze non-security spending for three years – which will bring non-security discretionary spending to its lowest level as a share of the economy in 50 years.
Moving forward, we will need to make many more tough choices to construct a plan to pay down these deficits and put our nation on sound fiscal footing. Later this week, the Fiscal Commission will release its report laying out its approach, and I look forward to working with people from across the spectrum on this challenge in the weeks to come.
Jack Lew is the Director of the Office of Management and Budget.
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