Under normal circumstances, federal employees get an across-the-board pay increase each January. What that increase should be is determined by the Federal Employees Pay Comparability Act of 1990 (FEPCA), which states that it should be set at the annual rate of increase of the employment cost index minus one-half percent.
CBO recommends that the annual across-the-board adjustment produced under FEPCA rules be reduced by a half percentage point each year from 2013 through 2021. The 2013 date was chosen because pay adjustments have already been cancelled for 2011 and 2012. "Assuming that appropriations were reduced by a commensurate amount, federal outlays would be reduced by almost $10 billion over 5 years and by $50 billion over 10 years.
One rationale for such an approach is that it would constrain personnel costs, which make up about 15 percent of federal discretionary spending. Another is that "it would signal that the federal government and its workers were sharing in the sacrifices that many beneficiaries of federal programs may be asked to make in the name of deficit reduction."
One counter argument is that it would make it more difficult to recruit qualified employees, especially by those agencies that require highly skilled workers where the competition to hire is more intense. Another is that while it would bring the wages of less educated workers in line with private sector wages, it would increase the gap for those with higher levels of education.
What isn’t clear to me is how the proposal to reduce the FEPCA-produced increases would have any effect on what the actual across-the-board pay increases would be. Those increases have never been implemented. Instead the President has used his authority to choose a different increase if he determines that a national emergency exists or that serious economic conditions call for such action. And the Congress can either go along with that or substitute its own judgment.
The only possible connection I can see between this proposal and reality is that by lowering the FEPCA number, the President would lower his recommendation by a similar amount. And the Congress, if tempted to overrule him, would similarly reduce its alternative.
Well, there you have it. We’ve gone through a series of recommendations made by the CBO on how to reduce the deficit. Whether any of them have a chance of being implemented remains to be seen. In the meantime, remember what Oliver Cromwell once said: "Put your trust in God; but mind to keep your powder dry."