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Federal pay freeze: why Obama is following path trod by states, businesses now

Obama's proposed federal pay freeze is an idea whose time has come to a sector whose turn has come. It's also a nod to the GOP and recognition that deficit-cutting is a priority for the public.

By Staff writer / November 29, 2010

President Obama proposes a federal pay freeze for civilian employees this year and next at the Eisenhower Executive Office Building in Washington on Nov. 29.

Andrew Harrer/UPI/Newscom

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President Obama's proposed pay freeze for federal workers underlines a message that was already signaled in national elections this month: Leaner times are coming to Washington.

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In a way, federal workers are the last to be hit by the aftershocks of America's deepest recession since the 1930s. Private-sector companies took emergency cost-control measures during the recession. State and local governments have been similarly cutting costs – including with freezes on hiring and pay raises.

IN PICTURES: Inside President Obama's White House

Why is Mr. Obama calling for pay restraint now?

The president's proposed two-year freeze, which would require congressional approval and would not affect the military, reflects a shift in political and economic conditions:

• A changed public mood. When Obama took office, the obvious imperative was to stop a freefall in the economy, and economists were widely calling for federal stimulus spending at a time when the private sector was spending less. By this fall, as congressional elections rolled around, the public mood had shifted considerably, with curbing deficits outweiging stimulus as a priority.

• A natural cycle. It's not unusual for private-sector employers and consumers to feel the pinch of a recession first, while the impact on the federal government is delayed. Congress sets budgets on a slower timetable, and the Treasury's ability to borrow cushions Washington from the impact of falling tax revenues.

• Fiscal reality. Even before the election drubbing, with Republicans taking control of the US House of Representatives, Obama said a fiscal reckoning was drawing near. Earlier this year, he set up a bipartisan commission to define ways to reduce federal deficits and stabilize the nation's public debt as a share of gross domestic product over the next few years.

At best, restraint on federal-employee pay is just a small part of any long-term budget fix. And a two-year freeze is just a temporary step. (Obama said the move would save $28 billion over five years.)

Obama cast his announcement Monday as part of a broader effort to put the federal budget on sounder footing.

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