Nov 302010
 
Authors: Rachel Childs

Editor’s note: An earlier version of this article incorrectly reported that the national debt is $14 billion. It is $14 trillion. In addition, it also reported the Presidential Debt Commission’s recommendations would reduce the national debt by $4 billion. It should have read $4 trillion.

CSU economist Martin Shields sees President Barack Obama’s recent proposal to freeze civilian federal pay as a political move, not an economic one.

“It’s a choice you have to make from a symbolic perspective,” Shields said. “It’s indeed real money, but it’s not going to get us anywhere we need to be if we want to seriously address the issue.”

The proposed pay freeze will affect roughly 2 million federal employees and save $5 billion over two years and $28 billion total over five years.
Salaries for military personnel, however, will not be touched by the freeze.

This is a small percentage of the estimated $1.3 trillion budget deficit already accumulated, according to the Congressional Budget Office, but it’s a way for the president to take charge of the issue before Republicans take the House majority. The national debt, which is separate from the budget deficit, comes in at $13.8 trillion, according to the U.S. Treasury website.

Shields said Obama’s decision could result in negative short-term effects, including loss of federal worker morale and the loss of money circulating into the economy from consumer goods.

Congress must approve the proposal, which is the first federal salary freeze for civilian workers since President Ronald Reagan’s one-year freeze in 1986, and the first two-year pay halt.

During his Monday speech, Obama said the federal government will have to make tough decisions. If families and small businesses are tightening their belts, he said, so should Washington. Republicans have called for cuts as well, in lieu of sacrifices made by the private sector.

“These small business employees often go without pay raises. Federal employees should have to adjust to the current environment just as those in the private sector have had to over the last few years,” said Larimer County Republican Party Chairman Larry Carillo.

Republican leaders have suggested that a hiring freeze should follow the initiative, but Shields said that move will be drastic and something of little positive impact.

“Sure it might save some money, but sometimes there’s real problems that come up. And if you say we can’t hire anyone, then you’re basically saying we can’t take on any new problems,” Shields said.

The pay freeze announcement comes shortly before Obama’s independent 18-member Presidential Debt Commission released its report –– which comes out today ––suggesting solutions to lower the nearly $14 trillion national debt.

Changes include cutting spending in the Department of Defense and upping the age retirees must reach before taking advantage of Social Security benefits, which could result in a projected $4 trillion reduction in debt over the next decade.

Crime Beat Reporter Rachel Childs can be reached at news@collegian.com.

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