Obama’s Underwhelming COLA Proposal

As reported here on Monday, a new analysis by Chris Edwards at the Cato Institute finds that federal workers averaged $119,982 in wages and benefits in 2008—over twice the private sector average of $59,909. With that backdrop, this news from USA Today should leave taxpayers scratching their heads (or pulling their hair out):

President Obama urged Congress Monday to limit cost-of-living pay raises to 2% for 1.3 million federal employees in 2010, extending an income squeeze that has hit private workers and threatens Social Security recipients and even 401(k) investors.

Obama’s proposal, outlined without fanfare in a letter to congressional leaders, would leave federal workers with their lowest COLA in two decades. Presidents Bill Clinton and George W. Bush proposed lesser increases three times. Congress, which must approve the plan, has not granted less than 2% since 1988.

The president’s action comes when consumer prices have fallen 2.1% in the 12 months ending in July, because of a massive drop in energy prices. The recession has taken an even tougher toll on private-sector wages, which rose only 1.5% for the year ended in June — the lowest increase since the government started keeping track in 1980. Private-sector workers also have been subject to widespread layoffs and furloughs.

How this can be spun as frugality is beyond me. The administration is only asking to mildly slow the rate of growth in federal pay, and somehow it’s OK for federal employees to get a 2% COLA adjustment while wage growth the recession-beleaguered private sector has totalled 1.5%. Throw in the fact that the adminstration and Congress seem bent on bringing a large chunk of contracted jobs back in-house—thereby increasing the federal workforce—and you have a recipe for fiscal disaster.

Edwards is right—a 0% COLA seems like the least Congress could do to demonstrate to taxpayers that they’re actually paying attention to the federal fiscal crisis.

Reason Foundation’s Annual Privatization Report 2009
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