“The Path to Prosperity” (And a Five-Year Pay Freeze)

The House Budget Committee has released its proposed budget for FY 2012. Among other cuts to government, the proposed budget suggests a pay freeze for federal employees and an increase in the amount they have to pay for their pension benefits.

The House Budget Committee, chaired by Rep. Paul Ryan (R-WI), has released its proposed budget for FY 2012. Dubbed the “Path to Prosperity,” the budget promises to “help spur job creation today, stops spending money the government doesn’t have, and lifts the crushing burden of the debt.”

Certain proposals in the budget will be of particular interest to FedSmith.com readers as they would directly affect federal employees.
This excerpt from the budget document summarizes these proposed changes:

“[The proposed budget would] boost private-sector employment by slowing the explosive growth of the public sector, achieving a 10 percent reduction over the next three years in the federal workforce through attrition, coupled with a pay freeze for the next five years and reforms to government workers’ generous benefit packages.”

Exactly how would this proposal be achieved? By freezing federal pay through 2015 and requiring federal employees to pay for half of their defined benefit. The full description states:

The reforms called for in this budget aim to slow the federal government’s unsustainable growth, and reflect the growing frustration of workers across the country at the different set of rules enjoyed by government employees. It reduces the public-sector bureaucracy, not through layoffs, but via a gradual, sensible attrition policy, permitting the federal government to hire only one new employee for every three federal workers who retire. By 2014, this reform would result in a 10 percent reduction in the federal workforce.

Additionally, it freezes federal pay through 2015. And it reduces taxpayers’ disproportionate share of the financing for the Federal Employee Pension Plan by requiring federal employees to pay for half of the defined benefit they receive at retirement, an increase from their current contribution of 0.8 percent of payroll. This proposal takes its cue directly from the Fiscal Commission. When combined, these proposals will save taxpayers approximately $375 billion over ten years.

As to the logic behind the cuts, the committee offers the following under the heading “Slowing the bureaucracy’s explosive growth”:

The federal government has added 155,000 new workers since the President took office. It is no coincidence that private-sector employment continues to recover only sluggishly while the government grows at breakneck speeds. To fuel the public sector’s growth, Washington must either tax the private sector or issue debt (i.e. impose a deferred tax upon the private sector).

The federal government’s responsibilities are dependent on a strong federal workforce. Federal workers deserve to be compensated for their important work, but pay levels, pay increases and benefit packages need to be reformed to be in line with the private sector.

Salaries for federal workers continue to outpace pay for their private-sector counterparts. Average wages in the federal civilian workforce ($74,311 in 2010) far eclipse the $49,777 median wages in private industry. When generous benefit packages are included, the advantages enjoyed by government workers are even more pronounced. The roughly 2 million federal civilian workers received average compensation packages of $101,628 in 2010, far in excess of their private-sector counterparts. Immune from the effects of the recession, federal workers have received regular salary bumps and cost-of-living-adjustments, regardless of productivity or
economic realities.

The budget proposal proposes cuts in many areas of government. Some of the other highlights outlined by the committee include:


  • Cuts $6.2 trillion in government spending over the next decade compared to the President’s budget, and $5.8 trillion relative to the current-policy baseline.
  •  Eliminates hundreds of duplicative programs, reflects the ban on earmarks, and curbs corporate welfare bringing non-security discretionary spending to below 2008 levels.
  • Brings government spending to below 20 percent of the economy, a sharp contrast to the President’s budget, in which spending never falls below 23 percent of GDP over the next decade.


  • Reduces deficits by $4.4 trillion compared to the President’s budget over the next decade.
  • Surpasses the President’s low benchmark of sustainability – which his own budget fails to meet – by reaching primary balance in 2015.
  • Puts the budget on the path to balance and pays off the debt.


  • Keeps taxes low so the economy can grow. Eliminates roughly $800 billion in tax increases imposed by the President’s health care law. Prevents the $1.5 trillion tax increase called for in the President’s budget.
  • Calls for a simpler, less burdensome tax code for households and small businesses. Lowers tax rates for individuals, businesses and families. Sets top rates for individuals and businesses at 25 percent. Improves incentives for growth, savings, and investment.


  • Creates nearly 1 million new private-sector jobs next year, brings the unemployment rate down to 4 percent by 2015, and results in 2.5 million additional private-sector jobs in the last year of the decade.
  • Spurs economic growth, increasing real GDP by $1.5 trillion over the decade.
  • Unleashes prosperity and economic security, yielding $1.1 trillion in higher wages and an average $1,000 per year in higher income for each family.

You can decide for yourself after reading the proposal if you believe that this is the “path to prosperity” or not. Whether or not this budget or anything like it will be passed is anybody’s guess at this point. As always, we will continue to keep readers informed of news items that may affect their lives and careers.

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.