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Cutting Federal Pay and Workforce Poses Problems

Senate Republicans propose to freeze federal employee pay through 2015 and shrink the federal workforce by 10 percent over the next ten years to help pay for extending the payroll tax cut — although the savings actually would come from further large cuts in discretionary programs, potentially hitting everything from veterans’ health care to border security to food safety.  News reports indicate that House Republicans plan to use a pay freeze and cuts in federal employee retirement benefits to offset their proposed extension of the payroll tax cut.

The House and Senate Republicans note that their workforce proposals were in the plan from fiscal commission co-chairs Erskine Bowles and Alan Simpson, ignoring the fact that Bowles and Simpson recommended them as part of a comprehensive deficit-reduction plan that called for more than $2 trillion in increased revenues.

Also, as we pointed out when Bowles and Simpson released their plan, freezing federal workers’ pay, cutting their retirement benefits, and reducing the federal workforce would likely make the workforce less productive, less efficient, and less competent.  It might also save less than anticipated as agencies rely more heavily on federal contractors, although the strict caps on overall discretionary funding that Congress has enacted make it unlikely that agencies could hire enough new contractors to offset even a significant part of the cut in federal employees.

These changes would make it harder for agencies to attract and keep qualified federal workers, and for the remaining workers to manage federal operations effectively.  It is difficult, for example, to justify cutting staffing at the Social Security Administration by 10 percent just as the baby boom generation retires in large numbers and the number of Social Security beneficiaries swells.

As long-time budget expert Stan Collender (now with Qorvis Communications) explained regarding the Bowles-Simpson proposals:

The plan calls for a substantial reduction in federal employees.  A reduction in employees generally results in the government relying on more outside consultants to get the work done but, in addition to the recommended reductions-in-force, Bowles-Simpson also calls for significant cuts in the use of contractors.

The combination of those two seems to indicate that the now smaller number of federal employees will have to do everything that was done before, that is, that they will have to be much more productive.  But Bowles-Simpson also calls for a three-year freeze on federal employee salaries, and that almost inevitably means an increasing number of federal workers will quit. That will reduce rather than increase productivity as new and less experienced workers replace the more senior folks who will have left for greener pastures.

In other words, Bowles-Simpson projects substantial savings based on the expectation that a less experienced and much smaller federal workforce will be more productive and just as effective as the more experienced and larger workforce it replaces. That makes absolutely no sense.