off the charts
POLICY INSIGHT
BEYOND THE NUMBERS

Federal Pay Freeze Proposal Obscures Likely Cuts in Domestic Funding

The payroll tax-cut proposal that House Republican leaders circulated on December 9 would, among other things, reduce the funding caps for non-defense discretionary (NDD) programs by a total of $29 billion over the nine-year period 2013-2021.  The bill says the savings would come from extending the existing pay freeze on federal civilian personnel for another year, through December 31, 2013. In reality, those savings would probably come from further cuts in other NDD programs, such as education, housing, Head Start, WIC, and biomedical research.  That’s because Congress will likely have to extend the pay freeze through 2013 just to help meet the existing NDD funding caps. The existing caps are already very tight — an average of 16.6 percent below the funding levels that the Congressional Budget Office (CBO) projected in March.  (That figure reflects the impact both of the spending caps in the Budget Control Act and of the automatic reductions slated for 2013-2021 due to the failure of the supercommittee process.)  One out of every six dollars of NDD funding are scheduled to disappear, which means that appropriations for a whole range of federal programs and activities, especially less politically popular items such as federal pay and personnel, will be squeezed over the coming decade. Since Congress is likely to freeze federal pay for another year in any case, reducing the NDD caps would just deepen the cut to other NDD programs, as we explained regarding a similar but far bigger proposal. Another point about the Republican proposal is worth noting.  While extending the federal pay freeze would also produce savings for the Department of Defense — by far the largest federal employer of civilians, employing more than one-third of all federal civil servants — the Republican bill does not reduce the existing defense caps to reflect those savings.  (The defense caps average a 14.4 percent cut from CBO’s March baseline, somewhat smaller than the 16.6 percent cut in NDD funding.) As a result, Congress could use the Pentagon’s savings from freezing civilian pay to help meet the existing defense caps over the next decade.  But it would have make further cuts in NDD programs meet the new, even tighter NDD caps that the bill would establish.  This looks very much like a double standard.