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After the Freeze: Real Reforms Toward Fair Federal Pay

President Barack Obama announced today that he will ask Congress to freeze federal worker pay for the next two years saving $5 billion through 2012. Good for him. This is a welcome acknowledgment on two fronts: 1) that, as Heritage research has definitively shown, federal workers are paid more than their private sector counterparts even after accounting for skills and education; and 2) that our federal budget deficits are driven by a spending, not a revenue, problem.

But while President Obama should be congratulated for this small step toward fiscal sanity, a federal pay freeze is not enough and far more than $5 billion could be saved be reforming federal worker pay. Heritage Foundation Senior Labor Analyst James Sherk writes:

Federal employees earn between 30 percent and 40 percent more than equivalently skilled private-sector workers. This represents costly forced sacrifices by lower-earning American taxpayers. … [M]ost federal compensation is not a contractual obligation and Congress can reduce it in those positions which are overcompensated. If Congress reduced this federal pay to market rates this would save taxpayers about $47 billion a year— more than eliminating the entire Department of Commerce, Department of the Interior, or Department of Energy. It would be enough to fully offset the cost of patching the alternative minimum tax in 2012.

Instead of just a pay freeze, Sherk recommends:

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