In case you haven’t seen it, Brian Buetler has a roundup of reactions to President Obama’s 2-year federal pay freeze. Ezra Klein has three ways of looking at the freeze. They are the non-mutually exclusive: 1) This is more unwise, unilateral bipartisanship, 2) This is a smart way to protect the federal workforce, 3) This is bad economics and bad policy.
I think we should discuss a fourth option: President Obama thinks this is a really good idea and wants to spend political capital and energy to carry it out. Rather than a piece of strategy to force concessions from the other side, this is instead something he wants his administration associated with and wants to take the lead in making it reality. He’s asking for the middle-class to take the first suffering point, before bankers and before the richest, without asking for anything in return, in response to what he sees as a major short-term deficit problem.
When people refer to Obama doing this as self-defeating, or a political miscalculation, they are assuming away precisely what needs to be interrogated and challenged, which is that Obama isn’t weak on core liberal values, or that his version of liberalism isn’t far different than what was expected, or that he think this is worth fighting for. The reality might be simply that his administration wants different goals much more aligned with traditional centrist Democratic positions, prioritizes fighting for different objectives, and views the world in a different lens. Bondholders over unions and public workers.
I see this with Treasury issues. The people I’ve met at Treasury are quite brilliant. I think they are wrong about a lot of what just happened, about what they prioritize and protect versus what they isolate or obscure, but I do not think it is because of ignorance. They had a different vision of what should be done, and I think we are living through the consequences of that. Obama is a smart person, smarter than me and probably smarter than you. If your read of this situation requires one of the first moves to be “Obama is consistently making bad calls and is being mislead” you should rethink your position without assuming that and see where it leads you.
It would be one thing if this was an ambiguous part of Maritime law or something, but this goes to a core debate. Liberals think that the work government does is both worthwhile and crucial to the functioning of our country. Conservatives think it is not. Conservatives want to sow discord between factions of middle-class people to distract from lowering taxes and providing goodies for the rich, and this is precisely one avenue for doing this.
We talked about state and local government not being overpaid here. They are definitely not overpaid in salary. What closes the gap partially – but not entirely – are the facts that health care costs have spiraled out of control for many middle-class people and retirement risk has been shifted more aggressively to working-class people. We see a failure in benefits for private workers, and Republicans and now Obama want to convince you that this is normal. It isn’t.
Larry Mishel brings up the important point that Federal workers are clustered in major cities, where their pay lags private workers. When I first worked in the private sector in San Francisco, I received a pay bump that was clearly targeted for the higher cost of living there. I wouldn’t have if I had decided to work for a regulator. Here’s how shocking it is (table 4):
Again, benefits close that gap, but that is a failure of the private market for benefits. This failure in the market for benefits is anxiety producing for middle-class voters. It isn’t surprising that it works as an effective lever against government.
Meanwhile, here’s the President of Third Way, Jonathan Cowan, sounding just like Obama:
As the former chief of staff of HUD, I’ve seen how crucial and committed the federal work force can be. But a pay freeze is the right thing to do. It shouldn’t be seen as a critique of their hard work, and federal employees should get behind it. We have a long-term structural deficit crisis and either everyone is going to contribute to spending cuts, or the United States will cease to be the number one global economic power. Federal employees can lead by example, showing the American people that they place the financial health of the country above a pay increase these next few years. If we’re going to trim Social Security and Medicare – which are essential steps to balancing the budget – we’re also going to have to show that we can bring the costs of running the federal government in line as well.
What’s the difference here?
So much for Ed Kane’s vision of stronger financial market regulators, more talented and more public-minded. You simply won’t get that without being willing to invest in the people you hire.