Budget battle analysis: feds are not the problem

Tuesday - 5/24/2011, 9:31am EDT

Robert Shapiro, former Under Secretary of Commerce for Economic Policy, chairman of Sonecon

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By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

Federal workers are feeling a little beat up, as the budget warfare between lawmakers continues.

And it's that forum that determines the nature of the debate.

Robert Shapiro, Under Secretary of Commerce for Economic Policy under President Clinton, told Federal News Radio with all the talk of federal employee pay cuts, and freezes, there is likely to be very little change.

"We have a very large structural problem," explained Shapiro. "It's not caused by federal pensions. It's not caused by federal pay. There's been a lot of disinformation put out about federal pay and federal pensions, comparing it to the average pension and the average pay in the civilian workforce. Well, the fact of the matter is that 40 percent of federal workers are professionals - lawyers and scientists. When you adjust for occupation, federal pay and federal pensions are not at all out of line with the private sector. They're quite in line. In fact federal pay is probably a little...on the low side when you make those corrections.

If that's the reality, Shapiro said the politics become even more apparent. Federal workers, he said, are always "vulnerable at times of fiscal consolidation. When the Congress is looking for places to cut, one of the advantages of cutting federal pay or federal pensions is that the recipients are relatively concentrated geographically," which diminishes the impact in, and on, Congress. In Shapiro's estimation, "nobody would touch it" if feds were distributed more evenly across the nation.

The split between politics and reality can occasionally favor federal employees, said Shapiro. For example, when the economy is bad "government is largely immune from the business cycle." Layoffs across the private sector in manufacturing, retail, recreation and entertainment, business and personal services may be widespread, said Shapiro, but "they don't get laid off in any numbers in government, particularly federal government." The worst that usually happens at the federal level, he added, "'is that there's a freeze."

For the time being, according to Shapiro, the future pay and benefits of federal employees rest in the hands of the Chief Executive. "The fact is the language and justification used to cut federal pay and federal pensions is out of line with reality, and we'll see how successful the President will be in trying to protect them."

If there was one note of encouragement Shapiro could provide, it was for federal employees concerned that hitting the debt limit might mean they wouldn't get paid. Remember this too is political, according to Shapiro, and on an even grander scale.

"I honestly do not believe that the Congress and the President will let it get to that. This is about the full faith and credit of the United States which forms the basis for the U.S. and global financial systems, and that's what will force both sides to figure out a way to save enough face so they can raise the debt limit."

Robert Shapiro is currently the chairman of Sonecon, an economic advisory firm.