Fiscal Cliff Looms! Federal Government Gives Raises! [Updated]

Fiscal Cliff Looms! Federal Government Gives Raises! [Updated]

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    As the country hurtles toward the fiscal cliff, President Obama signed anexecutive order cryptically titled "Adjustments of Certain Rates of Pay."  The text of the order on the White House website contains no details, but a copy with the attachments is available at the U.S. Office of Personnel Management.  A cursory examination of the document seems to indicate that those "adjustments" are generally in an upward direction.  For example, "Rates of Basic Pay for the Executive Schedule." Here are the rates that were effective in 2012, frozen at the 2010 levels:

RATES OF BASIC PAY FOR THE EXECUTIVE SCHEDULE (EX)
RATES FROZEN AT 2010 LEVELS
EFFECTIVE JANUARY 2012
Level I  $  199,700
Level II    179,700
Level III    165,300
Level IV    155,500
Level V    145,700 

    Here are the rates in the just-signed Executive Order:

SCHEDULE 5--EXECUTIVE SCHEDULE
(Effective on the first day of the first applicable pay period beginning after March 27, 2013)
Level I  . . . . . . . . . . . . . . . . . . . . . . . . . . $200,700
Level II . . . . . . . . . . . . . . . . . . . . . . . . . .  180,600
Level III. . . . . . . . . . . . . . . . . . . . . . . . . .  166,100
Level IV . . . . . . . . . . . . . . . . . . . . . . . . . .  156,300
Level V  . . . . . . . . . . . . . . . . . . . . . . . . . .  146,400

    Not much of an increase, but an increase all the same.  Other raises are included for, among others, foreign service employees, senators, representatives, and even Vice President Biden.
    Combine federal employee raises with tax increases hitting January 1st, increases that reach down to the lowest level of wage earners with the expiration of the payroll tax holiday, and the government might be initiating a winter storm that will make this week's Euclid look like a few flurries.
UPDATE: The website FedSmith.com posted on this yesterday.  Since that blog is targeted at federal employees, the end of the freeze is of course presented as good news:

As most readers know, President Obama proposed a pay freeze on civilian employee pay that was applicable all federal civilian employees. This was way back in 2010. It did not impact pay raises as a result of promotions or within-grade increases but it was good political theater and the move was supposed to save the government money which it has probably done. 

The White House said at the time that the pay freeze would save $2 billion for the remainder of fiscal year 2011, $28 billion over the next five years, and more than $60 billion over the next 10 years. We do not know if that much has or will be saved or if it was political rhetoric in lieu of actual facts. The president noted that  action had to be taken because of “the massive deficits we inherited and the unsustainable fiscal course that we are on. Doing so will take some very tough choices.” 

But, as readers know, the pay freeze is still in effect today and the deficits in the past four years have swamped previous yearly deficits by adding as much as $1.4 trillion in new debt in one year alone. The other three years of Mr. Obama’s presidency have also exceeded more than $1 trillion each year (despite the federal employee pay freeze) due primarily to increased government spending in the past several years. 

But, the good news is that the pay freeze will end in late March.

The reason: A new executive order has been issued providing for a new pay schedule beginning “on the first day of the first applicable pay period beginning after March 27, 2013.” The pay raise will generally be about 1/2 of 1%... 

The legal authority for the new executive order is in the continuing resolution that is currently in effect... 

For those who may also be wondering if Congress could change the pay rates or completely eliminate the pay raise, the answer is that it could be done. However, the change would have to pass both the House and the Senate and, as a practical matter, the Senate has not displayed any independence from the desires of the White House. So any change is unlikely (although not impossible) prior to the effective date. 

After most readers had an extra holiday on Christmas Eve, and with the announcement of a pay raise—even a small one—many of our readers may be looking at the new year with a more positive outlook.