Proposing pay freeze, Obama aims to seize initiative on economy

President Obama’s proposal on Monday to freeze federal workers’ pay was an unexpected announcement that represented the first in a series of White House moves to seize the initiative from Republicans on the economy.

The preemptive move was timed to precede a White House meeting Tuesday with congressional leaders on the subject of expiring George W. Bush-era tax cuts, and came just days before a final report from Obama’s fiscal commission on how to shrink the federal deficit.

“The hard truth is that getting this deficit under control is going to require broad sacrifice,” Obama said from the White House. “And that sacrifice must be shared by the employees of the federal government.”

By proposing the two-year freeze, Obama sought to stake his own claim to the argument that government must make tough decisions. A senior administration official said Obama’s proposal is part of a larger plan to draw Republicans into an overdue conversation about deficits.

The move would save about $5 billion over two years, the White House said — a substantial sum, though a mere sliver of the $1.3-trillion federal deficit.

Republicans gained dozens of seats in the House and Senate in part by targeting what they characterized as out-of-control federal spending.

Federal workers became a favorite campaign target of Republicans, who argued that the Washington payroll had swelled as private workers nationwide suffered job losses during the recession. Republicans have pressed for even steeper cuts to federal workers’ pay.

“As the recent election made clear, Americans are fed up with a government that spends too much, borrows too much and grows too much,” said Rep. Eric Cantor (R-Va.), the incoming House majority leader. “With so many Americans tightening their belts, Washington must do the same.”

But Obama, by echoing a GOP theme in an effort to undercut Republicans, has angered many of his allies who complained that by cutting federal workers’ pay, Obama was giving up something for nothing.

“No one is served by our government participating in a ‘race to the bottom’ in wages,” said Richard Trumka, president of the AFL-CIO. “The president talked about the need for shared sacrifice, but there’s nothing shared about Wall Street and CEOs making record profits and bonuses while working people bear the brunt.”

The freeze, which would not apply to military personnel or postal workers, would affect about 2 million employees. Congressional approval would be needed for the proposal to take effect.

Excluding military and postal workers, there are about 250,000 federal employees in the Washington area and 150,000 in California, which has the highest concentration outside Washington, according to Office of Personnel Management figures.

Republicans, who had been preparing their own plan to slash federal pay and the workforce next year, said the proposal was long overdue. But some of the president’s allies chided him for taking a symbolic step that they said would do little to affect the trajectory of federal spending, but would harm household budgets.

Congress reconvenes this week for a lame-duck session to confront a series of crucial deadlines. The Bush-era tax cuts lapse at the end of the year, and unemployment benefits will be cut off starting Wednesday, leaving up to 2 million jobless Americans without aid through the holidays.

Lawmakers are at a stalemate over the tax cuts. Republicans want to extend them to all households, including those with incomes above $250,000 annually, despite the $700-billion additional cost.

In Tuesday’s meeting with congressional leaders, Obama will continue to push for making permanent only the tax cuts on those households earning below $250,000 annually.

“We simply cannot afford to borrow $700 billion to extend the tax cuts of those who make $1 million or $1 billion a year, or make in excess of $250,000 a year,” White House Press Secretary Robert Gibbs said. “We can’t have an honest discussion about our debts and our deficits without understanding what those decisions mean in the short term and in the long term.”

The pay cut proposal, along with Obama’s embrace of earmark reform — another Republican priority to limit the special projects lawmakers designate for their home states, which is scheduled for a Senate vote Tuesday — is the kind of budget-cutting that deficit hawks see as more style than substance.

“Whether in earmark reform or freezing the pay of federal workers, the debate hasn’t moved on to the big issues that need to be confronted,” said Robert Bixby, executive director of the nonpartisan Concord Coalition, which advocates deficit reduction.

Even Obama’s allies on Capitol Hill reacted with concern. Rep. Steny H. Hoyer (D-Md.), the House majority leader, delicately critiqued the president’s proposal.

“Because meaningful deficit reduction cannot be achieved through a piecemeal approach to trimming federal spending, I am hopeful that the administration will propose a comprehensive and serious program for deficit reduction that recognizes the need for a comprehensive approach,” he said.

The president froze salaries for all senior White House officials upon taking office. In last year’s budget, he proposed extending that freeze to other top political appointees.

In the White House meeting on tax cuts, aides say they are not expecting agreement, but rather view the session as the first of several meetings on the subject.

In a telling change to the schedule, the get-together originally scheduled as a dinner is now set to be a more abbreviated business meeting in the morning.

“One of the most important things the president can do is send a message to the American people that he will not be the obstacle to bipartisan politics,” said William Galston, a former Clinton administration official who is now a senior fellow at the Brookings Institution. “He wins by taking the first step.”

lisa.mascaro@latimes.com

cparsons@latimes.com