Press Briefing by White House Communications Director Dan Pfeiffer and U.S. Chief Performance Officer and OMB Deputy Director for Management Jeffrey Zients to Discuss Federal Employee Issues

Via Conference Call

10:38 A.M. EST

MR. BAER: Good morning, everybody. Thanks for getting on. We're going to have Dan Pfeiffer, White House Communications Director, say a few words, and then Jeffrey Zients, who is the Deputy Director of Management and the U.S. Chief Performance Officer from here at OMB, say a few words. Then we'll go right to questions.

By the way, everything here is on the record and for attribution.

Dan.

MR. PFEIFFER: Thanks, Ken. And thanks, everyone, for joining us -- and welcome back from your holiday weekend. As most of you, or some of you at least, have reported, this is an announcement involving a freeze in civilian federal worker pay.

Let me first put this in a little bit of context and talk briefly about what the announcement is. And then I'll let Jeff talk through some of the details and what this means, and then we'll take your questions.

To put this in context, when this President came into office he inherited a $1.3 trillion deficit. At the same time, he also had an economic crisis that threatened to put the nation into a second Great Depression. Our first step was to take emergency action to get the economy moving again. We have broken -- the economy is growing now. We are no longer losing jobs; we've been gaining private sector jobs for many months now. But families and businesses are still hurting and job growth is still too slow, as you've heard the President say on many occasions.

Our top priority is making sure we're doing everything we can to help boost economic growth and spur job creation. But as the economy recovers we also need to focus on addressing the massive deficit we've inherited and the unsustainable fiscal course we're on.

As this President has said many times, doing so is going to take making some very tough choices. And just as families and businesses around the nation have tightened their belts in this economy, so must the government. That is why today the President will announce that he's proposing a two-year freeze in civilian federal worker pay -- the two years are 2011 and 2012. This announcement affects only civilians. It does not affect military personnel.

And with that, let me turn it over to Jeff for some additional details of the announcement.

MR. ZIENTS: Thanks, Dan. Let me start by taking you through the numbers. As Dan said, the President is proposing a two-year freeze for civilian federal worker pay. So that's for calendar year 2011 and 2012. This will save $2 billion for the fiscal year which we're currently in -- fiscal year 2011 -- and will save $28 billion when you combine the savings from this year's freeze and the second year's freeze, calendar year 2012. It will be $28 billion of savings across the next five years, and more than $60 billion in total over the next 10 years. So those are the numbers.

Clearly this is a difficult decision. Federal employees are hardworking and dedicated and central to delivering essential services to the American people. And today we are -- the President is clearly asking them to make a sacrifice. We believe it's the first of many difficult steps ahead that we'll be taking in the upcoming budget to put our nation on sound fiscal footing -- steps that will ask for all of us to sacrifice.

It's a tough decision, but it's also consistent with actions that we've already made as part of the President's Accountable Government Initiative to cut costs and do more with less.

Upon taking office, the President froze salaries for senior White House officials. And earlier this year, he proposed freezing salaries for all political appointees across the government.

We're going after excesses in contracting -- the more than $500 billion we spend each year in contracting. We're taking action across government to save at least $40 billion in contracting by the end of 2012.

The President has also set an aggressive goal of reducing improper payments by $50 billion by the end of next year and has also directed agencies to dispose of excess real estate to save $8 billion over the next two years.

In each of his budgets, the President put forward approximately $20 billion in terminations and reductions, encompassing more than 120 programs. And the President has proposed a three-year freeze in security spending, which will bring non-security discretionary spending to its lowest level as a share of the economy in 50 years.

So you can see today's decision is really a continuation of our work to reduce costs and make government more efficient. And it's one of the many difficult decisions we'll have to make in the months ahead. Ultimately, addressing the deficits will take tough decisions and sacrifices by all of us. And we look forward to working with both sides on Capitol Hill over the next several months to develop a common-sense deficit-reduction strategy that will rein in our deficits and keep our economy growing.

MR. BAER: Great, thanks. Operator, we're ready to take some questions.

Q: Thank you very much. Republicans on the Hill, a number of them have proposed pay freezes or even such things as a two-year furlough, which would be a pay cut. One, why did you not simply allow Republicans to propose and perhaps enact this -- obviously with the help of Democrats in the Senate -- as opposed to doing this administratively? And why did you decide on a two-year freeze as opposed to, say, a two-week furlough, which has been proposed in the House?

MR. ZIENTS: Thanks, Joe. This, as I mentioned earlier, is really a continuation of the work that we've done in the Accountable Government Initiative, and the President, when he took office, immediately froze White House senior salaries, proposed earlier this year extending that political senior freeze across government.

We're acting today because the President needs to send by the end of this month, Tuesday, to the Hill locality pay for 2011, and we're also at the point in the budget process where we need to decide on 2012 compensation. So that's the reason for this timing.

We will evaluate other proposals beyond federal workers, all the different various proposals from the fiscal commission and others, as part of our 2012 budget process and be rolling that out across the next couple of months.

Q: Hi, thanks for holding this call. I'm wondering in the President's remarks if he's going to be calling on Congress to extend the unemployment benefits that are set to expire?

MR. PFIEFFER: This announcement is specifically about federal pay.

Q: Hi, guys. Is it fair to say that since health care premiums are also going up for federal employees that this isn't just a freeze but also in a sense a pay cut?

MR. ZIENTS: Yes, Ed, there's been increases in premiums across all sectors, and what we're talking about today is the annual increase, and there will be no annual increase for 2011 and 2012, so I think it's fair to say that pay has been frozen.

Q: Hi, everyone, thanks for doing the call. A couple of quick questions. Does this need congressional approval? What is the two-year savings? You've mentioned the one-year savings and the ten-year, but what about the two-year? And finally, do you think that this will help the President make a case for not extending the upper-end tax cuts and why?

MR. PFEIFFER: Well, Margaret, let me answer your I think first and fourth question, or first and third. It does require congressional action. And this is about finding ways to deal with the deficit and cut spending. And I don't view this as part of a -- as specifically connected to the tax cut debate.

That is a -- the case of -- the Republicans are going to have to make a case for why we should spend $700 billion to permanently extend the tax cuts for the wealthiest Americans. That's the case they'll have to make and explain how that comports with a seriousness about the deficit. This is a separate announcement.

MR. ZIENTS: The two-year savings is in excess of $5 billion.

Q: Hi. Thanks, guys, for doing this. Since federal workers are being asked to forgo or not have any pay increases for the next two years, can you make any assurance that the President is going to fight to try to prevent the reduction and the size of the federal workforces? Or is that something that's likely as deficit reduction goes forward?

MR. ZIENTS: We're in the midst of the 2012 budgeting process. Clearly, agencies are going to need to do more with less. And no specific decisions have been made about the size of the federal workforce at this point. We'll roll that out as part of the budget.

Q: Good morning. Interestingly, you guys are announcing this -- timing-wise, Jeff, it makes sense in terms of how you describe it. But there's also been a ton of reporting, a ton of back and forth between the government and media about how much federal workers are paid, whether they're paid too much, whether they're paid -- the rate of increase. Did that play in the decision at all? Not necessarily the back and forth, but as you looked at the salaries, as you looked at, for instance, information from the Federal Salary Council, did that play in your decision at all?

MR. ZIENTS: No, Jason. The decision is made in the context of the difficult deficit situation and the need to make, as you point out, a decision at this point.

Q: Hey, guys, again. I realize that there has to be big cuts and that everything is being looked at. But Jeff, I know you especially have worried a lot about recruiting top talent. And with the hiring reforms and everything underway, I'm just curious what you say to people who are considering applying or are in the process of applying for a job right now with the federal government, partly because they know that the pay and benefits are so generous. And what do you say to those who may have just joined up knowing that, and now are facing a slightly less attractive pay and benefits package?

MR. ZIENTS: You're right, we do need to continue to recruit the best and brightest to federal service. I care about that passionately as a way to really drive strong performance to increase productivity and efficiency across federal agencies. I'm confident that we have a overall value proposition for employment that's quite strong and that a lot of people do want to serve, and that this freeze will not get in the way of our efforts to bring in the best and brightest.

Q: Hi. Thanks for holding this call. Just on the timing of this announcement, the deficit commission is going to meet this week. Is there any sense of which this was announced because that deficit commission is unlikely to make any recommendation formally? And will you expect any other deficit-related announcements this week?

MR. PFEIFFER: No, Jeff explained it, and he can explain again, the timing of why we had to make this announcement now -- it involves a legal deadline coming very shortly. And this is -- the deficit commission is going to finish the report on Wednesday. We'll see where that -- we'll see what the result of that is and we'll be prepared to comment on that then. But this should not be viewed as anticipating anything they may or may not do.

MR. ZIENTS: So just to repeat what I said earlier, the timing is driven by a legal requirement for the President to submit to the Hill a locality pay increase, and that will be zero here. And also by where we are in the budget process, we're at the point where annually we decide what pay will be as part of the budget. So that's the driver of the timing here.

Q: Hi, guys. Thanks for doing the call. Just following up one of the previous questions, so do you all agree with the critique that federal worker pay has increased excessively in the last 10 years, that it has outpaced private sector increases, and do you think -- and would the President be willing to consider proposals the Republicans make to actually cut that pay? Or is he drawing a line here saying he'll freeze it but he doesn't plan to do any further?

MR. ZIENTS: Dan, I'll take that. No, this is not in response to that recent coverage. As I mentioned before, this is in the context of difficult decisions that we need to make as part of deficit reduction.

Q: Hi, thanks for the call. I was wondering if you could just explain the figures for how it breaks down over the five years -- over the 10 years and beyond where those savings are made in addition to the obvious savings from a lack of increase in pay and whatnot?

MR. ZIENTS: I'm going to make it sort of the simple version here. It's a little more complicated because of how the numbers compound and all the rest. But let me just keep this simple.

The $2 billion for fiscal year '11 is actually about a $3 billion or so annual run rate. It's $2 billion because the fiscal year starts October 1st and pay is set on a calendar-year basis. So the $2 billion only captures 9/12 of the actual savings. Obviously, in out-years you get the benefit of the full annualized savings. So think of it as around $3 billion, the second year being around $3 billion on an annual basis, or $2 billon in actual fiscal year 2012. So take $3 billion plus roughly $3 billion -- you're at $6 billion. You do that for 10 years; that's your $60 billion. For five years it's slightly less than half because of that nine-month piece for the first couple of years, and that's how you get $28 billion for five years.

Q: Hi, thanks a lot for taking the question here. Just a real quick question on the function of this. Would it also freeze someone's pay scale? So let's say this year someone is a GS-9. Next year would they -- if they're supposed to, let's say, considering how many years they've been working in their current position, let's say they were supposed to go to a 10 next year, would it freeze them at where their scale pay is right now, or it only freezes each level of the government pay scale?

MR. ZIENTS: That individual -- that hypothetical individual would be eligible to receive such a promotion. So if they were promoted, yes, they would go up, in fact.

MR. BAER: Great. Listen, thank you, everyone, for getting on the call. Again, this information is not embargoed, and if you need any further questions to be answered, feel free to contact us at OMB communications or of course the White House Press Office. Thank you very much.

END 10:53 A.M. EST