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Tuesday, November 30, 2010

Federal Pay Freeze: Is this an example of efficiency?

In this article, President Barack Obama has proposed a two year salary freeze on all federal civilian employees’ salaries. This action will require congressional approval, but with heavy Republican support it should pass. President Obama’s salary freeze will affect about two million federal workers and will save $5 billion during the course of the next two years, $28 billion over 5 years and approximately $60 billion over the next 10 years. Currently the annual budget deficit is $1.3 trillion, which compared to the $5 billion in cost cuts over the next 24 months is not that much of a difference.
My question is, will this two year freeze be an example of efficiency if President Obama’s plan passes or a political move that will not have much impact to our current deficit crisis? My answer is no, I think it is just a political move that will not have a great economic impact. My reasoning is primarily because efficiency is a Pareto Optimal allocation of resources. Right now we, the United States of America, are too far in debt, an astonishing $13.8 trillion and counting. Something more effective needs to be done to counter this downward spiral. For us, as Americans, we need to advise our congressmen to take more aggressive action regarding the national debt. Once we develop a real plausible solution on how to get ourselves out of the large hole of debt we dug ourselves into then we may be on track to a more efficient government, but we are not there now. I think we are too inefficient as a administration to sustain any kind of plan to save and/or eventually cut a chunk out of the $13 trillion in debt we currently have. Also, it is not enough to make minor cost cutting changes that will not have any noticeable impact in the current debt figure. We need to do better national economic planning from here on if we want to reverse the out-of-control national budget deficit and stabilize America's economy.

Sources:
Weisman, J., & Paletta, D. (2010, November 30). Federal Pay Freeze Planned. Retrieved from Wall Street Journal: http://online.wsj.com/article/SB10001424052748704584804575644630815574018.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsTop

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