Fed Pay and Benefits Could be Hit Hard by Debt Ceiling Wheeling and Dealing

In recent weeks as the standoff in Congress over raising the debt limit continues to drag on, alarms are increasingly rising that this country’s political leadership might stumble, fail to legislate effectively and provoke an unprecedented default on government obligations. The current federal debt limit remains at $31.4 trillion, and the deadline to avoid default is June 1. What effect might all of this have on federal pay and benefits? 

Well, union leaders say one of the proposed measures from House Republicans – slashing discretionary spending at domestic agencies to fiscal 2022 levels – would burden feds in particular. The bill is not expected to get approval in the Senate and President Biden said he would veto it.

But, if the government runs out of the ability to borrow, among the first to be hit could be feds -- after all, as in a shutdown, the government would not be able to issue pay or manage many benefits obligations until the crisis is resolved. 

Alternatively, one way for lawmakers to buy more time to negotiate -- in theory -- might be to delay or alter payouts to its own employees and contractors. 

This week, Government Executive probed just how troubling the current impasse is with political scientist Don Kettl, professor emeritus and former dean of the School of Public Policy at the University of Maryland, as well as co-author with William D. Eggers of Bridgebuilders: How Government Can Transcend Boundaries to Solve Big Problems.

Q&A with Don Kettl 

Government Executive: What is your take on Congress’s long delay in passing a debt limit boost -- forcing reliance on “extraordinary measures” to fund federal obligations? Where is this headed? 

Kettl: In recent years, in our very politicized times, Congress has sometimes delayed approving needed increases in the debt limit right up to the deadline. However, in the past it was clear to most of us that lawmakers would find common ground and a way to get to a solution -- and they always did. But this time, at this late date a couple weeks before the deadline, it is still really not clear what a solution might look like. And that is making this crisis very real for everyone. 

Government Executive: For federal employees, can you discuss the harms here -- possibly in terms of delays or problems with pay or benefits?  

Kettl: Yes. Among some federal employees there are very real and growing concerns. With the debt ceiling crisis coming down to the wire, some feds are trying to figure the situation out. Will they be reliably paid in the coming months? Will the government possibly even be shut down for a while? Or even, in a more fundamental way, are some important programs that federal employees and agencies are working on likely to be slashed or cut altogether? And why wouldn’t federal employees worry? In the news, there are unprecedented proposals and ideas being floated in Congress -- not only about what might happen if government suspends debt payments, but on what kind of deals might have to be made downstream of that to perhaps quickly reduce federal spending overall. All this would of course have big impacts on federal employees, their jobs and families and meanwhile at work on their ongoing ability to try to make sure that they can fulfill their missions. 

Government Executive: But isn’t it likely that as usual there will be a deal, just before deadline? 

Kettl: Look, even if a deal is reached tomorrow or next week -- or heaven forbid at midnight on May 31 -- we have to accept there’s a risk that already there has been so much disruption to our normal government and business processes -- with so many unprecedented ideas of not paying bills and people bouncing around -- that we could see at least some continuing long-term damage from this crisis. What kind of damage? I mean from here on in, for a significant period, there might be a sense among many feds at all levels that in their work they are walking on eggshells in their work. Or, to use a different metaphor, that the rug might be about to be pulled out from under them. In properly financing government, we have never seen a political and financial threat this potentially damaging. That fact alone is clear to me and it is already hurting the morale of government employees -- including their confidence that their pay is safe and their work is appreciated. Obviously, in the ongoing political negotiations the specific threat to feds is not the first item on anybody's agenda. But these effects on public servants really should be considered. Do you believe in the security of your job? Do you sense some uncertainty in counting on timely pay? These are some of the questions already weighing on public servants as they go to work every day.

Government Executive: As the impasse continues -- possibly past the deadline -- we hear GOP pols propose tinkering with fed pay or benefits to keep government open. Your thoughts? 

Kettl: That’s true. There are all kinds of very novel things being tossed around Capitol Hill now, as ideas on how to save enough money to avoid or delay government defaulting on its obligations, at least short-term, as debt limit negotiations stretch out toward the deadline. But the aim of these ideas is often not just to save money -- by getting a new cap on spending or the like. Instead, the proposed cuts are aimed at items that -- in a fantasy kind of way -- could allegedly both reduce spending and meanwhile score political or ideological points with voters. That’s certainly the case, in my view, as we hear Republican politicians and pundits saying, “Hey, let's just suspend fed pay for a while” or “Let's curb or shut down operations at one of what we consider to be less necessary agencies.” 

Government Executive: About the politics of this, many people hear “feds” and automatically think “D.C.” and “Democrats.” But our readers know most feds live far from D.C. -- and that many vote Republican. So, couldn’t the GOP’s recent debt-ceiling angle of attack on feds backfire? 

Kettl: Great question. It is important to remember that 85% of all federal employees work outside the Washington area. That’s especially clear when you start looking at the feds who do a lot of government’s frontline work. Most of so many agencies -- the Park Service, Bureau of Land Management, the Customs and Border Protection and so on. Not by any means are all or even most of them liberal Democrats. This is just one of the reasons that the House GOP’s push against a clean debt ceiling boost is shaping up as a collision. Think of the political effect, for example, of just the ideas being floated of not paying federal employees. It’s going to be an issue, colliding with, for instance, the CBP folks involved right now in intense work in the frontline battle right now over the end of Title 42. Leading Republicans are at the same time saying we want our feds to stop the flow of illegal immigrants, but at the same time are talking about suspending or cutting pay for the people in charge of doing that work! It is creating an inevitable contradiction and collision. 

The same disconnect will be in play over many government functions -- from the indispensable work of employees at the Federal Aviation Administration who staff air traffic control towers, to the Department of Agriculture’s food inspectors, to the National Park Service folks who run our parks. Think about it, the morale implications inside government as well as the political implications in the minds of impacted workers. And then there are the potential effects on the public. To take another example, look at the recent problems with the Food and Drug Administration that caused great concern over baby formula -- still not fully resolved, right? The agency apparently didn't have enough food inspectors to visit plants and ensure manufacturers complied with federal safety regulations. All of these frontline functions that feds do all around the country are services that most people would be shocked if, as a result of arguably needless hardline debt ceiling negotiations, end up getting curtailed or cut off. What if in a few weeks, federal employees aren't being paid or they can't come to work, or -- in a worsening financial crisis over the debt ceiling -- millions of people are stuck at airports because TSA screeners and FAA air traffic controllers work has been shut down, and CBP agents can’t process those who have just arrived? It's potentially one nightmare after another.

Government Executive: You’ve listed a lot of likely practical problems in the event of default or slowed payments to avoid default -- but couldn’t you add summertime fires and maintaining confidence among our federal wildland firefighters, right? 

Kettl: Sure. That’s true. We are headed into a summer with forecasts for worse than usual severe storms and fire threats. Whether it's tornadoes, hurricanes or flooding, you have to think too, about disruptions to the role of FEMA in helping people who are caught in upcoming disasters. 

Government Executive: Could this breach or near breach on the debt limit create problems for recruiting new feds this summer -- including from the new crop of graduating students? 

Kettl: Yes, and that’s very important to federal agencies and the provision of future services. You and everyone who tracks federal hiring knows that for current employees and students graduating that there are lots of lots of job options out there. Work at federal agencies is already a tough sell for many. I often talked with my students about federal service, and mostly  they overwhelmingly said no, they didn't even think that they could master or spend the time on the application process. These days, too, the added problem is that younger people don’t think government has the same kind of impact. And impact is critically important for Gen Z workers. The debt limit crisis will not help to build confidence or interest here. 

Government Executive: Finally, what if the debt limit issue is resolved just before the deadline? Do you see any other effects beyond a dip in morale and a lesser hit to markets? 

Kettl: Yes. First, whatever increase is approved will of course not be permanent. In fact, because it the easiest and most likely outcome is a short-term boost in the ceiling.  That means Congress and the White House might be right back at the same place soon. In the longer term, the situation -- just how hard it has been to come to any agreement -- shows this could remain a serious issue. It’s terrible -- we haven’t done this in the past and we don't need to keep doing this to ourselves. If some of our leaders want to play chicken, there are other safer and more appropriate issues for that -- measures on legitimate policy differences. Remember, the U.S. is the only country in the world that sets itself up for this kind of ongoing crisis on money already promised and effectively spent -- and there's no good reason for a fight here at all.