Will cutting government salaries help the deficit?

A post from Free Exchange on Friday has come to the conclusion that if anything, it is politically impossible to cut the deficit.  It is hard because the programs that make up the largest part of the deficit are the least wanted to be cut.  In the post, Free Exchange did include the idea proposed by Larry Kudlow that maybe the best place to cut deficit spending is by cutting government salary.  This makes sense considering that a government salary is vastly higher than what one would make in the private realm.  Rather than dismiss this as a political impossibility, (it most likely is) let’s make a rough calculation for a fair salary cut. Using numbers from a post at Free Market Mojo, we find on average that the  salary difference between private and public is $29,262 for 2008.  In 2008, the amount of federal employees in the U.S. was 2.76 million. (Source: IHS Global Insight, BLS) If you were to cut federal wages (excluding benefits) down to what one would get on the private market, you would end up with $80.76 billion dollars. Including benefits? That number would jump to $165.8 billion dollars.  A substantial sum, but hardly a drop in a our trillion dollar bucket.

Even if some money could be saved, I don’t know if it could be justified. Higher incomes help pump more money into the economy. What would be a good idea however, is to freeze government wages, and let private  wages to catch up.  Cutting salary’s may not help the deficit that much, but freezing them can make sure it doesn’t get any worse. But this was just an exercise to see what slack is available. Expecting this to be a reality is naive.  How can you get someone to cut their own salary? For private industry that is easy.  For the government, what can you do?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s