President Obama announced today a two-year freeze on pay for all federal civilian employees. According to a press statement issued by the White House, the pay freeze for 2011 and 2012 will save $2 billion in 2011 and $28 billion over the next five years. The pay freeze will cover civilian employees of all federal agencies, including the Department of Defense, but will not apply to military personnel. The announcement noted the important services provided by federal employees and stated the reason for the move “is not to punish federal workers or to disrespect the work they do.” Rather, the White House said it is one of a series of actions, requiring “some sacrifice from all of us," designed to cut government costs and reduce the deficit ($1.3 trillion in FY2010). Federal pay has come under increasing scrutiny during the year as the economy has struggled to recover and the national civilian unemployment rate has hovered close to 10 percent. Critics, citing studies that show average federal salaries higher than their private sector counterparts, have called for pay freezes and even pay cuts for federal civilian employees. The Directors of the Office of Personnel Management (OPM) and OMB have argued that these studies do not fairly compare public and private sector jobs. They point out that average salaries are often misleading because the federal workforce is more educated and experienced and tends to be concentrated in high-cost urban areas. The president in February proposed a 1.4 percent civilian pay raise in his FY2011 budget. Numerous attempts to freeze federal pay in Congress this year have failed, but so far only the Senate Appropriations Committee has supported the president's budget request. Now that the president is calling for a pay freeze, Congress is less likely to support a pay raise this year. And the situation for federal civilian employees may not be any better next year. The changed political landscape on the Hill and continued sluggish economic recovery means that it is likely that the 112th Congress (convening in January) will consider more severe reductions to the FY2012 federal budget.