The Budgetary Impact of H.R. 3835
The House is currently considering the passage of H.R. 3835, legislation introduced by Rep. Sean Duffy (WI-07), which would freeze federal civilian employees’ and Members of Congress’ pay. A similar provision was included in previous House Republican efforts to extend the payroll tax, in which the pay freeze included a reduction in the statutory discretionary spending caps set by the Budget Control Act [BCA]. During consideration of the payroll tax debate last fall, the CBO scored the pay-freeze provision as reducing outlays by $26.210 billion. While this will change slightly as the new baseline is updated to reflect changing economic conditions, the savings previously estimated should remain largely the same. These reductions were scored by CBO because the legislation changed the caps on discretionary spending. However, it is important to note that even if the caps are not changed and the CBO does not give credit for deficit reduction, the pay freeze will save money. The question is how these savings are used.
Effect on Spending
While the pay freeze will reduce spending on federal employees pay and save money, the best way to lock in these savings is to reduce the statutory caps on discretionary spending in the Budget Control Act. Absent a reduction in the caps, the savings could be spent elsewhere.
If the caps are eventually reduced as part of a deal to extend that payroll tax reduction, that would lock in thesavings. Assuming a reduction in the discretionary statutory caps, the outlay savings would be those found in Table 1.
H.R.3835 will reduce spending on federal employee pay regardless of whether or not the caps are adjusted downwards. If the caps are adjusted downward, it ensures these savings are devoted to lower spending and deficits.