The MacNeil/Lehrer Report; Pay Cap

[Tease]

ROBERT MacNEIL (voice-over): Unemployment may be rising fast, but right now the federal government has hundreds of top-level jobs going begging. For example, the Treasury has 80 unfilled positions. Agriculture has 68. At the National Institutes of Health they have 28 jobs, including the director`s. The Army has 55 senior civilian jobs. NASA has 80. Justice has 63. Recruiters say qualified people don`t want these jobs because federal pay is too low.

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MacNEIL: Good evening. Congress is in a feverish rush to pass a budget resolution before the Friday midnight deadline when the federal government`s spending authority expires. Time is one pressure; another is President Reagan`s threat to veto it if Congress goes much above administration figures. So there is real pressure to hold down spending because a presidential veto would theoretically stop the machinery of government and perhaps force congressmen to spoil their Thanksgiving recess getting it started again. Yet in one area there is pressure to increase spending. Late today the Senate adopted an amendment calling for a pay increase for federal executives. Their salaries are currently frozen by a pay cap. The Senate amendment would lift the cap, but the House voted yesterday to continue the cap for another year, so a conference committee will have to sort out the difference before the resolution goes to the President. How it comes out is considered vital by people trying to persuade skilled people to take top federal jobs. Others say federal workers are paid quite enough. Tonight, is low pay keeping the best people out of government? Jim?

JIM LEHRER: Robin, a one-star general is paid the same salary as the chairman of the Joint Chiefs of Staff. The deputy commissioner and the chief counsel of the Internal Revenue Service make the same as their boss, the IRS commissioner. These are just a couple of examples of what the cap on federal pay has wrought. The cap is currently set at $50,112, meaning no matter what the promotion, the grade, the duties, the title, the pay for all but a few of the government`s top executives can go no higher than that. But below them people have continued to get pay increases until they, too, hit the cap. The end result is that there are 46,000 high-level federal employees in eight different pay grades all bunched and capped together at $50,112. It`s one of the major reasons those responsible for filling the top jobs in the government say they are having problems, none more so than the man who does it for the Department of the Army, its director of civilian personnel, Fred Newman. Mr. Newman, are top civilians in your Department leaving because of the pay cap?

FRED NEWMAN: Yes, this is true. As Robin mentioned, we have 55 vacancies currently; we range 50 to 60 and approximately three-fourths of those, Jim, are engineers and scientists. To fill those jobs it takes at least 11 to 12 months each to try to fill those jobs, mainly because [of] the skills that we need to handle the weapons systems, do the research and development, and also because of the limited sources that we have because of the compensation. Firms are writing us saying, "Don`t announce the jobs with us. Your compensation in the federal government -- particularly the pay cap -- is not sufficiently attractive to have our people go to the federal government to work."

LEHRER: But, Mr. Newman, when you add in the good pension system and the other benefits of federal employment -- security and those kinds of things -- do they not com-pensate for the pay differences?

Mr. NEWMAN: They do not because right now the people have to live and they need a current basic salary. And as to what`s going on with the pension system, it`s deteriorating, it`s eroding; this has been publicized, and there`s no doubt that this is a disincentive for the people on the outside to come work with the Army as well as the people that are currently on the Army who are also leaving.

LEHRER: You have under your direct supervision, what is it, 450,000 civilian employees at the Department of Army?

Mr. NEWMAN: We have 450,000 worldwide in the Department of the Army today.

LEHRER: What does 55 vacancies matter?

Mr. NEWMAN: Because these are the top people who manage -- an R&D budget, for example, or an Army budget, currently --

LEHRER: Research and development, right?

Mr. NEWMAN: That is correct; for the research and development people we have currently, right now, approximately a $46-biIlion Army budget. And what this amounts to is that these are the people who are professionals who are leaving the government, leaving the Army, and this is a disservice to the taxpayer to lose this managerial talent.

LEHRER: Clearly, I take it that you believe that the cap should be raised.

Mr. NEWMAN: No question about it. It`s an inhibitive factor.

LEHRER: Do you think it would directly result in your being able to fill those jobs?

Mr. NEWMAN: Yes. And not only that, though, it`s not a question of filling the jobs, but we can retain the people that are leaving because the taxpayer now is paying more to the people that are leaving than if we lifted the pay cap.

LEHRER: Explain that.

Mr. NEWMAN: Well, very simply, that if a person retires, you not only have to pay the annuity, but you also have to pay the person`s salary who is replacing the person who departs. That totals approximately 243,000 over the next three years. If you lifted the pay cap to support Senator Stevens amendment, that would be only a sum of $176,000 over the next three years, and that would be a savings to the taxpayer of approximately $67,000. But added to that, you don`t have recruitment costs; you don`t have training costs; you don`t have replacement of the individual -- the relocation, his transportation, family, household goods. I am estimating that upwards to $100,000 that you can save the taxpayer by retaining each retiree.

LEHRER: So by giving a pay raise, you save money.

Mr. NEWMAN: That is correct, and this is supported by the General Accounting Office in their report.

LEHRER: You mentioned that people are retiring. Now, as I understand it, you are about to retire.

Mr. NEWMAN: That is correct.

LEHRER: Why?

Mr. NEWMAN: Mainly because of the pay cap, and I`m reviewing job opportunities right now, and I just think it`s a disincentive. As you pointed out earlier in the program, I am supervising or directing a program that is the largest single federal employer, as the personnel director -- equating possibly to Ford, worldwide -- and I don`t think that I should be paid the same thing as, perhaps, three or four levels below me as a GS- 14.

LEHRER: Which is what the situation is now?

Mr. NEWMAN: That is correct.

LEHRER: You have people working under you directly making the same amount of money?

Mr. NEWMAN: Practically all my people at the 14, 15, and the SES level, correct.

LEHRER: Mr. Newman, thank you. Robin?

MacNEIL: Now a person who takes the opposite view, who thinks federal workers are not underpaid at all. He is Jim Davidson, chairman of the National Taxpayers Union, a non-profit, non-partisan organization dedicated to reducing taxes and government spending. He is with us tonight at public television station KUHT in Houston. Mr. Davidson, you`ve been listening to Mr. Newman. Do you still believe the federal executive is not underpaid?

JIM DAVIDSON: Yes, I think there are certainly examples which would suggest that we need to have a more flexible program. And if I had been listening for the first time to this debate, I would say that Mr. Newman was certainly right. But I think that we have a larger issue here, which is that the federal compensation package itself is quite generous. There may be a handful of people out of a million people employed in the federal government who, for critical skills reasons, require an exemption to the pay cap. But what we`re going to do if the proposal that we`re now considering in Congress passes, is to raise the cost to the taxpayers tremendously in order to hire a few people. This does not make sense. Let me point out that one of the reasons that we have this problem is because we have such a generous federal pension program, which enables federal retirees to leave the government at the age of 55. So obviously, people will leave at age 55. We have an aging civil service. When people reach that age when they can leave and collect a very, very generous pension -- better than you can get in private life --

MacNEIL: Well, Mr. Newman says they`re getting -- I`m sorry.

Mr. DAVIDSON: -- it`s reasonable that they would leave.

MacNEIL: Mr. Newman says they`re getting out in droves, as I understood him, because the level of pay -- the actual take-home pay to live on -- is so low compared to what they might get in private industry for comparable skills.

Mr. DAVIDSON: Well, I don`t doubt that there are some people in the federal government who have options in private industry which are very attractive. However, this is not a staggering problem. The problem today which we`ve heard mentioned, with the subordinates getting the same pay as the people who supervise them, is a reflection of the fact that the subordinate pay is too great. We have in this country a median income of a little more than $13,000 a year. There are many qualified people in this country who would be glad to work as subordinates to Mr. Newman at $50,100 and some odd dollars. Chancellor Schmidt in Germany, who is facing problems of the budget very similar to ours, has proposed in his recent budget not that the government pay in Germany be raised, but that it be lowered -- that government employees in Germany take a 1% reduction in their pay as a contribution toward balancing the German budget and paying the way that that country has to pay. In our society we have the same problem -- of a huge deficit.

MacNEIL: In this present predicament, with many grades of workers -- as we`ve just heard -- bunched up against the cap, isn`t the only way to solve that to raise the cap?

Mr. DAVIDSON: Well, there are a variety of solutions. One is that you could do what I have suggested, which is provide an exception to the cap for those employees -- and there are few of them -- who have critical skills who have to be hired out of private industry, and who will not be in the federal government long enough to qualify for the very super-generous pension which is the main allure for people in the federal government. We have an irrational compensation system; that`s true, because a very great part of the compensation for being a federal employee takes place after you retire. This great pension benefit, of course, does not benefit those who would be coming into the government at a high level with not a very great likelihood that they would ever qualify for the great benefits. So, obviously, you could exempt these people and you would spend a few dollars and not the billions which this is going to cost over time.

MacNEIL: You say exceptions for a few. How do you explain the phenomenon we opened the program with of hundreds of very attractive jobs going begging during really hard economic times in this country?

Mr. DAVIDSON: Well, I think part of it has to do with the fact that these jobs as vacancies provide a demonstration that the federal employee is underpaid, and this in fact is an incentive to people to believe we need to give another great pay raise and perhaps give a pay raise to the Congress as well. I think that this has happened in the past, and I wouldn`t be surprised that the difficulties in filling these jobs are partly self- created.

MacNEIL: What do you say about that, Mr. Newman?

Mr. NEWMAN: I think that`s an insult to my integrity and my colleagues who do the hiring for the federal government. I completely refute that.

MacNEIL: Mr. Davidson?

Mr. DAVIDSON: Well, that`s his prerogative. I didn`t mean it as an insult to him, but I think that it is a reasonable assumption that there are people in this country who --

MacNEIL: You are saying that people are deliberately exaggerating the difficulties of filling them, or not working as hard as they might to fill them in order to demonstrate this --

Mr. DAVIDSON: Well, this is not an opinion which is new to me. It came -- several years ago we had a problem when the federal pay was up for consideration, and a man who used to be the chief actuary for the Social Security system testified that he knew that many qualified applicants had applied for that job, which was one which was being exemplified as unfillable at that pay rate that then existed, and he determined that many of them were fully qualified and could have been accepted, but they chose to leave the vacancy as a way of demonstrating that they all needed greater pay. Now I don`t say that that`s unethical. We live in a political world. But I think that we should recognize that there is more to the story than meets the eye.

Mr. NEWMAN: I can assure you that the Defense Department hires in order to maintain its military readiness. We would not even condone such an action.

Mr. DAVIDSON: Well, I`m glad to hear it.

MacNEIL: Mr. Newman, Mr. Davidson also suggests that there may be some exceptions -- some people with particular skills for whom higher compensation is really needed to attract them -- but that to lift the cap altogether would just open the floodgates. What do you say?

Mr. NEWMAN: My retort to that is that I agree that the total compensation package should be looked at. There`s no doubt about that the pay, the retirement benefits -- but the total package must be looked at. This is going to require major surgery. But the fact remains we`re hemorrhaging now, and before we get that major surgery, we need a congressional tour- niquet.

Mr. DAVIDSON: May I suggest some alternatives? One of the things we could do is put on a federal payroll cap which would limit the total amount of money that the federal government can spend in compensation for its employees, and give the managers greater discretion as to how that money is spent. That is an alternative. I had suggested another one, which is to provide an exception for some few critical skills which would not require that many hundreds of millions be spent now and billions in the future. Another thing we could do is raise the federal retirement level to 65, which is the level that ordinary people listening to this broadcast anticipate for their own lives. And I think that the reason we`ve had this great so-called "hemorrhaging" of government employees leaving the federal service is quite obvious -- they can retire at age 55 and then go out and get another job. As a matter of fact, 2,300 of the people who are at the pay cap have already retired from the federal government, and they are getting a pension as well as their salaries. Some of them are making up to $80,000 a year right now.

MacNEIL: What do you say to --

Mr. DAVIDSON: I don`t think it`s a surprise.

MacNEIL: Mr. Newman, what do you say to those proposals? For instance, raising the retirement age?

Mr. NEWMAN: I want to say this, and I insist of what I said originally. Executives are not leaving because of the retirement benefits; they are leaving because of the pay cap. That I can assure you. Furthermore, to support that, the resignations during the past year of employees who are not even retired eligibles yet, went up 65%. Why? Because the pay disincentive. They don`t see any advancement. We are getting promotions now that are being declined by people because they`re saying, "Already we`re at the pay cap."

MacNEIL: Well, thank you. Jim?

LEHRER: For a variety of political and appearance reasons, Congress has tied its own pay to those of the government`s top executives. The cap applies to their salaries as well. This means that to raise the pay of the IRS commissioner and the others also means voting themselves a raise. Senator Stevens` amendment undid that link today in the Senate, but the House must now also agree. Two House members with very different views on federal pay generally are Congressman Michael Barnes, Democrat of Maryland, and Congressman Andy Jacobs, Democrat of Indiana. First, how do you feel about untying that link between your own salary and those of the federal employees, Congressman Barnes?

Rep. MICHAEL BARNES: Well, I think it ought to be done. I tried to do it three years ago. Congressman Joe Fisher from Virginia and I offered an amendment to do precisely that. We got clobbered. There has been a --

LEHRER: Why? Why?

Rep. BARNES: There has been a long-standing view among members of Congress who want a pay raise for themselves that the way to get it is to have so many people out there in America screaming for their own pay increase that there`ll be just a demand, and that the Congress will have to cave and raise their own salaries.

LEHRER: But they`ll be clamoring not to raise your salary, but to raise their own.

Rep. BARNES: To raise their own, which are tied. Judges, admirals, generals -- the top-ranking kind of people that Mr. Newman has been referring to - - they`ll be clamoring for a pay raise. I happen to think that strategy has been wrong all along. I think it`d be easier for a congressmen to justify a pay raise for themselves if all of the people who work for the federal government were making more than they were. But --

LEHRER: Let me ask Congressman Jacobs. What`s your view on the link?

Rep. ANDY JACOBS: Well, I don`t see why there shouldn`t be a link. After all, let`s take a member of Congress who has to run every two years -- has to run back and forth, mostly -- not in Mr. Barnes` case -- but most of us have to go out into the hinterland, back and forth, practically every weekend. All the rest -- job uncertainty. Why should members of Congress make less than federal executive employees who are pretty well settled in a career job? Now, on the other hand, I think they`re all making too much.

LEHRER: Okay. Well, let`s get to that. You do not believe the cap should be raised, correct?

Rep. JACOBS: Why, no. If there`s a safety net for the very poor -- and I question whether there really is -- in the Social Security program and so forth, why not have a safety net for the taxpayers, the average one of whom is making $13,000 a year in this country. Now, this gentleman, Mr. Newman, says that they can`t fill these jobs. I`d like a list of them on my desk tomorrow morning, and I think I can fill them from Indianapolis. I know enough people who are qualified who`d be glad to take those jobs. What they are saying in essence is that 98% of the American people are unqualified to fill those jobs, because if you have a salary of $50,000 a year, you are in the top 1 1/2 % of all wage earners in this country. Now, isn`t that a little hard to swallow, and don`t you think that the pension that Mr. Davidson was talking about is part of the private competition for public people? Because you add that to the job you take in private industry. I`m sure Mr. Newman, if he gets a job in private industry, will collect a pension. And you can ask him, but I`m sure he`ll confirm it. He`ll collect a very handsome pension, put that on top of the salary he gets from private industry. So in essence, the federal government is supplying the money by which private industry competes to get the talented people out of government.

LEHRER: Congressman Barnes?

Rep. BARNES: Well, there are two problems there. One is the unfillable job, and that is a real problem. I chair something called the Federal Government Service Task Force, which works on these issues, and I`m told repeatedly that personnel agencies and others simply tell the federal government, "We can`t find people who are qualified for these positions --

LEHRER: They haven`t gone to Indianapolis.

Rep. BARNES: -- that -- maybe they haven`t gone to Indianapolis, but they say, "We can`t find people" -- well, take, for example, openings in NASA for top scientists. Where are you going to find a highly qualified nuclear physicist for $50,000 a year in this country? They can earn $100-150,000 elsewhere. We just lost the two top people from space shuttle I; they weren`t there for space shuttle II. The number two man at Cape Canaveral just quit and took a job at twice the salary on the outside. But the other side of this issue, Andy, is not just the people who we can`t find to fill those jobs; it`s the people who are leaving and the experience that they `re taking with them out of government. Ninety-five percent of the people who become eligible to retire in the federal government now are doing it.

LEHRER: The minute they become eligible?

Rep. BARNES: Who are at that cap. The minute they hit it -- hit the eligibility for retirement -- they leave because they`re at that cap, and they`re not -- they have no confidence that Andy and I and our colleagues are going to have the courage to do what is clearly in the best interests of this country, and that is to pay our public servants the salaries commensurate with the responsibilities we give them. In Canada the top- ranked civil servants make in excess of $ 100,000 a year, and I would -- I don`t mean to suggest that we need to go that far, but I think we certainly ought to go at least as far as the Senate voted today to do.

Rep. JACOBS: Mr. Lehrer, do you remember a Jerry Lewis movie called ` `Don`t Raise the Bridge, Lower the Water?"

LEHRER: I don`t think I do, Congressman, you got me there.

Rep. JACOBS: If there is a problem of the underlings coming too close to what their bosses make, then it seems to me that you can always make that the highest salary for the bosses and stairstep down. I always- -- ask anybody who is watching this program right now, anywhere in this country, "Don`t you really feel sorry for someone who is trying to get along on $50,000 a year?" A wife of a Supreme Court Justice said that to me at a dinner party one night. She just snapped to me and said, "Nobody can live on $50,000 a year." I said, "There`s an awful lot of people who`d like to try to."

Rep. BARNES: Well, Andy, remember that these are people who have been making $50,000 a year for the last five years, except they got one 5% pay raise -- 5`A% pay raise within the last five years. They`ve got a mortgage; they`ve got all their commitments that they made that were at that lifestyle, and they`ve gotten a 5% pay raise at a time when the cost of living went up about 50%. So it`s not like you took somebody who was making $10,000 --

Rep. JACOBS: Excuse me, if they`ve been making $50,000 a year for the last five years, they`re money ahead because $13,000 is the average today. Five years ago it was about $11,000.

LEHRER: Your point, then, Congressman, I take it, is that if they don`t like making $50,112, they should leave and good riddance, right?

Rep. BARNES: And that`s what they`re doing. They`re leaving.

Rep. JACOBS: I have a good friend in Indianapolis, who is one of the most accomplished lawyers in our city, who applied for a position in the Justice Department one year ago. I don`t think anybody in the country is more qualified in his field than he is. He was turned down. There was no room. Why is that? I mean, the only cases I know about -- and we know about three people now who want jobs in private industry rather than in the government in a program which itself might be a tittle bit --

LEHRER: But you say they can`t fill them?

Rep. BARNES: They can`t fill them and we`re losing the best people. We`re driving the best people, the ones with the most experience and talent, out of government into private industry where they can get higher salaries.

Rep. JACOBS: One of the jobs on your program, on a call thing to the country, and see how many come in and apply. Let`s help this poor $50,000- ridden government out a little bit.

Rep. BARNES: Well, you mentioned a fellow -- the job at the Justice Department. The Chief Justice of the United States said this is one of the crucial problems in our judicial process right now -- is that we`ve capped our judges and they cannot attract the caliber of attorney to serve in the judiciary that the chief justice believes we ought to be attracting.

LEHRER: Federal judges are capped at about $60,000 now, aren`t they?

Rep. BARNES: That`s right. That`s right. The average-

Rep. JACOBS: And they`re all lousy according to this reasoning. We haven`t attracted any good ones.

Rep. BARNES: The average lawyer in the 400 largest law firms in the United States -- the average lawyer, so that includes the guy that just got hired last week all the way up to the senior partner -- makes $86,000 a year, and we pay our judges, before whom they present their cases, about $25,000 less.

LEHRER: I`m going to present this case to Robin. Robin?

MacNEIL: Yeah, Mr. Newman, in your view is the net effect of all this to be lowering the quality of top civil servants in this country? Are we going to keep in government only people who can`t get good jobs in private industry?

Mr. NEWMAN: Yes, I think that is a true statement. I think that eventually what is happening is that people are going to come into the government for a job and not make it as a career. And the Congress -- and the government is going to suffer from this. People are leaving now; people are declining promotion. And also, to answer the Congressman from Indiana, the fact remains that the purchasing power of the civilian executive today in the federal government, in spite of the $50,000 salary, has gone down 36%. So $50,000 is not worth $50,000 today in purchase power.

MacNEIL: Mr. Davidson, in Houston, what`s your answer to the question I just asked? Is the standard of federal civil servant going to go down?

Mr. DAVIDSON: I don`t think it will go down appreciably. I said at the outset that I thought that there might be some exceptions for critical skills, but I think if you look at the situation objectively, you have to recognize that what Congressman Jacobs said is correct -- that the federal taxpayer is subsidizing the competition to take away from the federal civil service those who are at the top levels of responsibility. Because, if you could retire at 55 with the very generous pension that Mr. Newman will get and other people will get -- if you took a job that paid half as much or even two-thirds as much -- [loss of transmission].

MacNEIL: I think we`ve lost our Houston connection there. I`m sorry we interrupted Mr. Davidson, but I think, Mr. Newman, we were getting his drift there; and that`s twice your pension has been mentioned. Do you want to comment on that?

Mr. NEWMAN: t still say that the retirement pension, as well as the total compensation package, must be studied. There`s no question that perhaps already Congress has curtailed the pension, so if they want to curtail it further, all I can say is that there`s going to be even of a more mass exodus from the federal government.

MacNEIL: Congressman Barnes, starting with you, can I introduce another area to this? President Reagan became president campaigning in part against the federal bureaucracy in Washington. Since then he has been at pains to reduce it, to cut it. Is this political psychology against the federal civil service -- is this an ingredient at all in this debate?

Rep. BARNES: Oh, I think it clearly is. I think that the federal employee has become in recent years a scapegoat, to some extent, for our economic problems. They are the easiest target, obviously, for any government. They`ve got these people captive; they are the employees. They can beat them over the head with some impunity. They are relatively defenseless in the Congress. There are a handful of members of Congress who are particular-ly concerned about our public servants and the future of the public service in this country. Congressmen from places like Indiana don`t have many of these top-ranked federal employ-ees in their area, and so they`re not, perhaps, as sensitive politically to these issues as they might otherwise be, and it`s easy for a president like Mr. Reagan to make these attacks.

MacNEIL: We just have a few seconds. Let me ask your colleague, Congressman Jacobs, what`s your view of that? Is the political psychological climate such as to discourage people from wanting to serve the federal government?

Rep. JACOBS: I really don`t think so, Mr. MacNeil. Let me just cite to you figures. Beginning lawyers in Washington, D.C., according to The Washington Post a few months ago, receive $34,000 a year, not $80,000 a year. The governor of Virginia gets $60,000 a year. The governor of Maryland gets $60,000 a year. I don`t think these people are being put upon. The lieutenant governor in Virginia gets $16,000 a year; it`s no wonder Mr. Robb wanted to become governor.

MacNEIL: Well, we have to leave it there. We`ll thank Mr. Davidson, whom I don`t think can hear us, for joining us in Houston until he got interrupted, Mr. Newman and Congress-man Barnes, Congressman Jacobs, thank you. Good night. Good night, Jim.

LEHRER: Good night. Robin.

MacNEIL: That`s all for tonight. We will be back tomorrow night. I`m Robert MacNeil. Good night.