Trump cancels pay rise due to federal workers

President Donald Trump arrives to speak to a campaign rally at the Ford Centre. Photo / AP

President Donald Trump is cancelling pay raises due in January for most civilian federal employees, he informed Congress on Thursday (US time), citing budget constraints. But the workers still could see a slightly smaller boost in their pay under a proposal lawmakers are considering.

Trump said he was nixing a 2.1 per cent across-the-board raise for most workers as well as separate locality pay increases averaging 25.7 per cent.

"We must maintain efforts to put our nation on a fiscally sustainable course, and Federal agency budgets cannot sustain such increases," Trump said. The president last year signed a package of tax cuts that is forecast to add about US$1.5 trillion to federal deficits over 10 years.

As workers across the country head into the Labor Day weekend, Trump cited the "significant" cost of the federal workforce, and called for their pay to be based on performance and designed to recruit, retain and reward "high-performing Federal employees and those with critical skill sets."

At the same time, Trump planned during a Friday appearance in Charlotte, North Carolina, to direct the Labour and Treasury departments to issue regulations designed to make it easier for small businesses to pool resources so they can offer retirement savings plans to their workers, administration officials told reporters. Most small businesses say high costs discourage them from offering plans like 401(k)s, the officials said.

Democrats criticized Trump for moving to cancel the scheduled pay raise, citing tax cuts he signed into law last December. That law provided steep tax cuts for corporations and the wealthiest Americans, and more modest reductions for middle- and low-income individuals and families.

"Trump has delivered yet another slap in the face to American workers," said Democratic National Committee Chairman Tom Perez.

Under the law, the 2.1 per cent raise takes effect automatically unless the president and Congress act to change it. Congress is currently debating a proposal for a slightly lower, 1.9 per cent across-the-board raise to be included in a funding bill that would require Trump's signature to keep most government functions operating past September.

Unions representing the 2 million-member federal workforce urged Congress to pass the 1.9 percent pay raise.

"President Trump's plan to freeze wages for these patriotic workers next year ignores the fact that they are worse off today financially than they were at the start of the decade," said J. David Cox Sr., national president of the American Federation of Government Employees, which represents some 700,000 federal workers.

"They have already endured years of little to no increases and their paychecks cannot stretch any further as education, health care costs, gas and other goods continue to get more expensive," added Tony Reardon, national president of the National Treasury Employees Union.

Cox said federal worker pay and benefits have been cut by more than US$200 billion since 2011.

Congress has approved legislation to give military service members a 2.6 per cent pay raise, the biggest in nine years, but funding must still be approved.

In July, the Trump administration sharply revised upward its deficit estimates compared to the estimates in the budget proposal it sent Congress in February. The worsening deficit reflects the impact of the US$1.5 trillion, 10-year tax cut, as well as increased spending for the military and domestic programs that Congress approved earlier this year.

The administration's July budget update projected a deficit of US$890 million for the fiscal year that ends Sept. 30, up from the February estimate of US$873 billion. The US$890 billion projection represents a 34 per cent increase from the US$666 billion in 2017.

For 2019, the administration is projecting the deficit will top US$1 trillion and stay above that level for the next three years.

The only other period when the federal government ran deficits above US$1 trillion was the four years from 2009 through 2012, when the government used tax cuts and increased spending to combat the 2008 fiscal crisis and the worst economic downturn since the 1930s.

Trump's call for a federal pay freeze was included in his budget proposal for 2019, the Office of Management and Budget said. Officials did not immediately say whether the pay freeze would also apply to White House staffers.

Rep. Gerry Connolly, D-Va., who represents many federal workers, blamed what he said was Trump's mismanagement of federal government.

"His tax bill exploded the deficit, and now he is trying to balance the budget on the backs of federal workers," Connolly said.

- AP