More than 200,000 Marylanders are likely to be hit by a two-year pay freeze for federal workers announced Monday by President Barack Obama.
The proposal, which appears headed for congressional approval, would affect the state disproportionately: The percentage of Marylanders in civilian federal jobs is three times the national average.
The state legislature's top fiscal analyst predicted an "adverse" effect on Maryland's revenue growth. Local economists said a freeze would hurt the state's recovery — and could foreshadow federal job cuts.
"This is a pretty big deal for the Maryland economy," said Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute. "I think this is a very good political move for Obama but one with bad economic consequences for the region."
If approved, the freeze would extend through the end of 2012 and affect all federal civilian workers, including those employed by the Defense Department, but not military personnel. A total of 261,000 Maryland residents hold civilian federal jobs, according to Sen. Benjamin L. Cardin's office.
The news drew shrugs from some of the state's federal employees.
"I'll just tighten a little more," said Lindsey Branch, who has worked at the Social Security Administration in Woodlawn for 15 years. She spoke of dropping cable television and her landline telephone. "There are things I can cut back on and it's not going to impact my lifestyle too much."
But John Gage of Baltimore, who heads the nation's largest federal employee union, called the freeze "a joke." He said he was particularly disappointed that Obama had resorted to what he called a well-worn tactic of treating federal workers as "sacrificial lambs."
"I expected more from this president than just superficial stunts, and it looks like he's really just caving in in the face of some political pressure" from Republicans, said Gage, president of the American Federation of Government Employees. "You're not going to make up for two wars and the financial sector's collapse by cutting federal pay."
In brief remarks at the White House, Obama said sacrifices will be needed to reduce the federal budget deficit "and I'm asking civil servants to do what they've always done — play their part."
The president made the announcement one day ahead of his first post-election meeting with top House and Senate Republicans. Reducing the $1.3 trillion deficit is expected to be a top item on the agenda, and Republicans had pushed for cuts in the federal work force during their successful 2010 campaigns.
House Democratic Leader Steny H. Hoyer, a longtime ally of federal workers, said government employees should not be immune from the belt-tightening that millions of American families have experienced during a period of persistent joblessness.
But the Southern Maryland lawmaker said he wished the wage freeze had been extended to military personnel in non-combat jobs, in order to spread the sacrifice and increase overall budget savings. Hoyer said "a piecemeal approach" to budget-cutting is the wrong way to reduce the deficit.
Democratic Sen. Barbara A. Mikulski of Baltimore said federal workers "should not be made into scapegoats" and also called for a more comprehensive plan to cut the budget. But like other Maryland Democrats, she stopped short of saying she would fight the president's plan.
Democratic Rep. John Sarbanes of Baltimore, who has made federal workers a major focus of his work in the House, said he "will be carefully monitoring how this freeze is implemented to ensure that it does not imperil critical government operations."
An official of the president's Office of Management and Budget said the freeze would save the government between $2 billion and $3 billion a year for each of the next two years. Federal pay scales would be frozen but workers who qualify for promotions would be able to move up.
Near the Social Security Administration's national headquarters in Woodlawn, workers seemed to take the news in stride.
Shelly Green and Bernadette LePore, who work in information technology for the SSA, said they expected the proposal. After all, Social Security recipients didn't get a cost-of-living increase, either.
"I would have been surprised if we did get anything," LePore said.
"I think we all have to do our part," Green said. "In private industry, I have lots of friends who haven't gotten raises for years. It is what it is." She added that she was happy that the military would still be receiving raises.
A spokesman for Democratic Gov. Martin O'Malley sought to play down the impact of the freeze on the state. The spokesman, Rick Abbruzzese, noted that Maryland's roughly 79,000 state workers have endured three consecutive years of furloughs, and said a pay freeze is preferable to layoffs.
"In that regard, what the president announced today will not have a dramatic impact on Maryland's recovery," he said.
But Warren G. Deschenaux, the top fiscal analyst for Maryland's General Assembly, said any move to freeze federal pay would have an "adverse" effect on the state's revenue growth.
"It's going to mean a somewhat less rosy view of the future," Deschenaux said. He estimated that the state would lose $7 million in income taxes for each percentage salary increase the state's civilian federal employees forgo.
After years of benefiting from the large federal presence, Maryland will feel more of the pinch from government belt-tightening, said Clinch of the University of Baltimore.
He doesn't think the ripple effects will be enough to throw the state back into a recession, because a salary freeze is better than layoffs. But no raises for two years will make federal workers more cautious about spending, he said — starting now, most likely.
"It dampens the pace of recovery in Maryland," he said.
Anirban Basu, a Baltimore economist with Sage Policy Group, said it's not just the number of federal workers that explains their big impact on Maryland. Their salaries have been growing much faster in recent years than those of private-sector employees, he said.
"The federal government is big business in Maryland, even if one ignores procurement activities," Basu said. "And what we might be observing is a moment in history at which point Maryland's growing reliance upon the federal government to drive economic activity will become more curse than blessing."
He sees a salary freeze as foreshadowing cuts in federal employment — "a taste of what is to come.
"Because of base realignment and cybersecurity, the temptation has been to wed ourselves more closely to federal activities and to de-emphasize diversification," Basu said. "That strategy will prove to be massively flawed if we do not change course now. … The only logical response is to create a better business climate to attract private investment to help replace the federal jobs and income that is sure to be lost sometime in our state's future."
Obama initially proposed a 1.4 percent pay increase in 2011. And federal workers had been expecting a 1.2 percent increase in the 2012 budget the president will release in February.
Jack Lew, the director of the president's Office of Management and Budget, wrote on his blog that the announcement was timed to Tuesday's "legal deadline to submit to Congress the president's decision about locality pay, a key component of overall federal worker pay. In addition, we are in the midst of the 2012 budget process, and need to make a decision about pay to develop the 2012 budget. Simply, the time to decide about pay for those two years is now."
Republicans, who will take control of the House of Representatives next year, have been calling for a freeze in hiring for non-security positions in the federal government.
In addition, recent deficit-reduction proposals, including a report issued by the co-chairmen of a panel appointed by Obama, have said federal jobs and pay should be on the chopping block.
Former Sen. Alan Simpson, a Republican, and former Clinton White House chief of staff Erskine Bowles, a Democrat, proposed a three-year freeze on federal civilian salaries and non-combatant military pay, as well as a 10 percent cut in the federal workforce.
At the same time, another recent report by a different presidentially appointed panel, the Federal Salary Council, found that federal workers make about 22 percent less, on average, than workers in the private sector and have been slipping farther behind.
But recent national polling suggests Americans believe federal workers are overpaid.
Witold Skwierczynski, president of AFGE's National Council of Social Security Administration Field Operations Locals, called that "a misconception fueled by rhetoric from Republicans who seem to think that we need a smaller government and the way to achieve it is to go after federal employees."
Annie Linskey, Liz F. Kay and Jamie Smith Hopkins contributed to this report.