President Trump recently wrote a letter to Congress explaining why he will eliminate the scheduled cost-of-living adjustments (COLA) for federal employees. President Trump argued that “[w]e must maintain efforts to put our Nation on a fiscally sustainable course, and Federal agency budgets cannot sustain such increases.” However, President Trump’s decision to eliminate the COLA is likely illegal. For the purposes of this article, I will not delve into whether federal employees are over or under paid, but this study from the Congressional Budget Office (CBO) provides an excellent summary of the issue.
To ensure “any existing pay disparities between Federal and non-Federal employees should be completely eliminated” the Pay Comparability System in Title 5 of the U.S. Code sets the annual COLA increase for federal employees. Specifically, it sets the national COLA to .5% less than the Employment Cost Index (ECI), which is a measure of the change in the employer costs of labor, independent of the influence of employment shifts among occupations and industry categories. To determine locality pay increases based on local changes in the cost of living, the Federal Salary Council makes recommendations in an annual report.
However, the president has the limited authority to adjust these statutory COLAs “[i]f, because of national emergency or serious economic conditions affecting the general welfare, the [p]resident should consider the level of comparability payments which would otherwise be payable . . . in any year to be inappropriate.” I see the plain meaning of this language as imposing three requirements for the president to reduce or eliminate the COLA: (1) there is a national emergency or serious economic conditions affecting the general welfare; (2) the president considers the payments to be inappropriate; and (3) the president considers the payments as inappropriate because of the national emergency or serious economic conditions affecting the general welfare. President Trump has not satisfied the first and third requirements.
First, he has not demonstrated that there is either a national emergency or serious economic conditions affecting the general welfare. The only allusion in his letter to either a national emergency or serious economic conditions affecting the general welfare are references to the current fiscal position and costs of the COLA. President Trump never explicitly finds that there is a national emergency or serious economic conditions affecting the general welfare exists.
His allusion to the current fiscal situation is not enough to infer serious economic conditions affecting the general welfare. Under the Pay Comparability System, “[i]n evaluating an economic condition affecting the general welfare . . . the President shall consider pertinent economic measures including, but not limited to, the Indexes of Leading Economic Indicators, the Gross National Product, the unemployment rate, the budget deficit, the Consumer Price Index, the Producer Price Index, the Employment Cost Index, and the Implicit Price Deflator for Personal Consumption Expenditures.” President Trump does not explicitly evaluate any of the required economic measures. The only potential reference to one of the economic measures is when President Trump alludes to the budget deficit by describing a fiscally sustainable course and federal agency budgets. However, he does not explain why this alone rises to the level of a serious economic condition affecting the general welfare. Additionally, President Trump only alludes to one of the pertinent measures even though the law requires the president to consider multiple measures. Thus, President Trump did not establish a prima facie basis for eliminating the COLA.
Furthermore, there is no objective basis to find that there is a national emergency or serious economic conditions affecting the general welfare. Specifically, there is no basis for finding that there is a national emergency. President Obama officially ended the War in Iraq in 2011 and the United States is not officially engaged in another armed conflict. Likewise, in fiscal year 2018 there has been no major natural disaster. I will note that President Trump has continued a declaration that a national emergency exists because of the September 11, 2001 terrorist attacks and the continued risk of terrorist attacks. However, I imagine a court would closely examine whether the president can still claim emergency powers from the attack. Additionally, there is no causal relationship between the national emergency and federal pay.
Similarly, there is no basis for finding serious economic conditions affecting the general welfare. The unemployment rate has not been this low since 2000, more Americans are employed than ever before, and real gross domestic product grew by 4.2% in the most recent quarter. Unsurprisingly, President Trump agrees that the economy is doing well. One day after President Trump issued the letter eliminating the COLA, he stated that the United States has a “booming economy. . . and unemployment filings have dropped to the lowest level . . . in over half a century.” His statements are in direct opposition to a finding that the United States has a national emergency or serious economic conditions affecting the general welfare.
Finally, even if the findings regarding the current fiscal condition are taken to mean that there is a finding of a national emergency or serious economic conditions affecting the general welfare, President Trump has taken actions that demonstrate that he does not consider the current fiscal condition to be why he wants to eliminate the COLA. During this fiscal year, President Trump has increased the deficit through tax cuts and increased appropriations spending. Based on these policy decisions, CBO estimated that he increased the federal deficit in 2018 by $242 billion and by $2.7 trillion over a ten-year period. Similarly, one day after President Trump issued the letter eliminating the COLA, he issued an executive order to examine providing greater tax benefits to retirement accounts (i.e., decreasing revenue and increasing the deficit). These actions show that President Trump is not concerned about the fiscal course. Further, increasing the deficit by more than $242 billion over the last year and planning to further increase the deficit shows that President Trump does not view an increase in the deficit as unsustainable for the budget.
The Pay Comparability System only gives the president the power to reduce or eliminate a COLA under limited circumstances. President Trump cannot legally use his view that federal employees are overpaid as a reason for eliminating the COLA.