Mr Obama said he had not made the decision lightly. But he said these were times when ''all of us are called upon to make some sacrifices''.
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The head of the government's largest employees' union, which represents 600,000 federal workers, denounced the proposal. ''A federal pay freeze saves peanuts at best,'' said John Gage, president of the American Federation of Government Employees. ''The American people didn't vote to stick it to a Veterans Administration nursing assistant making $US28,000 a year or a border patrol agent earning $US34,000 per year.''
The move will require congressional approval and will not apply to military personnel, though it will hit civilian employees at the Defence Department.
Mr Obama yesterday met Republican leaders to discuss the extension of George Bush's tax cuts, likely to be an area of intense political contention.
Today, the 18-member commission set up by Mr Obama to make proposals on how to bring the deficit under control will make its recommendations. Its preliminary report included a three-year pay freeze for federal workers.
Earlier this month, the commission proposed a $US3.8 trillion deficit-cutting plan that would raise the petrol tax, slash defence spending and farm subsidies and bring down healthcare costs by clamping down on medical malpractice suits.
The social security retirement age would rise to 68 in about 2050 and 69 in about 2075.
The federal deficit is likely to be the central battleground between the Obama administration and the Republican Party that from January will take control of the House of Representatives. Cutting back the size of the federal government was the key message of the Tea Party groups that were seminal in many of the Republican victories at the November 2 mid-term elections.
In announcing the pay freeze, Mr Obama said he hoped that there would be a new ''bipartisan discussion about our future''.
Mr Obama is likely to use the pay freeze as a bargaining chip in his negotiations with the Republicans over the Bush-era tax cuts.
While both parties agree the cuts should be extended for lower and middle-income families, they disagree about what should happen to wealthier households.
Republicans are resisting a move by Mr Obama to end the tax cuts for people on incomes of more than $US200,000 and couples on more than $US250,000.