Since no other controller has chimed in...
The federal budget is about 3729 billion dollars. The government is cutting 85 billion. That's about 2.2%. The FAA's budget is about 15 billion. The FAA needs to cut spending by about 0.3 billion The FAA has about 47000 employees. Reduce their compensation an average of $6400. Problem solved.
Controllers took a 33% cut in the pay bands from 2006 to 2010. For already certified controllers it was essentially a pay freeze, for trainees at the time it was a true 33% pay cut. Those trainees haven't seen a legitimate length of service raise since they've been hired to this day 7 years later. I get what you're saying, but we've already given more than anyone in the public sector.
Phase out FSS and continue to privatize ATC, that will save a bundle, the contract tower guys make something like 50% of their FAA counterparts...
Phase out FSS? Who will open and close VFR flight plans/distributes and disseminates NOTAMs/PIREPs/TFRs/weather briefs/enroute weather/enters IFR flight plans/relays clearances? There is a significant population out there that doesn't use tablets or smart phones as well as situations that those devises aren't a suitable replacement.
Also, your statement about contract controllers making 50% of what FAA controllers do is simply not true if you compare apples to apples. Most (certainly not all) contract towers are on par with an FAA level 4 or 5 VFR tower. I know what two contract companies pay in the CONUS and their pay is in line with the FAA level 4 and 5 pay scale.
The tower controllers making about twice what a contract controller makes are in places like DCA and LGA. I don't think you can, with a straight face, compare working the average contract tower with LGA or DCA and argue that they should earn the same.
Also, realize that a large portion of savings that a contract tower sees is due to single staffing most towers. The FAA doesn't allow their own facilities to staff with one controller at a time after COM5191. I personally believe that is wise policy.