10 October 2003

One of the interesting issues in governance—whether of corporations, of media conglomerates, or elected and appointed government officials—is their compensation. Once upon a time, when I was a lieutenant (that's a looooong time ago), a reputable survey organization put out a study comparing total military officer compensation with total compensation for a variety of equivalent jobs in industry. The survey was smart enough not to just say "major = department head," but described the kinds of duties. My sarcastic remark (which caused painful levity from my boss, a lieutenant colonel on the colonel's list) was that I took a 60% pay cut for the privilege of having my ass shot at.

   Of course, those who go into government with the idea of "getting rich"—like it or not, a military officer is "in government"—are not exactly in the mainstream. The comparison to the private sector, however, is rather distressing, particularly when comparing what a federal judge makes to an associate counsel at a Fortune-1000 corporation. Part of this is the "experience phenomenon"—that you can't do the job until you've already proven that you can do the job. Not only does this artificially restrict the market of available executives (or executive-level government workers), but it forces all of those workers into the same mold.

   Professor Bainbridge is correct that making excessive executive compensation illegal, as it is in Germany (and Austria, if I am reading the statute correctly), is not a valid solution. Instead, we'll end up with interlocking directorates that make zaibatsu look positively open and clear, as executives take nominal, but heavily compensated, "consulting" jobs with related/friendly companies. As a modest proposal (in the Swiftian sense), however, we could continue to misuse the tax system for achieving nonrevenue objectives, by establishing a Heath/Wilson tax bracket above a certain relationship to the top government compensation. If, for example, we determine that the President's total compensation is $1 million (considering his salary, housing, and other in-kind compensation), and that a fair "pay enhancement" for private industy is four times that amount, we would impose a very high (80% or so) tax rate on marginal income about $4 million.

   The hidden agenda here is that executives will want to keep increasing their pay without throwing it all back at the government. The solution is simple: raise the government pay base. If the President's total compensation rises to $2 million, using the same calculation means that executive pay can be up to $8 million without falling into the top bracket. With the President's pay that much higher, there is now sufficient room to increase judicial, Congressional, and senior executive branch pay without remark—especially if the baseline is not the President's compensation alone, but some averaging of the top three pay rates in each branch of government.

   Like I said, this is a Swiftian proposal. I do not actually believe that private-industry figures deserve exhorbitant compensation merely because they play with money instead of with lives. However, executives can still brag about their $35 million pay packages; it's just that a hefty portion of that bracket goes back to compensate for the corporate welfare they're getting.