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politicians defy reality with a salary that is far higher than they justify with the value they don't create. The President of the United States earns in the top 1% of all US salaries, more than 8 times the U.S. GDP per capita. The prime minister of China, on the other hand, earns only his countries GDP per capita adjusted for purchasing power. Is realvalue being created by politicans? Why does the president need a presidential pension when he's quite likely to get paid 7 figures by the Carlyle Group after his term of office ends?


 
Home / Politics  /
Politicians, Masters Of Defying Reality
George W. Bush

If you're a well-connected jester, buffoon, or liar, there's always a job waiting for you


In Economies of Obsolescence, I discussed how the Formula 1-like speeds of change we all face in the twenty-first century are sending us rapidly towards obsolescence.  Blue collar workers got the chance to be the first in line, but skilled workers whose jobs can eventually be done by overseas penny labor will be joining their blue collar brethren eventually.    I personally watched as an upper tier manager of a major vacuum-cleaner manufacturer in my hometown saw his job dive into the Chinese abyss.  His job didn't dive in alone.

One thing you can be sure of is that the politicians will never be made obsolescent, as they seem to operate in a world immune from the yardsticks the rest of us are forced to measure up to.  They are truly masters of defying reality.  In the real world, someone or something is made obsolescent when someone or something better comes along.   'Better,' in this case, can have several meanings:   less expensive, more powerful, easier to work with, safer, more value.  

By these definitions, politicians should be obsolescent.    Compared with politicians a hundred years ago, today's politicians are:

Politicians: Defying Reality   More expensive.   In 1900, an American senator earned $5,000/year (about $120,000 in today's money)  The same senator today earns $174,000.   Presidential salaries have fallen in real terms.  Factoring in inflation, Jimmy Carter earned more in 1980 ($200,000/year) than Barack Obama earns today.  But Presidential benefits packages are better than they've ever been and no one can ignore the lucrative speaking circuit and memoir-writing racket a recent ex-President like Bill Clinton has pocketed millions of dollars from. 

Presidential salaries    Less powerful -- that is, less powerful in what they can or will do for the people they represent.  They're actually more powerful in what they can do for themselves.   40% of all American senators as of 2003 were millionaires.

 British MP salaries  Harder to work with.     I am talking about working with and for the people they represent, not working with big business to facilitate corporate and personal gain.

 Presidential pension   More dangerous.   In the Soviet Union at least, everyone knew the guys in government didn't represent them.  The stooges standing in as representatives for most Western democracies are actors playing civil servants.

salaries European parliament  Worse value.    That's what you call people who get paid more for doing less.

The politician's ability to defy reality is not limited to the United States.  The basic salary of a British member of parliament (MP) is £64,766 plus a generous expense account.  MP's from constituencies outside London can claim up to £24,222 in mortgage interest, rent, utilities, and furnishings and have access to another £100,000 per year to employ staff and hire office space.   This a huge jump from 1900.  Until 1911, British MP's earned nothing, and even then, they were still expected to support themselves with another job. 

Members of the European parliament do pretty well, too.   Starting in 2009, all European parliament members receive a basic monthly salary of 38.5% of a European court judge.  This comes to about $10,000/month plus the expense account.   For members coming from poor Eastern European countries, this is like winning the lottery.   The parliamentary reps can earn more money sitting in Brussels than the President/Prime Minister of their own country. 

Let's put all of this into perspective.   According to US Census Data from 2005, an American earning as much as a senator would chart in the top 5.5% of earners.  An American earning as much as the President would be in the top 1%.    

To obtain these kinds of salaries in the private sector, you would have to be highly educated and/or creating some serious value for the company you work for.    Doctors can earn a senatorial salary, but must spend over a decade in school and training and will probably have student debts to pay off.  Entrepreneurs can make this amount and possibly much, much more, but they incur great risks and have a better chance of making nothing than they do of making a fortune. 

No regular job is going to pay someone $175,000/year unless that person generates more than $175,000/year in value for the company.  And even if this someone generates more value than his salary, he may still be made obsolescent because the company feels they can find someone even cheaper who provides a better return.

If we held politicians to this same standard, each American senator and congressman would have to generate at least $175,000 (plus all their vast expense accounts) in value or else be booted.  But who assesses whether an individual politician has produced?   The U.S. Congress doesn't.   The voters from that representative's constituency don't.  They have nothing concrete by which to measure value.  Politicians are usually cast out, not because the voter 'fires' them for not producing value, but because a better-liked, slicker politico came on the scene and told them what they wanted to hear.   Politicians are valued by how much they're liked, not by how much they've achieved. 

Indeed, in the case of Barack Obama, he was being valued as a JFK reincarnate and savior revisted during his run for the Presidency.   None of this value was based on his past Congressional record, which was unremarkable.  It was all assessed on how he was perceived by the masses of voters. A politician's job is to promise value but he won't necessarily be chucked out if he doesn't produce it, unless someone more likable comes along or his term limits have been reached.    

I remember when Bill Clinton was running for the Presidency in 1992.  I was overseas at the time, but still caught his appearances on the popular talk shows of the day and on MTV.   He was the first presidential candidate to treat the job as just another celebrity position, a convenient job from which to utilize perks and score babes.  We judge celebrities' "value" by how much we like the movies or television shows they appear in and to a much lesser extent, about his or her character as the media portrays it.   Clinton and his wife personified youth next to the aging George H.W. Bush.   They promised a balanced budget and national health care, and everyone, including my parents, thought change had come.   But what real value did the Clintons produce?  Forrest McDonald, acclaimed historian of the American presidency, asks a similar question:  "Was there any major legislation he was responsible for?  Everyone approves of what he's doing, but no one can say anything he did."    He slavishly sought expensive gifts and pardoned tax cheats, cocaine dealers, trade embargo flaunts, and corrupt business partners on his last day in office.   Clinton defaced whatever nobility of the Presidency was left. 

We'll outsource the programming tasks to produce the code to run government software.  We'll outsource the security of U.S. personnel in Iraq.  But the lucky politicians can rest easy that we won't ever outsource their jobs.  

The Prime Minister of China makes just $6,000/year, equivalent to his country's GDP per capita.  The President of the United States makes $400,000/year, 8 ½ times the U.S.'s GDP per capita.   If a widget maker in China makes 8 ½ times less money for doing the same task his American counterpart does (adjusted for purchasing power parity, as we've done here), the American's job would be outsourced.   It doesn't matter an iota if the American widget maker is fantastic at his job, and the Chinese man only marginally competent.  When the price differential between him and the Chinese man becomes great enough, the American will lose his job, and we might find lower quality widgets on the market.   Our politicians aren't doing a fantastic job nor are they performing it for a decent price. Not by a long shot.   It's as if we're paying the price of a Ferrari for a shoddily constructed Oldsmobile Omega.

Let's examine a few reasonable measures of American politicians' value.  None show the group as a whole earning their keep.   Is the average man today better represented than the average man in 1900?  Not as far as I can tell.   Since the U.S. population has quadrupled since 1900 with no change in the size of Congress, each representative's attention per constituent has been diluted by 75%.  It seems only natural that as the population of their constituencies rises, reps will only focus on the most important concerns -- in other words, the concerns of their area's biggest businesses.    

Has the average man today benefitted more from the government's financial expertise than a man of 1900?  Hmm, let's see.  In 1900, the debt of the U.S. Treasury was $1.55bn (equivalent to $40bn today),  $525 per person in today's money back in an age when there was no income tax.   In 2000, the U.S. debt stood at $5.6tr.   A decade later, the debt stands at $11.2tr or $36,684 per person. I think we can conclusively say that our politicians haven't grown more fiscally responsible in light of their own greater affluence.   

I am not one of those people who believe politicians are there to solve all our problems.  If they were earning the GDP per capita, no one would expect them to.  But when they're taking home salaries in the top 1-5% of all earners , we do have the right to expect these guys to be in the top 1-5% of performance. 

It almost begs the question why these guys get a salary and expense account at all, when they always have a back-door ticket into prestigious law firms and industry -- the Carlyle Group is always hiring ex-politicians -- and can receive huge speaking and book advance fees.  Bill Clinton and his wife collected $18m in advances for their memoirs.   Newt Gingrich was offered $4.5m for his.   When Harry Truman exited the presidency in 1953, there was no Presidential pension.  That law didn't come into existence until 1958, and you have to wonder why it was ever needed.  Even in Truman's day, there were big bucks in presidential memoirs.   Life offered him the equivalent of $4m in today's money for the exclusive rights.  

With all the access to back-end deals, future cushy private sector jobs, and government contracts they can pass to their friends, you'd think bigtime politicians wouldn't collect a salary for their "efforts," they'd pay to have the jobs.   What are our political office positions today but mini-businesses?   And if one wants to buy a business, that business is assessed a value based on its current and expected future earnings and then the agreed-upon price is paid to the business owner(s).   Politicians' supporters, lobbyists, and political cronies basically buy the politicians their jobs, but this money goes for PR, ad time, polls, good-will tours.   The money doesn't go to the ostensible business owner, which in the United States' case is the American people.   Rather, the situation is the opposite:  the American people are bilked yet more cash to pay for the politicians' crooked dealmaking.  Figure that out.  We have to pay them a salary so they can rip us off yet more money.  Meanwhile,  the rest of us are paid our salaries so we can create more value for our organizations and even then we can be made obsolescent.  If we were caught ripping off our bosses, we'd be fired and/or face prosecution.   When they rip us off, they get rewarded after their term of office ends. 

Politicians constantly remind us of the reality we're forced to live in.   It's about time we demand them to live in the same reality they impose on us.  

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