What's the President Worth? For Doing What?
Driving home the other night, I heard a snatch of radio discussion about whether we’re paying the president enough.
If I understood the argument while dodging traffic, it seems that corporate executive salaries have soared so high that the president’s salary is puny by comparison. Company CEOs earn millions. Michael Eisner of Disney earns in the mid nine figures ($589,000,000 per year), while the poor president is mired in the low six ($200,000, plus $50,000 for personal expenses).
One radio guy said such a low income can’t attract top talent. I thought at least it weeds out candidates who are in it merely for the money. On the other hand, it might select for candidates who are in it merely for the power.
Then one of the discussants made an Economically Correct suggestion. Why don’t we reward the president on his performance? Why don’t we link his salary to the growth rate of the economy?
That made me pound the steering wheel. “No, you idiot!” I yelled at the radio.
“The president doesn’t make the economy grow! Even if he did, economic growth is a lousy measure of how well off we are!”
The radio folks did not explode; they went on talking calmly, as if they had just heard a reasonable suggestion. Which means I have to ask your help in debunking two deep-seated, constantly repeated, unquestioned, counterproductive national myths.
First, whenever you hear a president take credit for the economy growing, or when you hear someone blame the president for the economy not growing, please point out loudly: THE PRESIDENT DOES NOT MAKE THE ECONOMY GROW. Few of the levers in a president’s hand are attached directly to economic motors. The chair of the Federal Reserve Board sets interest rates. Congress makes tax laws. Herds of hysterical investors determine stock prices. Business executives decide to build new factories or move them to Mexico. Workers make things. Consumers buy them. The president is inconsequential to all that.
The economy is a huge, complex system, with many parts and players. It is wired together in such a way that it goes through ups and downs that are not really in anyone’s control. Presidents luck into presiding over the ups or downs; they don’t create them.
Of course the president can impact the economy. His job is to enforce the laws of the land. That includes regulations, tax laws, securities laws, trade laws, all of which affect how business is done. He also works with Congress to set the federal budget, a big chunk of spending.
Those duties have economic impact, for good or ill. For example, when Ronald Reagan stopped enforcing savings and loan regulations, we had an epidemic of irresponsible banking and billions of dollars of bailouts at taxpayers’ expense. If we paid presidents by their performance, that failure to do his job should have dropped Reagan’s salary into the negative range. Similarly, when Bill Clinton twisted congressional arms to pass the North American Free Trade Agreement (NAFTA), he made it easier for companies to move factories to Mexico. His pay cut for that should have been shared by Congress.
If economics were all we cared about, and if we were to judge our president for economic powers he actually has, we’d ask if he enforced regulations firmly and evenhandedly, protected national wealth, including natural resources and public infrastructure, spent the taxpayers’ money wisely, and ensured fair treatment of workers. If a president ever actually did those things, the economy may or may not grow, but it would work more smoothly and fairly and make most people economically secure. If we had to link presidential salary to a single economic indicator, it should probably be the minimum wage. Or maybe the median household income, about $37,000. Neither of those numbers has grown in real terms for two decades.
Right there — the stagnant income of the majority in a growing economy — is one reason why you should join me in another loud statement whenever the opportunity presents itself: ECONOMIC GROWTH IS A LOUSY MEASURE OF REAL WELFARE. It tells us more dollars are changing hands, but it doesn’t clarify into whose hands they are flowing. Nor does it say what is growing. Homes for the homeless? Small local businesses? Huge ugly discount stores? Vaccinations for children? Guns sold to high school students? Solar collectors? Cleanups of oil spills? Organic farms? Clearcuts in the national forests? Legal fees for divorces? Weapons of mass destruction?
All these things contribute to economic growth, but they don’t all make us better off. It beats me how we ever got brainwashed into rejoicing whenever the economy grows without asking exactly what is growing. At what cost? To whom?
Growth always has costs, some measured in dollars, some not. Growth should proceed up to, but not beyond, the point at which its costs exceed its benefits. Past that point growth literally costs more than it’s worth. The faster the growth, the poorer we get. It would be silly to link the president’s pay, or our rejoicing, to economic growth without asking a lot of questions first.
I think it’s a fine idea to pay public officials according to merit. But merit needs to be defined by some indicator of real welfare, preferably an indicator the officials can actually influence. So, for presidents — no Monica jokes now, think back to all the presidents you’ve experienced and forward to the ones you hope to experience — what would you look at to evaluate their performance? What about Congressfolks? Mayors? Governors?
Whatever indicator you choose, you don’t get to pay them by it, not directly, not yet. You do get to vote by it, though, to determine whether we should pay them at all.