Merit Pay for Pols

This article appeared in on July 29, 2002.

Congress’s reluctance to pass laws to help the American taxpayer is made more galling by how easily our congressmen pass laws to help themselves.

A case in point: Lawmakers recently approved a $5,000 pay raise, bumping their salaries to $155,000 effective January 2003. It will be the fourth straight year that congressional salaries have risen. Under a 1989 law, congressmen receive automatic cost-of-living salary increases unless they vote to reject them. As the latter is as likely as a humidity-free summer in Washington, D.C., the annual pay hike is a given.

This remunerative state of affairs satisfies no one except the political class. Some critics of congressional pay argue that our politicians are grossly overpaid; others complain that we pay our elected representatives too little to attract high-quality candidates. This debate is further constrained by the Constitution. The 27th Amendment permits Congress to alter the next Congress’s salaries, but not its own.

Nevertheless, the most practical solution for improving political remuneration remains untapped. Congressmen should be paid according to their results, like their private-sector counterparts. Our politicians should be paid on the basis of how successful they are in leading their “corporation.”

We must publicly acknowledge that incentives matter; they affect all aspects of our behavior. Why not introduce some monetary carrots and sticks for those who make a career out of spending other people’s money?

As in private business, if the federal government pleases its “customers,” i.e., taxpayers, then the management should be rewarded with bonuses. Conversely, if the government poorly serves its customers, then management should pay the price financially.

How would such a salary scheme work in practice? First, at the start of a new Congress a base-salary figure could be established for congressional pay. Second, a series of measurable factors — e.g., personal and corporate tax levels, the regulatory burden, and the nation’s overall fiscal position — would be individually weighted, then totaled, producing a base figure of 100 for this new “political performance” index.

At the end of two years, the chosen measurable factors would be reassessed to determine which had risen or fallen and whether, collectively, the base figure was now, say, 110 (indicating a more expensive, lower quality of life for taxpayers and constituents) or, perhaps, 90 (indicating a less expensive, higher quality of life). Once the new total was published, salaries for the following Congress would be adjusted according to a sliding scale. If the new total were 110, then congressional salaries would be cut by ten percent.

Finally, politicians would be directly accountable in dollar terms for their fiscal stewardship, or lack thereof. All decisions to tax, to spend, to regulate, and to subsidize would take on added significance as (in most cases) congressmen would be adjusting their own pay scale according to the economic merit of their decision-making.

Unemployment couldn’t be eliminated overnight by Congress authorizing ditch-digging on a mass scale, as such economic interventionism would have the correspondingly negative effect of raising government spending, requiring higher taxes and/or higher deficits to pay for it. As these elements would be factored into the annual political performance index formula, such superficial solutions would be self-defeating for those congressmen pushing for a quick fix.

Congressmen interested in raising their salaries would have to do something that is today considered quite radical: introduce cost-benefit analysis into government budgeting and regulating operations.

Taxpayers are increasingly cynical, distrustful both of the motives and efforts of their political representatives. The political climate, therefore, is ripe for such a radical proposal as an incentive-based salary scheme: a guarantee that taxpayers receive value for money.

Government decision-making today remains hostage to the tyranny of the organized minority, i.e., the myriad special-interest groups. As congressional campaigns get into full swing, all politicians will promise to give us value for our money. Isn’t it time for them to put their money where their mouths are?

Patrick Basham is Senior Fellow, Center for Representative Government at the Cato Institute.