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Tuesday, September 04, 2007

Inefficent Governmental Management

I hope that what I am writing makes sense to you. With that in mind I would like to frame my discussion about the political economy of America with this quote.

"Democracy is the best form of the worst type of government"
- Winston Churchill

Political economy implies that there is a relationship between politics and the economy and it is an especially strong in a democracy with rule of law. A strong government has a strong economy. A poor government has a weak economy. There are many examples of these countries throughout the world. However, none of them have made the perfect form of government for their economy.

Our government prides itself on the division of power but I believe there is one more power that needs to be separate from it and that is the paychecks of the legislators. Borrowing a page from Corporate America, there is a very good model of accountability. Shareholders (voters) elect the board members (legislature and judicial branch) who hire the executives (executive and judicial branches) who employed the workers (bureaucrats) who make the revenue. The boards of many companies has the power to determine the salary of executive via their charter. However, the problem with the legislature of today is that they control their own pay raise, salary, benefits and lack the incentives to make the United States as a whole a better country.

This seems to cause inefficiency because there does not appear to be any financial incentives for legislators to do their job well if they can get their money whenever they want. What I propose is letting the voters approve any raises or benefits for the legislators . That way there is a financial incentive for them to do their job well and get rid of redundancies within the government. Perhaps wasteful spending might be reduced if a senator that represent Colorado is paid by a state such as Wyoming, that way the good of the country will not be focus on in pork projects in a senators home state. Another addendum to prevent senators from catering to their state(Colorado) voters and to their paycheck (Wyoming) state would be to not allow them to appropriate monies for pork projects in those two states that they have an interest in. In theory this seems like a good idea if it could get approved, let me know what you think.

Personally, I don’t have a problem with members of Congress making about $160,000 a year, or even $200,000 a year. They have such a huge influence over our nation, and I believe their high levels of education and their high levels of global and intercultural understanding are worth it. A high salary promotes competition, which I want to be as high as possible (fair competition, that is). And if you think about it, $200,000 isn’t a very large salary for skilled, high-ranking jobs. There are 535 members of congress, and if each of them makes $160,000 a year, the total annual cost of their salaries is $85.7 million. David Beckham alone makes $43 million, more than half of what we pay the entire Congress.

Now, I realize that Beckham is paid by the revenues earned by the L.A. Galaxy, not by the money taken from taxpayers, but consider how much we actually pay toward Congressional salaries. In 2004, 68% of the total number of taxpayers, 42.5 million people, paid a positive net value in taxes. This means that (.68)(42.5 million) = 28.9 million people paid money toward Congressional salaries.

$85.7 million paid / 28.9 million payers = $2.97 per taxpayer for the entire Congress

or, look at it another way:
$85.7 million paid / 300 million Americans = $0.29 per person for the entire Congress

The cheapest ticket to an L.A. Galaxy game is $18.00.
Including players, coaches, directors, trainers, and managers, the L.A. Galaxy has 31 people.

31 people / $18 per ticket = $0.58 per ticket for each member of the L.A. Galaxy.

L.A. Galaxy fans pay David Beckham more than our Congress. (Yes, I understand that not all ticket revenues go toward salaries, but you get my point.)

I think that if we want to cut wasteful spending, we shouldn’t worry about nickels and dimes until we take care of the dollars. For example, we have spent over $450 billion (yes, with a “b”) on the War in Iraq since 2003.

$450 billion / 4 years = $112.5 billion per year
$112.5 billion / 28.9 million payers = $3,900 per taxpayer!
$112.5 billion / 300 million Americans = $375 per person!

For my money, I’d rather get season tickets for the L.A. Galaxy ($250), a David Beckham home jersey ($65) and away jersey ($30), and get food and beer at the game!




http://www.nationalpriorities.org/Cost-of-War/Cost-of-War-3.html (This website has a “real-time” clock of the money being spent.)
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