The election is over, but how about partisan politics? Will Democrats and Republicans be able to work together this time or will it be more of the same? I have always felt that the way Congress and even the president are compensated does not encourage compromise. Perhaps if the government were run like a corporation, incentive pay would encourage elected officials to actually get something done. It appears that I am not the only one who thinks that structuring pay for performance for members of Congress and the president would stop partisan bickering and encourage problem solving. So how should pay packages be structured? Sheila Bair, former chair of the Federal Deposit Insurance Corporation, has a plan.
Bair believes in economic incentives similar to the private sector. Currently elected officials can keep their jobs just by being successful fundraisers.
After being elected, they start the process of being re-elected so what incentive is there in actually accomplishing anything? Only one in 10 Americans think Congress is doing a good job, but politicians keep getting re-elected. Voters do not hold Congress or the president accountable for actual job performance, so Sheila Bair has come up with a plan that, like private-sector CEOs, does not provide an all-cash paycheck.
Here is Bair's idea: Both Congress and the president will get only half their paycheck in cash and the other half in 10-year Treasury notes. If the economy does well, and they get our fiscal house in order, those 10-year bonds will hold their value. If Congress continues the current can-kicking policy that will only create more debt, the bonds will be worth substantially less than face value.
Bair also suggests that those 10-year bonds will only be paid based on hitting performance benchmarks. How does she divide the pie? First, she would condition one-third of the bonds to the labor participation rate. If there is no job creation, bye bye to one-third of the bonds. Secondly, the next third of bond incentive would be tied to gross national product.
Bouncing off the bottom as we currently are doing will not cut it. Historical growth rates in the U.S. have been around 3 percent or above. So if we fall below the historical average, say good-bye to that third of the bonds. The final third would be determined by us, the citizens who have to live with the decisions that Congress and the president impose. Every two years, we would get to decide if we think our Congress and president are earning their pay. No more blaming things on the previous guy in office. If we approve of the job they are doing, they get the last third of their bond incentive.
I loved Bair's idea. It would encourage elected officials to actually solve problems in a timely manner in order to be re-elected. Aligning pay with long-term performance would start changing behaviors now entrenched in government.
Bair has the right idea. Government should be paid just like the private sector. A good job gets rewarded and poor performance means termination. I would add one more thing to Bair's proposal. All government employees from the president on down must also have Obamacare. Perhaps if they have to wait six months to see a doctor they may or may not know, they would think twice before signing bills they have not read.
• Carol Perry is a retired financial adviser and has been a Northern Nevada resident since 1983. She can be reached at Carol_Perry@att.net.