Geithner deserves a raise!

I say that not because I’ve been a fan of the Treasury Secretary’s job performance so far (far from it), but because positions like Treasury Secretary, Securities and Exchange Commission Chair, and President of the United States should be well compensated.

In the case of finance-related positions, anyone who was previously working high up in the industry or even in a Fed bank must take a huge pay cut to take on a job that brings power and prestige but also frustration and blame.   Cases in point:  Geithner and new SEC Chair Mary Schapiro.   Now, neither is going to have any trouble paying the bills:  Geithner made more than $400,000 last year at the New York Fed and received a similarly sized severance package; Schapiro made almost $3 million as head of the Financial Industry Regulatory Agency (the securities dealers’ self-regulatory board) and got a severance package of over $7 million; but still.

Geithner’s salary at Treasury:  $196,700.

Schapiro’s salary at the SEC: $162,900.

After adjusting for the much higher cost of living in Washington, DC than in Oswego, NY, the head of the SEC barely makes more than I do.  (Not that I think I’m overpaid. . . )

Now, there’s a reasonable argument that a problem with economic policy is that these positions have too often gone to Wall Street insiders who put the  Street first,  and so one could argue that if the pay’s too low to attract Wall Streeters (just as some are arguing of the $500,000 pay cap for bailout-receiving executives), then so much the better.  But . . .

Even for a star academic economist who takes one of these jobs, the pay cut would still be substantial.   It stands to reason that the law of supply works well enough for Washington policy jobs:  pay more, and you’ll have more people, including more of the highest-caliber people, willing to do the job.

I’m thinking $500,000 would be a decent pay level for economics- and finance-related cabinet and agency heads.  Seems a nice round number.

Also due for a pay raise is the President of the United States.  Barack Obama makes $400,000.  Woodrow Wilson made $75,000 in his first year, in 1913; adjusting for inflation, that would be $1.6 million in 2009 dollars.  If that’s too much, then how about adjusting it to 1930, the year that Babe Ruth famously justified earning more than President Hoover because “I had a better year than he did?”  Hoover made $75,000 that year; in 2009 dollars, that’s $950,000.   Even if one wants to argue that presidents don’t need to be paid very much, wouldn’t it at least make sense to index their salaries to inflation?

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