Transcript
PAUL C. LIGHT: Good morning. It's my pleasure to emcee a PAI event. I'm not presenting anything. Everybody else has done the work and is going to provide the commentary, and I think it will be a very interesting conversation today about a next agenda for the Presidential Appointee Initiative dealing with some issues that we didn't touch on in our reform agenda.
I should start by saying that yesterday, the Senate Governmental Affairs marked up and reported to the Senate, as a whole, the Presidential Appointee Improvement Act— is it appointee or appointments— Appointments Improvement Act? Now, the initials of that are PAI Act. I don't think that they meant it that way, but we're going to take it that way. And Senator Thompson, I believe, and Senator Lieberman are going to push for passage of that important first step to reform. There are other reforms along the way. We have Connie Horner here today, and Frank Carlucci, who are both members of the recently launched National Commission on the Public Service, which is chaired by Paul Volcker. I think the Volcker Commission will take another bite at reform. Some of the issues presented here today will certainly be on the agenda.
This particular event began with a survey of potential appointees that we did last year. We talked to senior executives at Fortune 500 companies, presidents of colleges and universities that were rated by U.S. News and World Report in the top 300. We talked to the heads, a sample of the heads of America's largest nonprofit organizations by revenue. We talked to lobbyists and lawyers at the nation's largest lobbying firms here in Washington and elsewhere, and we even talked to think tank scholars about whether they would take a presidential appointment if offered. And there was overwhelming desire to serve among these presidential appointees, but serious concerns about both the process of getting into office, which we think will improve under the Presidential Appointments Improvement Act. That's a good first step towards improving the process to make it less burdensome for potential appointees. And they also said that they had serious problems with presidential pay, as well as with relocation.
And so we commissioned two papers, one by Gary Burtless, who's a senior fellow here at the Brookings Institution, a terrific scholar of labor economics, to take a look at the dynamics of presidential pay. And we asked Carole Plowfield— and I'm the co-author on this paper, but I did not do the bulk of the work on this, that's why Carole is listed as the first author— to take a look at what we do by way of relocation for presidential appointees. And the bottom line: is we don't do very much at all.
I would start by saying that the founders did not intend presidential service to enrich. Benjamin Franklin, at the Constitutional Convention, one of the first discussions was around his proposal that presidential appointees and other officers of the federal government not be paid at all. The founders never discussed that; they dismissed it. But there was an undertow in the Constitutional Convention about the need for people to serve for the right reasons, meaning for the honor of service, and to make a difference for their country.
At the same time in the Constitutional Convention and later, there emerged a tradition of also not requiring presidential appointees and other officers of government to suffer. We didn't want them to be enriched, but we didn't want them to suffer. And I think that the body of evidence that will be presented today will suggest to you that presidential appointees, and perhaps the people below them, and perhaps people in the other branches— my affection for Robert Katzman on the Circuit Court of Appeals requires me to talk about the judicial branch ever so briefly — that we may be asking our appointees to suffer, and we may be asking others to suffer.
I'm going to ask Gary Burtless to stay by talking about presidential pay, then we'll turn to Carole Plowfield to talk about relocation. We will then ask Frank Carlucci, former Secretary of Defense, and current Chairman of The Carlyle Group, who's had really a wonderfully distinguished career, to speak. I may be wrong about this, but Frank Carlucci is the last career officer, the last careerist who really made it all the way up to the secretary of a department, I believe. Larry Eagleburger, too? Yeah, there's a little bit of a timing effect, and if he were here he'd correct me. I mean, we had Eagleburger here, and now I will be corrected, I'm sure. He loves to correct. (Laughter.)
Frank was also a member of the first Volcker Commission, and has been a deeply committed public servant, and a strong supporter of efforts to improve public service.
We have Charles Kolb, who's the president of the Committee for Economic Development. I've worked with him on campaign finance reform. He achieved a major victory. I believe that CED played a major role in getting campaign finance reform passed, largely by taking a very tough and strong position and becoming a target for some of the opponents, so that bull's-eye on his back continues, and we're hoping to strap on a new bull's-eye that deals with presidential appointee salaries and have him out there as our stalking horse. He's been in government. He served as the general counsel and secretary of the United Way of America between 1992 and 1997. All the good things about the United Way of America are due to him. The Liberty Fund has been actually very responsive. I think the United Way has done a terrific job in the wake of September 11th. We'll give you credit for that, too.
We have Cal Mackenzie at the end, who is the king of presidential appointments. Cal has been working on this for 30 years. Actually, his dissertation at Harvard was on the presidential appointments process, and he's been arguing for reform since 1972, would you say, Cal?
CAL MACKENZIE: Yes.
PAUL LIGHT: And here we are, 30 years later, we're now seeing that perseverance may yet pay off.
So we'll start with presentations on the papers, Frank Carlucci at the podium, and then we'll go to a panel discussion, starting with Charlie and going to Cal, and fielding some questions.
So, Gary Burtless.
GARY BURTLESS: Well, good morning. I'm a labor economist. I'm a specialist in public economics. I don't pretend to be a political scientist who understands the logic and politics of how these salaries are set. My job was to analyze what they look like, and how they're determined.
What is the pay structure for the top federal officeholders? What are the non-wage benefits that these people receive? My report contains findings from a study of this. No one with any interest in this broad topic would be surprised by the findings reported. The pay of top federal officials has declined after controlling for inflation. It has slipped in relationship to the income of a median income American family. It's fallen in relationship to the pay earned by rank and file American workers. And even more worrying is this: it has fallen very substantially in comparison to the pay received by top executives, top doctors, top accountants, scientists, and academics.
Now, I recognize that average voters have real problems seeing top officials earn salaries that are much, much higher than their own. But I also recognize that most people who accept a top federal job are not mainly thinking about money when they decide whether to accept or reject a job. But top federal officeholders are not recruited form the rank and file of the American workforce. People who are asked to serve do have alternatives to serving in these critical positions, and some of the best potential recruits may say, no, Mr. President, I cannot afford to accept.
We have to worry, I think, if too many highly qualified people start to say that, not at the cabinet secretary level. I think anyone looking at cabinet secretaries who have served in recent years would not think that there's been any deterioration in the exemplary quality of people that are recruited into those positions. But what about the positions below them? I'm much more concerned about lower ranks of the executive service of the United States than I am at the very top level.
Some evidence on pay trends can be found in the report around pages 8 or 9. On the bottom of page 9, you'll find the trend in the pay of cabinet level positions measured, if we adjust these pay scales, in constant dollars. Between 1969 and 2001, a cabinet officer's pay rose 170 percent, which sounds like a lot. But, unfortunately, the cost of living in those years increased 390 percent. And this means that cabinet officer's pay fell about 45 percent in those years, measured with dollars that have the same value at the beginning and at the end.
You might think that I picked 1969 because it's a year when federal salaries were particularly high, and it's true they were at a local high. But the picture at the top of page 11 should convince you that that's not really true viewed over a long period of time. In comparison with the wages of rank and file workers in the United States, top federal salaries have been declining for most of the past century, not just since 1969.
In 1909, a cabinet office received a salary that was 24 times as much as that of a line rank and file worker in a manufacturing plant in this country. Last year, a cabinet officer received about 5 times what an average manufacturing production worker receives. In case some of you may not have heard, wages of top managers, lawyers, researchers, nonprofit executives, and academics have been climbing much, much faster than the wages of average manufacturing workers in this country, and that's been true for the past quarter century.
Towards the end of my report, on page 17, I offer some comparisons of the pay received in particular top federal positions and the positions in the nonprofit sector, other government, state and local government positions, and the for-profit sector from which recruits to these top federal positions might be found.
The first position listed, for example, is that of the Assistant Secretary of Treasury for tax policy. I actually know some people who have held that job, so I am a little familiar with it. That job paid $122,400 in the year 2000. Now, for purposes of comparison, a starting lawyer in a New York law firm, hasn't even passed the bar exam yet, has never practiced law in his life, in that same year received as a starting salary, $125,000. And that doesn't include the bonus that was typically paid to these starting new salaries, first year in their job. A partner in one of the New York law firm, same year, received a salary or share in partnership profits of $1.22 million, roughly ten times what we pay to the person who advises the president on the formation of tax policy.
So, this is the situation. The person the president relies on to develop his tax policy and to analyze shortcomings in the tax code earned less in the year 2000 than a brand new associate starting at a law firm, in a Washington or New York firm, and roughly one-tenth as much as a partner, whose main job might be trying to outsmart the government of the United States in paying a corporation's income taxes.
The question is: is the kind of pay package that this country offers for its most senior positions damaging the quality of the people that we can count on to accept positions in that government? As I said before, I don't think this is a problem at the cabinet level. We have people who would be wonderful additions to the best companies, the best hospitals, the best universities, the best nonprofit organizations in the country who serve at cabinet level. But there are many people who hold positions that do not command the attention and the prestige of these top positions, and they're being asked to serve at salaries that I just described that are substantially less than what the best people in academics, in law, in accounting, in science can expect to receive outside of the federal government, even in the nonprofit sector, even in state and local government.
Solving the problem is not brain surgery, really. From the point of view of an economist, it's quite plain that you more or less want to have salaries rise in proportion to the salaries paid to people who have comparable positions in the rest of the economy, if you still want to have a good shot at recruiting the best people. That's not brain surgery.
What is brain surgery, probably, is figuring out the politics of how to make that happen. And as I said at the beginning, I'm not a political scientist, I'm not a politician. I don't really quite understand how it can be that over the last 25 years of this country, in the private sector, the salaries, the pay packages we give to people who have the most responsible positions have grown faster than have those of workers with middle level responsibilities. And on talk radio and at the voting booth, or on the floors of Congress, we hear that it is unconscionable for people in senior positions in the federal government to be paid wages that are rising at the same pace. Are voters really so stupid that they're willing to accept the risk entailed in paying substantially lower compensation? Perhaps they are, and I expect someone could tell me.
CAROLE M. PLOWFIELD: Good morning. Thank you all for coming. And I want to say a couple of thank yous. First of all, co-authoring with Paul Light was a lot of fun, and then I'd also like to thank the rest of the PAI team: Sandy Stencel, Anna Gallagher, Erin Murphy, Michael Hafken, Gina Russo, for helping put this event together. And Judy Labiner and Mary McIntosh of Princeton Survey Research Associates for helping with the survey. They did a great job. Andrew Mohraz, who was the research assistant on it. And there's a couple of people who came today who I really want to thank, Jim Hart from GSA, Doris Hausser and Bryce Baker from OPM; they were all extremely helpful in helping me make sure that everything in the report was accurate. And I appreciate that.
Everything we do at PAI is a team effort, so I could drag on with a lot of thank yous. But, I guess that's what we have the Academy Awards for on Sunday night. So, before I go any further, suffice it to say, I guess if I could vote, I would vote for the PAI staff for the best supporting role. And I guess I would probably have to vote for Paul Light in the starring role that he has played at PAI for the last two years. Okay. I can tell by the look on Paul's face, and the staff at PAI, that if I'm ever reminded that I said that, maybe by you, Paul, at some time, I will say that it was under duress that I said that.
Paul gave some background as far as the origins of this survey. It came from a potential appointee survey that we did last year, and as Paul said, we have this group of great, talented people, just the kind of folks you want serving in government, they think it would be a great honor, they think it would be great for their career, they just didn't seem particularly enthusiastic about coming to Washington. So we're thinking, what's going on here?
The survey that we did with Princeton Survey Research Associates was to help us find out just that. What's going on that they don't want to come here, and what do other Washington area organizations do to get these people to come here? The 85 organizations that we surveyed, as Paul mentioned, represented a group — from the previous survey, this is a group that has historically produced presidential appointees— the Fortune 500 businesses, think tanks, lobbying firms, nonprofits, universities, and state and local governments. A brief telephone survey of the human resources officers at each of these organizations was conducted by Princeton Survey Research in the summer and fall of 2001. And nine simple questions about the organization's relocation policies were asked. And we also asked them what their experiences were recruiting top level executives to the Washington area. And you can find the full questionnaire and the answers in the back of the report. I'll just briefly give you some of the results.
They were actually a bit more hopeful than we thought they would be, based on what the potential appointees has said earlier about their misgivings about coming to Washington. And that's shown in tables three and four on page eight of the report. Thirty-six percent of the respondents said that the top level executives their organizations had recruited over the past year viewed Washington as a much more, or somewhat more, favorable place to live than their current residence. And 69 percent said it had been very, or somewhat, easy to recruit top level executives to the Washington area.
The next part was, well, what exactly do these organizations pay for? Eighty-eight percent pay travel costs to find a new home; 87 percent pay for costs of moving personal property; 71 percent pay for closing costs for the purchase of a new home. Another 71 percent provide assistance finding temporary housing, but, interestingly, that figure drops to 53 percent when asked who will actually pay for the temporary housing that 71 percent of them were just willing to find. About a third of all the organizations provide the following services: loan assistance, assistance buying or selling a home, help finding childcare, job placement for a spouse or partner, and assistance finding schooling for children.
So, the next question in this investigation we were doing was: what do presidential appointees get, and, unfortunately, the answer was not quite as much. Basically, they get transportation costs for themselves and their immediate family, per diem reimbursement for themselves only, and transportation and temporary storage of household goods. And that's shown in tables 5 and 6 on page 10 of the report. One point to note here is that career and non-career employees are eligible for the same benefits. However, the federal government offers different types of relocation benefits, depending on whether you're new to the government, or you're a transferee within the executive branch of the government. And then there are some allowances that an agency must reimburse, they're required to, but there are other benefits where it's discretionary. So, as an appointee, you're coming in, you don't know. Well, are they going to give me this benefit or aren't they? And I'll come back to that point in a moment.
So, now to the comparison. How do all these policies stack up? And this is shown in table 8 on page 12. That shows our survey of the Washington area firms, and additional data we used from a comparison, which was from a Runsheimer survey, which was a national survey, and then the federal policies. And it shows the federal government lagging behind in almost every category of relocation benefits. And one note here about recruitment and relocation bonuses; they're a bit of a different animal from the reimbursement benefits. They can get a bonus, which is up to 25 percent of pay, but the reimburse