Obama to staffers, “You’re not worth that much.”

Posted by Marc Hodak on January 23, 2009 under Uncategorized | Be the First to Comment

One of Obama’s first policies on entering the White House was a freeze on all salaries above $100,000.  WaPo estimates that this will save taxpayers about $443,000, which I suppose will help pay for the $825 billion spending package he is considering.  But of course the president is not really doing this as a cost savings; he’s making a symbolic gesture, albeit one being paid by his staff.  It’s designed to make the nation feel better that other people are suffering along with them.  It’s also, no doubt, meant as an example for the greedy businessmen that populate our executive suites.

I don’t know if this is a good idea.

Ordinarily, freezing pay would create retention risk, i.e., it would cause some number of people to leave who might otherwise stay.  Presumably, the people who are there now are the best people Obama could find to fill those positions at those salaries, so turnover of those people on the basis of pay makes it likely that they will be replaced by “next best” people.  It doesn’t appear that any of the 120 staffers affected by Obama’s order are having second thoughts about joining the White House as a result of this freeze, at least not yet.  And turnover would eventually happen at the White House even without a freeze–most of the top people working there are already sacrificing pay relative to what they could make in the private sector.  But a freeze makes turnover more likely.  So, freezing pay sends a message that Obama doesn’t really care to have the best people working for him.

A company normally loses a little bit of it effectiveness with higher turnover as a result of incrementally poorer business decisions by “next best” employees.  That’s not true of every company, of course, but it’s true on average over a large number of competing firms.  The White House, being a political entity, loses a little bit of political efficiency.  Those who are a bit cynical of the value of government might not think this is a bad thing, but it might be.

It might be that the White House balances the wasteful tendency of the truly, monstrously wasteful arm of government–Congress.  If Obama really wanted to control spending, he would have someone study the impact of a better run White House on overall government spending.  He might conclude that saving taxpayer dollars actually suggests a raise for White House staffers, in order to get the best people able to check the impulses of Congress.  I could be convinced.

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