The Wall Street Journal Shamelessly Criticizes Capitol Hill Bonuses

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Includes: AIG, BAC, C
by: Deep Value Guy

Normally the Journal’s news pages don’t pander to their audience quite so shamelessly:

While Congress has been flaying companies for giving out bonuses while on the government dole, lawmakers have a longstanding tradition of rewarding their own employees with extra cash — also courtesy of taxpayers.

That sounds pretty horrible and hypocritical, doesn’t it? How dare Congress give its people bonuses when it criticizes Wall Street for doing so. But then you get to the actual numbers:

Last year alone, more than 200 House lawmakers, both Republicans and Democrats, awarded bonuses totaling $9.1 million to more than 2,000 staff members, according to a Wall Street Journal analysis of office-disbursement forms.

Let’s do the math on that, shall we? $9.1 million over 2,000 people. That works out to $4,550 per person on average. Indeed, the article notes that the bonuses range from a few hundred dollars to $14k, hardly irresponsible next to the insane bonuses being paid out by insolvent banks courtesy of taxpayers.

To wit, compare to the $165m in bonuses that were paid out to AIG’s Financial Products Division (NYSE:AIG) (400 guys, including 9 who got over $3 million each) or how ’bout Merrill’s $3.6 billion bonus pool (of which $121 million was earmarked for just four execs).

Incidentally, it’s important to emphasize the point about taxpayers being the source of all Wall Street pay at this point. In the absence of taxpayer intervention—directly via Treasury and indirectly via the expansion of the Fed’s balance sheet—the entire banking sector would have collapsed months ago. To the degree that Wall Streeters continue to get paid anything, it is courtesy of taxpayers.

Struggling hard to make a story out of nothing, the writers note that “more than 100 aides who earned salaries of more than $100,000 a year” received a bonus. So that means, some congressional staffers who otherwise would have walked home with $125k, got an extra $10k. After taxes, that’s enough to pay a couple months rent on DuPont Circle. Where’s the outrage!

My biggest problem is that the writers deliberately ignore necessary context that would totally change the narrative of the story.

The fact is, government staffers are fantastically underpaid. Ten years ago, I worked on the Hill for a Senator. Back then, legislative aides made no more than $40k-50k. Some made as little as $25k. Try living in NW D.C. on that salary. Since then salaries have increased, but not much. These are the people responsible for crafting federal legislation for goodness sakes. Is it any wonder they run to lobbying or law firms as fast as they can?

Harry Markopolos, the whistleblower who warned the SEC repeatedly about the Madoff scandal, has offered withering critiques of how absolutely incompetent he found SEC staff to be in his dealings with them. But of course they are; they are ridiculously underpaid. No one with any meaningful ability is going to take a thankless job as a regulator or congressional staffer and stick with it. To the degree that talented people actually take such jobs, it’s typically as a stepping stone.

That’s the real story behind this badly written and wholly misleading article. Congressional staff are badly underpaid, which is a key reason why regulatory capture has rendered our federal government more or less feckless.

Is it any wonder policy-making amounts to little more than playing referee between opposing special interests? Our whole legislative process, from the election of our representatives to the crafting of legislation, is bought and paid for by rent seekers and others with skin in the game. Rarely does this include “the public.”

Americans have no one to blame but themselves for this state of affairs, of course. We only vote for candidates we see on TV. The only candidates that get on TV are the ones with access to lots of cash. The only folks willing to put up the cash are those that can earn a return on their investment….