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White House seeks to limit ‘excessive’ contractor salaries that exceed Obama’s

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A recent White House blog post suggests that government contractor executive salaries exceeding that of President Obama‘s are “excessive,” and that the administration will be doing something to correct this problem.

Barack Obama
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Joe Jordan, the White House’s administrator for federal procurement policy, announced Thursday afternoon that the president will be submitting an initiative to Congress next week meant to put an end to what he feels are “excessive payments to Federal contractors.” The White House is specifically targeting executive compensation and its contribution to “fiscally imprudent contract spending.”

First of all, executive salaries attribute to an infinitesimally tiny percentage of the overall payments made to government contractors. Much like the president’s own budget cut proposals, they amount to removing a few drops of water from an ocean of deficit.

Secondly, how does one define “excessive compensation?” Excessive for one may be normal for someone else and even below par for yet another. In fact, Jordan notes that “Under current law, contractors that are paid based on their incurred costs (which represents about one-third of current contract spending) may demand reimbursement for executive salaries, bonuses and other compensation up to the level of the Nation’s top private sector CEOs and other senior executives.”

This would seem to put the issue to rest — they’re merely keeping pace with other private sector executive salaries. From that, one might surmise that anything above the current standard would be “excessive.” However, the president proposes a different standard.

The Administration’s proposal calls on Congress to abolish the current formula and instead tie the reimbursement cap to the President’s salary and apply it across-the-board to all defense and civilian cost-reimbursement contracts. Tying the cap to the President’s salary provides a reasonable level of compensation for high value Federal contractors while ensuring taxpayers are not saddled with paying excessive compensation costs.

Wages and salaries, just like the price of anything else, are set by the marketplace — not by one person’s notion of what constitutes “reasonable.” Every attempt to control the market has resulted in failure. Richard Nixon’s 1971 wage and price freeze, meant to combat inflation, is a prime example.

If executive salaries of federal contractors were limited to that of the president, it wouldn’t be long before we would see a shortage of executives in, for example, the defense industry.

Also the president’s salary is but a fraction of his total compensation package. Reams have been written about the tens of millions of dollars spent for vacations taken by the president and his family — something the private sector would never tolerate.

In addition, after a mere four years in office, a former president enjoys a lifetime pension and benefits — including secret service protection.

I’m not begrudging any of the perks that come with the president’s position — in most cases, presidents earn them. But the president, likewise, shouldn’t begrudge the salaries paid to others.

H/T The Weekly Standard.


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