Tie congressional pay to inflation as a way to stop senseless overspending


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I have had the rare privilege of providing expert testimony at hearings in the United States House and Senate. More than a year ago, I warned representatives of the House Committee on Oversight and Reform about the inflationary effects of reckless government spending and the proposed Green New Deal. A few of the Democrats at the hearing listened intently, but others dismissed my warnings outright as partisan theater (Rep. Ocasio-Cortez, D-NY, remarked in response to my warning “[A]another day, another line on Green New Deal hysteria”)

Of course, I wasn’t the only one issuing these warnings, as the likely outcome of the spending and energy policies enacted and proposed by the current Congress and President Joe Biden was obvious. Larry Summers, Treasury Secretary under President Bill Clinton, and someone President Barack Obama viewed as a possible Federal Reserve Chairman, warned that Biden’s $2 trillion spending plan would have dire consequences .

I am a man of modest intellect who received an exceptional education. As part of this training, I learned the law of supply and demand. If the demand for a good exceeds the supply of that good, the price will rise. The Democrats borrowed money and gave it to consumers who were not working (not producing) and so the demand for goods grew faster than the production of goods. At the same time, Democrats implemented policies that intentionally limited the supply of oil and gas when the demand for oil and gas was as high as it ever was. High demand in an economy with low supply in an economy leads to higher prices.


The effect on Americans, especially poor and working class Americans, is devastating. Over $5,000 per household, or over 25% of the purchasing power of a poor 3-person household, has evaporated and there is no end in sight.

Speaker of the House Nancy Pelosi of California, along with other Democratic leaders, speaks during a press conference on Capitol Hill in Washington, Wednesday, June 8, 2022.
(AP Photo/Manuel Balce Ceneta)

The political calculations of how we got here are even easier than the economic calculations. Government spending buys votes. Congress has an incentive to spend as much as it can borrow and then hope for the best, even in the face of warnings from important people like Summers and well-meaning but less important people like me.

We can change that today.

Across government, there are benefits tied (in a positive direction) to inflation through the consumer price index so that Americans are not punished for inflation. I propose that we tie Congressional pay (negatively) to inflation for the express purpose of punishing Congress for its reckless economic policy. The process is simpler than you might think.

The Federal Reserve has not set an official inflation target, but it believes an acceptable inflation rate is 2% or slightly below. For the entire year following a recorded inflation rate above 2%, congressmen’s salaries should be adjusted for the following year to reflect the relative impact of inflation on poor and classy Americans. factory Girl.

A brief example will demonstrate:

Members of the House and Senate currently earn $174,000 a year. Our current inflation rate of 9.1% translates into an impact on a poor family of $5,000 or 25% of that family’s income. Members’ salaries should be adjusted for the remainder of the year to $130,500 (a 25% salary reduction) so that members’ circumstances reflect people’s circumstances and that members live with the outcome of their policies.

Logistically, the change only requires the Treasury Department to determine whether the first-quarter inflation rate is above 2%, if so, how much, and what the effect is on poor American families, all information the Treasury collects currently. Congress is already subject to automatic salary adjustments, and Congress was originally paid on a per diem, so the logistics here are manageable by comparison.

“But Shay,” you might ask, “what about members of Congress who don’t support reckless policies, should they be punished?” My response is that these members need to do a better job of persuading, opposing, or cooperating with the majority to produce sound economic policy.

The chamber of the House of Representatives is seen at the Capitol in Washington, February 28, 2022. The site of so much overspending.

The chamber of the House of Representatives is seen at the Capitol in Washington, February 28, 2022. The site of so much overspending.
(AP Photo/J. Scott Applewhite, File)


“But Shay,” you might ask, “wouldn’t European-style spending caps or a balanced budget amendment do a better job of controlling spending?” I would respond that while a spending cap (say, as a percentage of GDP) might help, it cannot combat the damaging regulatory policies that undermine US energy production. (The Green New Deal is much more of a regulatory disaster than a spending disaster.) It can’t stop the policies that are driving up prices and sending our leaders begging “enemy” foreign nations to increase production. of fossil fuels.


A balanced budget amendment, on the other hand, requires a change to the US Constitution that is politically very difficult and still fails to address the drivers of inflation beyond spending.

There are two things we know; first, not all poor people can vote, and second, no politician wants to be poor. So whatever the mechanism, our ruling class must be required to live in the real world, the world they shape every day on Capitol Hill.



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