Carpe Diem

Excessive College President Pay? Not Really

From today’s NY Times article “Increased Compensation Puts More College Presidents in the Million-Dollar Club”:

Soaring compensation of university presidents, once limited to a few wealthy institutions, is becoming increasingly common, with the number of million-dollar pay packages at private institutions nearly doubling last year, and compensation at many public universities not far behind.

Presidents at 12 private universities received more than $1 million in the 2005-6 school year, the most recent period for which data on private institutions is available, up from seven a year earlier, according to an annual survey of presidential pay to be released today by The Chronicle of Higher Education (subscription required). The number of private college presidents earning more than $500,000 reached 81, up from 70 a year earlier and just three a decade ago.

The survey also found that the number of public university presidents making $700,000 or more rose to eight in 2006-7, the reporting period for public institutions.

From The Chronicle: Among private institutions, the median compensation of leaders of research institutions rose 37% in the last five years of the survey, from $386,631 in 2001-2002 to $528,105 in 2005-2006 (see chart above, click to enlarge).

From The Chronicle’s salary database, the highest paid private college president in 2005-2006 was Donald Ross, who earned $5.7 million at Lynn University. The highest paid public university president was Purdue’s Martin Jischke, who earned $880,000 in 2006-2007. Note also that almost all college presidents get a free house, free car and expense accounts, in addition to deferred compensation, retention bonuses, performance bonuses, retirement pay and club dues.

MP: Since administrator pay has increased at a rate far above pay increases for faculty and staff pay increases, income inequality in higher education has increased significantly in recent years, perhaps just another industry-specific example that reflects an overall, general pattern of rising income inequality in the U.S. in many/most industries.

I really don’t have any problems with college presidents’ pay, just like I don’t have any problems with Bill Clinton’s speaking fees, or rising CEO pay, or the rising number of millionaires in China or India, or rising income inequality in the U.S., etc. See this previous CD
post where I suggest that the more competitive and dynamic the economy, the greater the natural amount of income inequality.
Bottom Line: College presidents are academic CEOs who are often managing very large organizations in an increasingly competitive environment, operating in an increasingly globalized market, facing declining public support for higher education, etc. Rising college president salaries are a reflection of an increasingly dynamic and competitive market for academic CEOs. Not to worry.
Carpe Diem

Google Stock Option Wealth Creation

From today’s NY Times article “Google Options Make Masseuse a Multimillionaire“:

“Although no one keeps an official count of Google millionaires, it is estimated that 1,000 people each have more than $5 million worth of Google shares from stock grants and stock options.”
Including massage therapist Bonnie Brown, “who answered an ad for an in-house masseuse at Google, then a Silicon Valley start-up with only 40 employees. She was offered the part-time job, which started out at $450 a week but included a pile of Google stock options that she figured might never be worth a penny.
After five years of kneading engineers’ backs, Ms. Brown retired, cashing in most of her stock options, which were worth millions of dollars. To her delight, the shares she held onto have continued to balloon in value.” (See chart above of Google’s stock price over the last two years.)
MP: Perhaps this is one explanation for rising income inequality in the U.S. in recent years. I don’t think there were any comparable examples of this type of “Google stock option” wealth creation for part-time employees during the 1960s, 1970s, 1980s, or maybe even the 1990s?
Carpe Diem

Excessive Speaking Fees for Bill Clinton?

According to the Washington Post, Bill Clinton earned $31 million in speaking fees between 2001 and 2005, as disclosed in his wife’s Senate ethics reports. The chart above (click to enlarge) lists the amount Bill Clinton earned for 43 speeches he gave in 2005.

Working less than one day a week, Bill Clinton earned almost $7.5 million in 2005, making an average of about $174,000 per one-hour speech. In other words, Bill Clinton earns more in one hour than the average American makes in about 6 years ($29,544 per year), and certainly earns much on an hourly basis than the average CEO of a large corporation, who probably has to work 50-60 hours per week to earn $10.8 million per year on average in salary and bonuses in 2007.

According to this report from Social Funds, “While Americans have been concerned about the widening pay gap for years, what is different now is that this concern is beginning to impact lawmakers. Several bills addressing executive pay are pending in the House and the issue is gaining the attention of some high profile politicians, including Barak Obama and Hillary Clinton.”

Just wondering… if the Clintons are so concerned about excessive CEO pay, why is Bill Clinton charging $174,000 per hour to give speeches, in addition to receiving an annual pension of $186,000 from the government? Or if Clinton is just charging “whatever the market will bear” for his speaking services, how is that different than highly-skilled managers charging “whatever the market will bear” for their managerial services?

Carpe Diem

Proclamation of Pardon For European-Americans

From George Mason Economics Professor Walter Williams’ “Proclamation of Amnesty and Pardon Granted to All Persons of European Descent“:

Whereas, Europeans kept my forebears in bondage some three centuries toiling without pay, Americans of European ancestry are guilty of great crimes against my ancestors and their progeny.

But, in the recognition Europeans themselves have been victims of various and sundry human rights violations to wit: the Norman Conquest, the Irish Potato Famine, Decline of the Hapsburg Dynasty, Napoleonic and Czarist adventurism, and gratuitous insults and speculations about the intelligence of Europeans of Polish descent,

I, Walter E. Williams, do declare full and general amnesty and pardon to all persons of European ancestry, for both their own grievances, and those of their forebears, against my people.

Therefore, from this day forward Americans of European ancestry can stand straight and proud knowing they are without guilt and thus obliged not to act like damn fools in their relationships with Americans of African ancestry.
Carpe Diem

Challenge: Raise Taxes on Your Rich Selves Now!

All of the major Democratic presidential candidates would allow the 2003 tax cuts for wealthier households to expire. Most support raising the cap on income subject to Social Security taxes. Some want to raise taxes on capital gains and other investment income.

On Capitol Hill, a leading Democrat – Rep. Charles Rangel - has proposed an additional tax on wealthy people and a levy on hedge fund managers to help pay for easing taxes on the middle class.

In 2005 (most recent year available) it took income of $145,283 to be in the top 5%, according to IRS data. Members of Congress earned a base salary of $162,100 in 2005, putting each member of Congress into at least the top 5% category and making them part of the group most would agree is “the rich.”

Given Bill Clinton’s $9-10 million in income from speeches in 2006 (see a list here), the Clintons are probably the kind of super-rich Americans in the top 1/10 of 1% that John Edwards has in mind when he unveiled his plan to raise taxes on the rich: “The top 300,000 income-earners in America now make more than the bottom 150 million combined. Our tax code has shifted most of the burden onto the backs of working Americans.”

When a presidential candidate like John Edwards or Hillary Clinton, or a tax-raising member of Congress like Rep. Rangel, tells us that they think taxes should be raised on the rich (which includes themselves), isn’t it a fair question to ask them how much they voluntarily added to their tax bill this year, and how much they plan to add next year? After all, if they think “the rich” should pay more taxes, shouldn’t they already be doing so voluntarily?

Challenge: If taxes increases for “the rich” are a good thing, the members of Congress and presidential candidates (all part of either “the rich” or “super-rich”) don’t have wait for the Bush tax cuts to expire or for Congress to pass new tax legislation, they can immediately raise taxes on themselves voluntarily by making a gift to the U.S. Treasury.

Here is the link to the Treasury’s website with instructions for politicians, presidential candidates, or any citizen who wish to make a general donation to the U.S. government into an official account called “Gifts to the United States.”

For example, what if Edwards, Rangel or Clinton proposed legislation to force everybody to “donate” 5 pints of blood every year. Wouldn’t it be a lot more credible if they were already donating blood themselves right now voluntarily, and not waiting until they were forced to “donate” blood by their own legislation
Carpe Diem

Quote of the Day: You Can Fight Or Ignore Economics, But Economics Will Win Every Time

Attempting to put all the drug dealers in jail is simply not possible. There is a demand for their job function, so the only effect of jailing somebody who has taken on that job is to create a job opening at a higher pay rate.

The War on Drugs is a War on Economics. You can ignore economics if you want. You can even fight economics. But economics is going to win every time.

~The Angry Economist

Carpe Diem

Alcohol Nannies and The New War On Alcohol

David Harsanyi, a columnist at the Denver Post, is the author of the book “Nanny State: How Food Fascists, Teetotaling Do-Gooders, Priggish Moralists, and Other Boneheaded Bureaucrats Are Turning America Into a Nation of Children.”

Part of the book was published in the November issue of Reason Magazine as an article titled “Prohibition Returns! Teetotaling do-gooders attack your right to drink.”

A D.C. police officer who arrested a middle-aged mother of two driving in Georgetown after eating in a restaurant and having only one glass of wine (only 0.03% BAC), was quoted as saying “If you get behind the wheel of a car with any measurable amount of alcohol, you will be dealt with in D.C. We have zero tolerance …. Anything above 0.01, we can arrest.”

Note: That would mean that .0001 of you blood is alcohol.

From the article:

Drinking is under attack these days in ways we haven’t seen since the failed experiment with national alcohol prohibition in the 1920s. Indeed, for many neoprohibitionists, that experiment wasn’t a failure at all, since it did cut alcohol consumption, which is all that matters. We can see that mentality today in policies that go beyond preventing drunk driving or punishing drunk drivers and aim to discourage drinking per se.

Pretty scarcy stuff from a very interesting article.

(HT: Society and Money)

Carpe Diem

Top Ten Reasons That $100 Oil Won’t Last

1. The amount of oil in storage tanks around the world is near all-time highs.

2. Supply below ground is abundant. The world’s proven reserves are now at 1.4 trillion barrels, up 12% in the past 10 years.

3. Production is set to increase. Sustained high oil prices have encouraged drilling. There are 45% more oil rigs in service today than there were three years ago.

4. The cost of production is much less than $100 a barrel, about $4-30 per barrel. Oil prices can fall heavily without making any of this production uneconomic.

5. Iranian exports aren’t likely to be cut.

6. High prices are pulling back demand. Oil consumption in the U.S. fell by 1.3% in 2006 and world-wide demand grew only 0.60%.

7. High prices are forcing governments to cut subsidies (Iran, China), which should curb demand growth.

8. On a relative basis — comparing the amount of energy bought with a dollar’s worth of oil with a dollar’s worth of natural gas — the price for natural gas is now about half that of oil, further suggesting that $100 oil is not sustainable (see chart below from today’s NY Times).

9. A weak dollar doesn’t justify $100 oil. Since Aug. 22, the dollar is down by only 8% against a basket of currencies while the oil price has risen by 40%.

10. Speculation is artificially boosting prices.

Source: Wall Street Journal article “Why $100 Oil Can’t Float