Two or three times a month I have the privilege of listening to desperately poor people tell their stories. It seems as though virtually every one of them I have talked to in the last several months has either lost his/her food stamps or had them cut. Last Thursday I interviewed a disabled homeless man with no income whatsoever who had lost his food stamps. He has called repeatedly, trying to schedule a review, but has been unable to reach anyone. Since he has to borrow a phone to make the call, he cannot leave a return number. Millions of others as well have been affected by recent benefit cuts, including even military families. After food stamp cuts last summer, the Pentagon estimated that as many as 5000 active duty military families would have their assistance cut. While Congress cuts aid to desperately poor people who struggle just to survive, our government subsidizes exorbitant salaries for contractor executives. This infuriates me.
To get some idea of just how much contractor executive salaries drain from the federal budget, I want to focus on just one contractor industry, military. The top five military contractors in 2012 paid their CEO’s an average of $21.5 million dollars each. Another contractor, Honeywell, not among the top five, paid its CEO $37.5 million. Since federal contracts provided a substantial portion of those contractors’ earnings, then we as taxpayers funded a significant portion of those exorbitant salaries. If, for example, we assume that each contractor earned half its income through government contracts, an estimate that is probably on the low side for many military contractors, then we taxpayers actually paid half the salary of each CEO, or $10,750,00. On the other hand, the starting pay for an army private first class is $20,760. For a five star general, the maximum salary is $227,244. Whose service has greater value for us—that of the CEO or that of the military man or woman who risks life for us all? Why does our government pay the CEO 47 times as much as the general and 517 times as much as the pfc?
What is true of military contractors is likely to be true as well for other contractors. In 2012, just 77 small businesses that do most of their business with the government paid their top five executives a total of $644,000,000. No doubt our government subsidizes the pay of thousands of contractor executives with total subsidies amounting to tens if not hundreds of billions of dollars.
Would it not be reasonable, then, to set guidelines for contractor executives’ pay? We could base contractor salary limits on executive or cabinet level government salaries ($200,000) or on the average salaries of military general officers (about $225,000), using a simple formula to determine the maximum amount of contractor executives’ total compensation: amount of the government salary divided by the percentage of the corporation’s total income provided by the government. For example, based on a cabinet level salary of $200,000, maximum pay for employees of a company whose revenues from the government amount to 40% of its total revenues would be $200,000 divided by .40, or $500,000. Or we could simply set the maximum pay for contractor executives at $200,000 and refuse to do business with companies that pay executives more.
Obviously, we cannot change existing contracts, but we can certainly refuse in the future to do business with corporations that pay such exorbitant salaries. This is not dictating executive pay; companies can pay their executives as much as they wish. And we can, if we choose, refuse to do business with those who fail to limit their executives’ pay. That, after all, is the way the free market is supposed to work. If I don’t want to buy a company’s product because the company pays its workers too little or its executives too much, that is my privilege. Surely, the federal government has the same privilege.