Bloomberg View: The State of the Union Is ... Eh; Singapore's Pay-for-Performance Plan

The State of the Union Is … Eh ● Singapore’s Pay-for-Performance Plan

A Speech Wrapped Around a Paradox

Osama bin Laden shouldn’t be the only man capable of getting Democrats and Republicans to work together. In so many words, that was the message of President Barack Obama’s State of the Union address.

Obama’s 65-minute speech began and ended with references to the U.S. military’s killing of bin Laden. In between was a grab bag of programs and proposals that would require Congress and the President to “work together”—a phrase or variation thereof that Obama used five times. At least he didn’t pretend this was likely, acknowledging that most Americans believe “nothing will get done in Washington this year, or next year, or maybe even the year after that, because Washington is broken.”

Obama’s ideas for fixing Washington aren’t necessarily bad, but they raise a chicken-egg problem. Congressional reform is necessary to eliminate congressional gridlock, but congressional gridlock is what prevents congressional reform. And congressional gridlock is a function of partisanship as much as process.

This being an election year, partisanship isn’t likely to diminish as November approaches, making Obama’s agenda even less relevant than usual. All the same, it has some items to recommend it. His proposal to allow foreign-born entrepreneurs and students to stay in the U.S. would help the economy. And Obama has a strong case that people who make more than $1 million a year should pay a higher tax rate (whether 30 percent, as the President proposed, or something else).

Other proposals were disappointing, misguided, or nonsensical. There was precious little about deficit reduction. While calling for tax reform, the President also proposed complicating the tax code with credits and incentives for clean energy, tuition, veterans, and various manufacturers. His rhetoric about China—he bragged about stopping “a surge in Chinese tires,” as if it were part of the North Pacific Drift—is simplistic and has the whiff of protectionism. After declaiming the need to rescue the U.S. auto industry, he declared that the federal government should offer “no bailouts, no handouts.”

Maybe it’s too much to expect a speech like this, especially in an election year, to be logically coherent or ideologically consistent. In that case, what such speeches have to offer is a sense of possibility and, not to put too fine a point on it, partisanship: The President, it is usually noted at this point, is both head of state and leader of the party. Obama is a talented speaker and skillfully alternated between pointed warnings about class warfare and gauzy calls for shared responsibility.

Which brings us back to the killing of bin Laden. In the speech, Obama used the raid to show what U.S. troops could achieve when they “worked as a team.” Speaking to 535 members of Congress, he didn’t need to elaborate.

Higher Wages Lead to Less Corruption

Singapore’s Prime Minister, Lee Hsien Loong, isn’t often taken publicly to task. But when you make S$3.1 million ($2.4 million) annually to run a country, people expect results. When they don’t get them, the aggrieved masses turn to that lowest-of-common-denominator gripes: Hey, how much are we paying this guy?

Lots, compared with Barack Obama, who makes $400,000 a year. So Lee’s compensation will fall 36 percent, to S$2.2 million, and that of Singapore’s President will drop 51 percent, to S$1.54 million. The cuts were based on the recommendations of an advisory committee formed three weeks after last May’s elections, when opposition party candidates made hay with the pay issue—and the ruling People’s Action Party won by the narrowest margin since independence in 1965.

Such still-fat paychecks may give pause. Yet let’s applaud Singapore for what it’s trying to achieve by paying top salaries to leaders and ministers: attracting the best and brightest to public service and reducing the temptation to engage in graft. Done properly, such initiatives can make government more efficient and economies more vibrant. Transparency International has ranked Singapore among the world’s top five least-corrupt governments since 2001, and, according to Worldwide Governance Indicators, it has also been among the best governed.

Since the 1997 Asian crisis, the region’s other governments have had a mixed record in holding public servants to account, making growth more efficient, and creating the institutions—independent judiciaries, central banks, and media as well as freer watchdog groups—needed to clean up political and economic systems. One way for Asian countries, home to a big share of the world’s households living on $2 a day, to boost their economies is to increase the pay of their civil servants.

Take Cambodia, which ranked at the bottom of a recent regional Transparency International corruption survey. Its government workers pad their paltry, sporadic pay by demanding bribes for everything from birth certificates to school grades. One oft-cited International Monetary Fund working paper argues that paying civil servants twice the wages of manufacturing workers is associated with a reduction in corruption. In Cambodia, civil servants make less than half what a garment worker makes.

In China, corruption is the common link between state-owned banks doling out billions of dollars to cronies, land grabs by local officials, and the negligence that killed 40 people in a high-speed rail crash last July. If Beijing paid higher salaries, it might reduce the incidence of graft that aggravates the lopsidedness of China’s development. There’s a saying in Asia that the real money is in government. Not the paychecks, but the kickbacks. More capitalism at the highest levels of public service should make capitalism itself more efficient and equitable.


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