In light of the arrest of Rod Blagojevich – the Illinois governor who is alleged to have attempted to sell a vacant senate seat earlier this week, the Club for Growth blog asks, “How much does a Senate seat cost?”
First, Senators make a base salary of $167,100. Assuming a person joined the Senate at age 44 and stayed for two terms, and adjusted for 2% inflation with a 2.7% discount rate (10-year treasury), the net present value would be ~$1.9 million.
But membership in the Senate carries more than just a salary. After two terms in the upper chamber, a retiring Senator can become a well-paid lobbyist. Assuming a very conservative base salary (in today’s numbers) of $318,362, a Senator-turned-lobbyist could make ~$4.5 million over another 12 years.
But that’s not all, Senators are given a lifetime pension starting at age 62. The average annual pension is currently $60,972. If payments started in 18 years and continued until death at 84, the total amount received would be ~$1.8 million.
If you discount everything back to today, the net present value of the Senate seat would be ~$6.2 million.
Kerching!
Blagovich wasn’t asking for anywhere near that much, allegedly. At least not according to the charges filed against him:
ROD BLAGOJEVICH stated that he is interested in making $250,000 to $300,000 and being on some organization boards.
There were other mooted perks too, but even with those larded into the bargain, the ballpark Blagojevich bonus is less than Club for Growth’s senate seat net present value.
Of related interest: a question posed by Tim Harford a couple of years ago: why do lobbyists spend so little?
There are now 35,000 registered lobbying groups in Washington, and they spend more than $2 billion every year trying to influence what Congress does… Federal government spending is about $2.5 trillion a year-or very close to a nice round $10 trillion in a four-year election cycle.
Tyler Cowen mooted a theory.
If your winning coalition demands too high a bribe from interest groups, you will be undercut by another coalition able to deliver the policy for less. Government is not a unitary agent.
Rod Blagojevich, of course, doesn’t appoint Senators. He can only hope to influence the decision. He is one agent in the Illinois government. Other agents in that government, as Cowen notes, will undercut his influence. And was he being undercut? Certainly. And probably, you’d hope, by people willing to influence the decision for free.