Compensation for ex-government officials, then and now
Philip Greenspun's Weblog 2014-03-14
The book Coolidge, which I recently reviewed (posting), relates that the former president was able to earn about $150,000 per year by writing a syndicated daily newspaper column. That’s $2.1 million in today’s money, according to the BLS.gov inflation calculator.
[Coolidge might have been able to spend more than Orszag, however. The top income tax rate in 1930 was 25 percent and that applied only to income over $100,000 ($1.4 million in today's mini-dollars). So let's assume that Coolidge kept about 80 percent of his income after taxes or $1.68 million in 2014 dollars. Orszag, on the other hand, under New York law will owe 17 percent of his pre-tax income to a recent ex-girlfriend, mentioned in the article as having given birth to a daughter. The mother is described as a "venture capitalist" but even if she were to earn $10 million per year that does not affect her entitlement to child support at the 17-percent rate. (New York courts can cap the amount of income on which the 17 percent is calculated, however.) Let's assume that Orszag pays about 50 percent of his income in local, state, and federal taxes plus the standard 17 percent pre-tax child support in New York. Thus Orszag keeps 33 percent or $1.32 million. According to the Post, the child support plaintiff in D.C. seeks $264,000 per year in "direct" payments to herself plus, presumably, additional amounts to pay for the actual expenses of the two children that have given rise to the lawsuit. Politico.com says that the plaintiff seeks $300,000 per year (to supplement a $350,000 per year pre-tax income from McKinsey and $2 million in liquid assets). The Post says that the children attend Georgetown Day School, where tuition seems to be about $35,000 per year (are there any government officials whose children go to government-run schools?). This New York Post article implies that the children are with their father at least some of the time. Thus, in addition to paying for the two kids when they are at their mother's house, Orszag also will pay for these two kids' expenses when they are with him. At a minimum that would entail a bigger apartment so that they can have rooms. The USDA "cost of raising a child calculator" estimates that a high-income two-parent family in the Northeast will spend about $40,000 per year on two kids, excluding "child care and education". Add that to the $70,000 in private school tuition and using the $300,000 per year child support number from Politico and the total is a $410,000 per year after-tax subtraction from income. The Post article says that the $400,000 trust fund established by Orszag for the children's education has been depleted. So he'll need to put away $50,000 per year for college (child support recipients are not expected to save any of the money that they receive). This New York Post article mentions that Orszag had at least one previous legal dispute with this plaintiff, from whom he was divorced 8 years ago. So Orszag may have ongoing legal fees averaging $200,000 per year. That leaves Orszag with $660,000 per year with which to support himself and his current family.]