The Economics of the Revolving Door

Though it is sometimes portrayed as a liability, the so-called revolving door in American politics — referring to the change of parties in the White House and the resulting flux in political appointees — is actually quite a good thing. This system allows for a steady exchange of people between the public and the private sectors in senior-level positions. With good reason, that is often viewed as more refreshing and stimulating than the situation in other countries which rely solely on civil servants for most of the senior positions in government.

Private-sector experience can be useful for subsequent government service, as it ensures that officeholders have plenty of real-life experience. Conversely, having served in an important government job can advance one’s career upon returning to the private sector.

This is very much what’s on the mind of people in and around Washington these days. According to many estimates, about 3,500 senior-level administration positions will need to be filled with the arrival of the Bush Administration. Republicans come in, Democrats go out.

They key question, of course, is which of the two sides got the better deal. As far as people’s life-cycle planning is concerned, this is not just a matter of wanting to stay in political power. After all, there are times when you want to serve in government, even though you are likely to make comparatively less money. And then there are times when you want to be in the private sector — and make up for the income foregone during the years of government service.

Of course, you want to serve in the government whenever the people have voted your party into power. But it is even better, at least from a strictly personal perspective, if that coincides with times where the stock market and the economy as a whole are not doing too well. That way, you aren’t losing too much income by being on the government pay scale.

Thus, aspiring Republican office seekers are currently asking themselves with good reason why anyone would want to stay in the private sector right now. The odds are that Wall Street and the other U.S. stock markets will at best move sideways for quite some time — after it has ended its current downward spiral.

Under those circumstances, business executives can read the writing on the wall. Whatever stock options may be granted to them, are in all likelihood not going to be worth anything, since the overall stock market is stagnant.

With few incentives for an attractive payout in private sector jobs, what better time than to serve in the government? And what sweeter revenge on one’s predecessors in office on the Democratic side than to send them off into the private sector when the markets look flat. At least, the Democrats aren’t going to be making any real money during their time in the private sector.

And with the stock market boom of the 1990s, the Republicans could not have sought a better period to be outside the halls of government than the years of the Clinton Administration. While all the Democrats’ men and women toiled and tilled heavily to staff all the levers of government, their Republican counterparts were busily raking in stock bonus and option packages galore. Oh, what sweet revenge.

There is one caveat, however, in this otherwise clear-cut scenario. If the stock market doesn’t perform too well — and if the overall economy doesn’t to grow very dynamically either — isn’t that bad for the guy who serves in the Oval Office? Couldn’t those circumstances condemn him to a one-term presidency?

That is quite possible, of course. But, strictly examining the issue from the perspective of personal gain maximization, those folks coming in now might not worry too much. After all, few people want to serve in top government jobs for very long. Hopefully, the policy work one does while in Washington will improve some conditions to smoothen the path of the economy. And hopefully, that work will be good enough to give the President a second term (so that one’s deputy may take over one’s current job before too long).

But if it doesn’t turn out that way, it’s not the end of the world. The main thing is that you get back into the private sector when it booms so that you can buy that 10-bedroom house on the shores of Martha’s Vineyard the next time around.