Treasury Secretary W. Michael Bluementhal plans to ask the heads of the World Bank and International Monetary Fund to put a "cap" on further increases in the tax-exempt salaries.
Because of the exemption the salaries are 30 to 40 per cent higher than they look, and also about the same percentage above those paid for comparable U.S. government jobs.
Bluementhal in an interview scored the bank and IMF salary levels as "excessive" and warned that "if we can't put some limits" on the pay at international agencies, Congress is likely to place restrictions on U.S. contributions to them.
The discrepancy between pay levels at the international lending institutions and U.S. scales comes about because they pick up the tax bills for U.S. citizens and pay generous allowances for dependents.
As an example, Bluementhal pointed out that Edward Fried, U.S. executive director for the World Bank, is paid $47,500. Theoretically, that's a notch below an assistant secretary of the treasury at $50,000. But Bluementhal estimated that Fried's tax-exempt pay is the equivalent of a taxable $75,000 to $80,000, or better than anyone in the U.S. government except the President and Vice President.
World Bank President Robert S. McNamara is paid the equivalent of $116,000, against Bluementhal's Cabinet level salary of $66,000.
According to a World Bank spokesman the bank reimburses its U.S. employees, dollar for dollar, for federal and state taxes, at a cost of about 15 million a year. That provides a salary worth up to $90,000 for any American who happens to be a bank vice-president, up to $70,000 for a department head, and around $60,000 for a senior specialist, such as an economist, IMF scales are similar.
"We're very much concerned about this problem," Bluementhal said. "We just don't think that excessive salaries considerably above virtually everybody in this government are essential . . . That fact is they create great difficulty for us to get the collaboration of the Congress."
He cited the recent action of the Senate Appropriations Committee that reported an aid bill to the floor reducing salaries of six top U.S. officials at the World Bank, the Inter-American Bank, and the Asian Development bank from the $80,000 level to a maximum of $50,000. Whether this provision survives a conference session with the House remains to be seen.
Bluementhal was also highly critical of "lavish" subsidies he said the lending agencies pay for "restaurants, travel of wives, all sorts of things." In a recent floor speech, Rep. C. W. Young (R-Fla.) charged that the World Bank makes personal loans to employees at 4 per cent interest using funds intended "for the poorest of the poor."
Officials at the agencies vigorously contest the charge that their salaries are too high. A World Bank spokesman said in an interview that Bank salaries are less than those paid by the United Nations, or by the European Common Market in Brussels. At all the affected agencies the argument is made that high salaries are necessary to attract highly-qualified professionals.
The tax-exempt status provides a net benefit for a U.S. employee of the Bank, compared with U.S. salaries, the spokesman conceded, "but only because we are in the business of sustaining real wages, as do most governments, with the notable exception of the U.S. government."
The bank spokesman said that the average real wage in the bank has risen less than 1 per cent a year since 1970, and emphasized that "tax dollars" supporting national contributions to the bank "do not pay (our) salaries." The money, he said, comes out of bank earnings on loans.
"We reserve the right to determine how to operate [the World Bank] effectively," he said, "and our salary structure is part of that." As for Young's report of low-interest loans, he said they had been made largely to non-Americans settleing here for the first time, and that none of the funds came from money earmarked for loans.
A key IMF official said the agency "has to pay a significant expatriation allowance to get people to come here. Washington is not regarded as that ideal."
But Bluementhal insists that "we will have to deal with this (salary problem) in some practical way," probably in step-by-step negotiations with McNamara and IMF Managing Director H. J. Witteveen.
Blumenthal recognizes that the salary issue is a difficult and sensitive one for McNamara and Witteveen to handle. No one objects to salary levels except the United States. An effort by former Treasury Secretary William E. Simon to block an IMF increase last year resulted in a one-day walkout.
"The question is: "What is an adequate salary to attrack competent people from different countries to come here to do this job?" Washington is not the Sahara desert, and I really don't think you have to pay someone $100,000 and give them all these fringes to bring them here," Bluementhal said.