Actually, one critical glance at the data shows that, while the DJ rose from about 3500 to about 9000 between 1993 and 1998, so the US senators managed to beat the market by about 2% annually, which is good, but not fantastic, so your premise is not easily supported by evidence.
I don't think you're reading the paper correctly.
US Congresspeople don't make a lot of money in salary - most make $174,000/yr. They could easily make several times that much as consultants. They do, however, have insider information giving them very large returns on the stock market. For that, or other reasons, many of our representatives care more about keeping their jobs than about not wrecking the economy.
Most discussion of incentivizing assumes that higher pay leads to higher performance. The logic is that higher pay leads to wanting more to keep the job, which leads to higher performance. But the second link in this chain is weak. Sometimes higher motivation to keep the job leads to lower performance. CEOs are motivated to hide losses with accounting tricks, military officers are motivated to deny and cover up abuse by their subordinates, teachers are motivated to inflate their students' test scores.