It's even more damning than that I think.
>we find that lawmakers who later ascend to leadership positions perform similarly to matched peers beforehand but outperform them by 47 percentage points annually after ascension.
The same person makes more after being put in a leadership position than before. That essentially removes any possibility of 'well maybe they're just more knowledgable and that's why they're in leadership.'
A person typically picks stocks based on some view of the future: what’s going to be valuable, how the world is going to change, etc. Presumably, a congressperson does the same when drafting legislation - try to move the world in the direction they think it should go. The underlying worldview and outlook is the shared variable, and congresspeople in leadership positions are more capable of moving the world the way they think it should go than anyone else. The increased stock performance is because someone in congressional leadership’s predictions for the future are more self-fulfilling than most.
(Again, that’s the best steel man I can offer, and if you made it this far without laughing, I commend you)
Maybe I'm simply too dumb to interpret this paper, but overall I find it unconvincing of anything notable or scandalous.
At this point, there's a whole body of evidence
https://www.sciencedirect.com/science/article/abs/pii/S10590...
https://www.brennancenter.org/our-work/research-reports/cong...
https://www.pnas.org/doi/10.1073/pnas.2501822122
https://www.sciencedirect.com/science/article/abs/pii/S00472...
https://campaignlegal.org/sites/default/files/2022-02/Congre...
The Unusual Whales piece says that in 2023, Democrats had 31% returns, Republicans 18%, and SPY was 25%. Doing a weighted calculation, I get (31212+18222)/(212+222) = 25% exactly. So that piece provides some strong evidence that in that year, Congress did not outperform the market, despite attempting to imply the opposite.
Your other links are just general speculation on the subject, and in fact link 4 even says "House and Senator stock returns are consistent with random stock picking."
I do think Congress should probably be restricted from options and maybe short-term trading in general. But I get frustrated by all these doomers who think Congress is corrupt and doing insider trading all the time when there's just not any generalized evidence for it.
Don't these people get a salary already? If "serving the people" isn't enough as an incentive, maybe they shouldn't be in a position for serving the people?
Outlaw politicians owning stocks at all, it makes no sense they ever could in the first place, when the incentives are so obviously misaligned. It simply lives too much room for misbehaving actors, no matter how much bandage you put on top.
Running an election campaign as anyone but a filthy rich person means you have to accept a brown bag at the beginning with a lot of implied conditions. Sortition means it's at least possible you get someone who isn't looking for the brown bag.
I mean sure, but sortition has tons of it's own problems, and it's actually pretty easy to reduce the requirement to take a bag before you can run a campaign, because this is something every other democratic country manages.
The US is the only country that allows you to run campaign adverts years ahead of time. That's expensive. The US has no limits to campaign contributions in the first place, and no ceiling on campaign spending. The US has loudly declared that it is right and just that the mega rich oil Baron can pay for literally every single campaign if they want, and unilaterally control who has access to his funds for getting elected. The US Supreme court has declared that it is a good thing that the oil baron can always outspend average people to get their needs heard.
Maybe fix the part of our country where we allowed the supreme court to insist that more money should give you more access and control over government. Maybe fix the part where half the country insists that we should elect "Businessmen" who will run a country like a "Business" because that's somehow a good thing, and that having someone who has direct business interests that are contrary to the interest of the general public run said government is a good way to do things.
It's like thinking that Pharma adverts are bad and so we should destroy the pharma industry. Like, no, chill, just ban pharma adverts like the rest of the world.
The bigger risk with sortition is that power isn't granted through a title, but through people agreeing to respect that title. If the authority of that title ends up being undermined, then it's entirely possible for power to shift from our representatives to other, probably more entrenched, groups. One could argue that on many issues this is already the case. For instance Congress ostensibly has oversight over the intelligence agencies but the power relationship there is completely reversed. For those that don't know, Congressmen don't have classified access by default. Millions of people in the US have classified clearance, but the people representing the country at the highest level - nah, why would they need such a thing?
Less sure on senators.
But on the whole I agree with term limits for Congress.
The problem is getting the house full of lifers to agree to the real swamp of government (it’s Congress).
I'm only half kidding - yes, there are outliers, many of whom probably should have retired years ago (but not because they've been around too long, but because they're simply too old to do the job - Pelosi and McConnell come to mind). But, the range of term limits that are usually discussed are already within the existing range, so it doesn't change all that much.
I doubt a minority/majority leader with only 2 terms would be as good at snaking in this kind of stuff in, or snaking their way through the politics of various committees to kill off proposed legislation before it's voted upon, that takes practice to really get good at all the underhanded techniques.
I'd absolutely support a maximum age limit, maybe e.g. if you will reach 70 years of age in your term of office you cannot run. So a senator could be elected up to age 64. A Representative up to age 68. And I'd apply that to all elected offices. My biggest criticism of Biden vs. Trump was that they were both too old.
We want the stability of someone who has seen life’s ups and downs and understands there is more to life than the petty day to days of a presidency. There is a legacy beyond them and they imbue that in their policy.
Age can be a symptom of your inability to do this, but it is not the problem.
The problem is with specific mental ailments and behavior coming into the presidency. We should scrutinize those ailments heavily, and build a culture around stepping down when life inevitably gets to you too — and having it taken from you if you do not take the opportunity for mutual dignity.
The problems that afflicted Biden could happen to anyone at any age. It is a problem if any candidate experiences it.
And I do not really think age has effectively changed Trump’s view of the world.
Also, where are you getting these numbers?
How realistic is this though? Getting elected to Congress usually means having some other prior government experience, or your opponents attack you with "why would you give this person responsibility at a congressional level if they've never even worked in local politics?" Not to mention you need name recognition, a history in government that people can use to understand your values as acted, relationships in government to accomplish anything.
As I get older it seems that liberal democracy basically requires career bureaucrats to function. I'm very open to discussing other ways of organizing society, but if we're gonna do liberal democracy, seems this is the way.
I would contend there are plenty of people in lower levels who can move up or not. Was the mayor of the next town over any good and thus I want to send them onto state congress? Was a library board member two towns over good and I want them in the US house? For that matter, do they run a good honest business (there are lots of businesses) that I can check out locally and thus I want to risk them.
The real key is that term limits need to apply to everyone and so nobody will bother asking about experience as there isn't anything more on their side to fall back on.
Though in the end you are probably right - doesn't mean I like it.
> As I get older it seems that liberal democracy basically requires career bureaucrats to function.
I agree, but the people in congress should not be the career bureaucrats.
It's always funny to me how much people hand wring over politicians and then they somehow believe that putting someone who currently and actively has large personal interests and incentives to make government worse for people for their own gain is somehow a good thing
If you think politicians doing things to affect their bottom line through stocks is bad, surely you recognize how crystal clear and more direct the incentive is to do that kind of thing when your "asset" is your own business that can't be easily pivoted and depends on labor being cheap and desperate?
Nevermind that those kind of people just usually have radically different worldviews about what a government SHOULD do, and that worldview almost never allows for government preventing them from harming people for profit
Even to the extent it isn't true, a plumber followed by a chef followed by ... ensures that whatever they try to do that benefits themselves is checked soon enough by the next person.
Career politicians with most power who reach the top will always be good primarily at one thing - bullshitting their way to the top in various sociopathic manners that no power structure anywhere is immune to. Those who are inside the circus for 30+ years? Expect them to be rotten to the core while wearing very polished masks, seeing and dealing with the worst and staying on top. Not a place for a nice good hearted well intending folks.
Don't expect some common good to come out of them just because it would be nice or proper thing to do, either its by mistake as a byproduct of some other effort or some pre-election campaign.
Also, let's take a step back:
> where does the power accumulated by long-term congressmen go
We need to take a very hard look at any supposedly democratic system in which power is "accumulated" by individuals. Deeply entrenched politicians who never face term limits nor reelection resistance have no reason whatsoever to care about the will of the people.
Ding ding! I think that's the real problem. If I were king for a day, I'd end gerrymandering and replace it with non-partisan (probably algorithmic) districting. And I'd shit-can partisan primaries and introduce approval voting or instant-runoff (or something similar).
Make an argument that actually supports this rather than asserting it.
Most people who study this kind of thing outright disagree.
Lobbying in the US doesn't happen because we let people work in government for a long time, plenty of other countries do that, it happens because we are one of the only places that legally empower rich people to pay for the campaigns of elected officials and have one of the most expensive political campaigning systems in the world and we openly claim lobbying to be a right of rich people.
Political parties in the US yet again come back to just how absurdly expensive running a campaign is in the US, largely because we refuse to regulate it. Other countries don't allow candidates to run advertisements a full year in advance because that's wasteful and stupid. Candidates are beholden to the political parties for campaign funding. Even Bernie suckles the political party teat to maintain his seat.
If you don't fix that but you limit the ability of a politician to gain mindshare simply by doing a good job in congress (because you only give them two terms) all you have done is make it easier for rich people to control who can get elected.
Indeed, even the US system used to be better! The Civil Rights Act was bipartisan, with meaningful republican support, because there used to be socially progressive republicans! There used to be racist asshole democrats! When the Clinton government was cutting programs, prominent republican representatives from Texas were actively working with prominent Democrat representatives to maintain funding to the particle collider project there. But as America continued to enshrine the right of the rich to fund politicians, and continued to let campaign costs balloon to the point that only a rich person's super PAC or the literal party establishments could afford to run one, what did you expect to happen?
Trumps power over the republican party is fascinating because it largely isn't money based. He's just so populist among republican voters that he can unilaterally control who gets elected regardless of funding. This is generally a fucking bad thing, because trump sucks, but it's just a more direct version of what the Democrat and Republican parties have done for a few decades now.
Are you aware that both democrat and republican lawmakers spend most of their time on the phone calling and begging rich people to fund their next election campaign, even right after an election?
None of this goes away with term limits. All you are doing is giving the people who hold the purse more power over elections.
How good would you be at your job if you had to spend a few million dollars every four years to keep it? How good would you be if your company's competitors were loudly offering to pay that burden?
Guaranteeing they never get good at their job, and institutional knowledge keeps decaying.
We need to stop pretending that Congress or any of these elected positions don't require skills. I think to be a Congressperson you have to go to specific trade school--let's call it Congress U--graduate with high honors, serve in some other government capacity, and your grades are public record. Only then are you qualified to even run for election.
Democracy isn't about letting any random firebrand run things. Heck, we don't even let random firebrands install electricity.
If there's one qualification test I would possibly support it would to pass a high school AP US History exam.
I don't know if you've been paying much attention to US politics since the year 2000 but the vast majority of them are no good at their job regardless of how long they've been there.
> We need to stop pretending that Congress or any of these elected positions don't require skills.
I don't think anyone does? But currently the only real skills you need for attaining high US office are 1) be rich and/or have enough rich people in your phone book or 2) the ability to make Donald Trump feel like a special boy.
> Democracy isn't about letting any random firebrand run things.
waves in US/UK/Argentina/Brazilian politics over the last decade
It's uh, king for a day, with checks and balances on human cruelty via chaotic caprice. How likely is that world to be worse than ours? If so, how much worse? If not here and now, then which counterfactual geography or year would you have to transported to so that this randomized process is definitely preferable?
History has shown everything we have tried ends up worse than what we have, but that doesn't mean there are not things that could be better. Only that we need to be really careful not to make things worse in a way we can't get out of in our attempt.
For another datum consider presidents' second term. This is often where they are supposed to be able to really act out their vision for the future since they're ostensibly out of politics after this and have at least 4 years of experience at the highest level, yet they almost invariably tend to be extremely underwhelming.
I'm not arguing there is no skill, but I am arguing that just spending a lot of time in office doesn't seem to correlate much with achieving that skill.
It probably, on net, increases the power of elites and decreases the power of ordinary people, which increases the already extreme tilt in that direction. Like with a lot of things, it depends on the virtue of the elites in question whether this is a great idea or a catastrophic and oppressive one. As we can see, our current elites are so shameless they blatantly trade on privileged knowledge and can’t even manage to pass a budget for the country.
This can work. We do accept accreditation for lots of aspects of the economy, and though none of them is a perfect system, does for the most part keep quacks out of certain trades.
This means you want them to do a job for four years when it takes them two or three to learn how to do it.
To me, the above seems slightly complex, but well worth undertaking in order to stop this blatant and shameless corruption.
As we’ve seen with the current president, though, it’s much more difficult when they own and control whole businesses instead of just fungible securities. To be fair to the president, there isn’t really any reasonable way to get rid of his massive conflicts of interest besides having a pre-inauguration IPO for all his companies and retaining 0 shares - and his family retaining nothing too. But that’s a bigger problem that probably cant be solved.
Stocks though, it would be easy, they just don’t want to solve it.
For similar reasons, all presidents are newbies. The benefits of having one with lots of experience would be vastly outweighed by the downsides...
The counter counter argument is that you could be a career politician working your way up: two terms at city council, two as mayor, two as governor etc…and by the time someone is voted into the national stage they presumably have decades of experience.
We are not the first people to come up with this idea.
I think it is generally believed that the less time legislators serve the more power accrues to the bureaucracy and other non-elected positions.
This is also an undesirable situation. Possibly worse than the disease, so to speak.
I really think the best and maybe only way to avoid this wealth building nonsense are much harsher term limits — public service should be severely limited to prevent people from being in decades long positions to abuse it. Term limits also prevent the incessant campaign fundraising to some extent, because say you're limited to 2 terms... there's not much point in personal fundraising on your last one
BUT in exchange, you, your immediate family, and any business, LLC, or other similar vehicle you are a named party to as a consultant, beneficiary, owner, or investor must divest of specific investments and can only hold the equivalent value of an index fund that tracks the general market. Or, you can remove yourself from the investment/ownership vehicle during the term you serve as a congressperson.
Problem solved? Probably not, but it's an interesting thought experiment. I'm sure there are a bunch of loopholes I haven't fully through through, too.
The problem with "blind trusts" is that even blind men wink and nudge. It's quite hard to police a veritable horde of Congressmen who pinky-swear to never pass information along to friends, relatives and various other associates, employed by them or otherwise.
And I know that the next stone to be cast is "yeah, but if they help friends/business associates beat the market, congresspeople can still benefit with board seats and jobs when they're done with congressional terms". That's totally valid, and I have no idea how to combat that.
They should only be allowed to invest in a fund that is open to public participation. This should also be public information. You should be able to pick a congresperson and invest in the exact same funds that they do.
1 - $174,000 is the current salary. With that, they have to maintain two households (one in DC, one in home district/state). That salary is far from unusual for white collar workers in major metro areas.
That should take the edge off any money seeking schemes. It's hard to bribe the wealthy!
For 435 congress people and 100 senators, that adds up to $5.35B, which is about 6 hours of federal spending.
They probably do more than just pay a lot though.
Congress should be paid minimum wage. They are the ones who determined that this is enough to live on so everything above that is wasteful spending of public funds. If they don't think it's enough, they can change the minimum wage to a liveable amount.
Singapore pays its public officials high salaries primarily to ensure the integrity and quality of its government. The official justification centers on attracting top talent who could otherwise command high incomes in the private sector, thereby establishing a "clean wage" that reduces the financial incentive for corruption. Salaries are explicitly benchmarked to the median income of the nation's highest earners.
e.g.,
Singapore PM annual salary: ~$1.63 million USD
Singapore President salary: ~$1.14 million USD
(These are the highest public salaries in the world for politicians)
There's no good reason to stop anyone from owning stocks. It's part of any sensible person's retirement strategy. The issue is whether there's a conflict of interest there, and blind trusts or broad market ETFs are two good ways of addressing that issue.
Other alternatives include announcing their intention to trade in specific stocks several months in advance of doing so, so that even if they know about specific long-term future advantages a company might have, it's public knowledge and others can also trade in a similar way. But the easiest solutions by far are blind trusts and broad market ETFs.
Congrescritters already have a retirement strategy provided to them for free courtesy of the American people: a pension.
On top of that, many of them never retire, they just hold power and keep collecting paychecks until the day they die.
I get the sentiment that they shouldn't be in it for the money. But money is important even for idealists. Let's say someone wants to serve the people, but not enough to take a $174,000/year salary with a lot of travel and needing to pay for lodging in a remote city, when they could be making $500,000/year at Facebook instead. Would you say that this person doesn't want to serve the people enough, and shouldn't run?
Maybe you would, but the problem is that you mostly won't get people who want to serve even more. By paying a relatively low salary, you'll end up getting:
1. Idealists with poor prospects in the job market.
2. Extreme idealists with good job prospects.
3. People who think they can leverage the position to make enough money to offset the difference in pay.
4. People rich enough not to care about piddling W-2 income.
In practice, categories 3 and 4 will win. According to https://www.quiverquant.com/congress-live-net-worth/, 107 members, or 20%, of Congress has a net worth of over $10 million. That net worth is in the top 2% of their age group. 16 members, or 3%, have a net worth of over $100 million.
And of course people don't tend to attain substantial net worth without having an eye for ways to make money, so it's very likely that those people will abuse their position to make money as long as they think they can get away with it.
I'd rather see a substantially increased salary, something like $1 million/year, so that ordinary people with decent skills can see serving in Congress as something they don't have to sacrifice for, financially. That would create a lot more competition for those positions and push out some of the extremely wealthy ones.
Who's talking about a second living space? They can move like most Americans do for work when the commute is too much.
> Let's say someone wants to serve the people, but not enough to take a $174,000/year salary with a lot of travel and needing to pay for lodging in a remote city, when they could be making $500,000/year at Facebook instead.
Then they can go work for Facebook. Who cares what they would like to have.
> Would you say that this person doesn't want to serve the people enough, and shouldn't run?
Yes.
> Maybe you would, but the problem is that you mostly won't get people who want to serve even more.
Source?
> In practice, categories 3 and 4 will win. According to https://www.quiverquant.com/congress-live-net-worth/, 107 members, or 20%, of Congress has a net worth of over $10 million. That net worth is in the top 2% of their age group. 16 members, or 3%, have a net worth of over $100 million.
Before or after they started their career?
> I'd rather see a substantially increased salary, something like $1 million/year, so that ordinary people with decent skills can see serving in Congress as something they don't have to sacrifice for, financially.
Ordinary people don't have the expectation of needing to be payed $1M to serve their country.
> That would create a lot more competition for those positions and push out some of the extremely wealthy ones.
The wealthy ones just use their wealth to get ahead.
> Before or after they started their career?
Does it matter? You don't get that kind of wealth from $174,000/year. Either you came into the job with it and thus are in category 4, or you didn't and you managed to build that wealth despite not having a salary that would produce it, meaning you're in category 3.
I don't understand how you envision moving for the job would work. You think a member of Congress from, say, Oregon should live full-time in DC? That certainly doesn't sound like a "serve the people" situation, that sounds like a "completely insulated from your constituents and always surrounded by insiders" situation. In practice, representatives are only in DC about half the year, and the part where they're not in DC is an essential part of the job.
But your link doesn't answer your statement which was that you wouldn't find people more willing to serve if you were to lower the salary.
Your link lists congressional representatives net worths which is a biased dataset which only looks at the type of people that currently run for Congress but also the money they managed to accumulate in sometimes illegal ways during their tenure (in Congress or other political appointments).
> Does it matter? You don't get that kind of wealth from $174,000/year. Either you came into the job with it and thus are in category 4, or you didn't and you managed to build that wealth despite not having a salary that would produce it, meaning you're in category 3.
Or you made that money through insider trading which is the topic at hand.
> I don't understand how you envision moving for the job would work.
You sell your house or rent it out and then you buy a train / plane ticket.
> You think a member of Congress from, say, Oregon should live full-time in DC?
Sure, that's where the votes take place.
Congress representatives have reimbursements of up to $367 per day which is enough for them to pay for travel, lodging and food costs while back in their state.
> That certainly doesn't sound like a "serve the people" situation
This is already the case right now: https://www.cityandstateny.com/politics/2020/05/house-candid...
> that sounds like a "completely insulated from your constituents and always surrounded by insiders" situation
Well you do have to be elected first so that means you still need to be known and liked in that district.
Their job is not only in DC though.
They have significant responsibilities in two locations, which could be a 16-hour plane ride away from each other. It would be more expensive in many locations to get temporary housing for the months when their responsibilities were in their constituencies.
The back-and-forth would be extra burdensome for families (kids in school, partner with job, etc).
Also, House terms are only two years. They'd need to be prepared to disrupt their families' lives on ~60-days notice, every two years.
My understanding is that many Representatives, especially, keep their house at home, and rent in DC (often with other Reps as roommates).
None of this is insurmountable or particularly egregious. Many of us have had to do worse! But it selects against people with ordinary adult-responsibility lives, which I would argue are the kinds of people we want to select for as representation.
> Or you made that money through insider trading which is the topic at hand.
Right, that would be the thing I mentioned where people leverage the position for money beyond the salary. I’m not sure you’re actually understanding what you’re replying to.
The point is to level the playing field, not to become so restrictive and punishing that the job only appeals to politicians who are so self-sacrificing that they don’t exist as much as people want. Stocks also aren’t the only place where politicians could leverage their positions for personal financial gain.
I think the simplest way forward would be to require immediate, not delayed, disclosure of trades. If they’re doing something, let everyone see it immediately and it specific detail.
We could also implement some planned trading requirements for large purchases of individual stocks: If someone wants to trade more than $100K of something, make them announce it 7 or even 1 day in advance. They still get to buy it, but the market can front-run the investment if they believe there’s inside info at play.
If Congress is acting on singular companies, the congress people are usually smart enough to avoid obviously trading that singular stock.
The abstract doesn't seem to agree. The use of "firms" and "corporate" implies individual companies.
"purchase of stocks whose firms receiving more government contracts and favorable party support on bills. The corporate access channel is reflected in stock trades that predict subsequent corporate news and greater returns on donor-owned or home-state firms."
Banning trading outright is impossible and won't happen.
Congressional staff and congresspeople (and their families + extended families) should be forced to trade via an exchange that publicly discloses immediately, and any person on public dime needs to disclose specifically WHY they made the trade or, there needs to be some sort of mechanism that forces said congressfolk to disclose their trades 48 hours prior to execution, and held for at least X amount of time. Any selling of security needs to be announced well ahead of time.
Running for congress is already kind of a financially silly thing to do, that ship has sailed. Let’s pull the trigger on this and just see what happens.
Evidently it's not. There's another problem that it seems to me that it's mainly wealthy elite who get in. How many working class people are there in major leadership positions?
Cards on the table: I just don’t think people operate with single incentives like that, and even if they did, it’s a cost I’d pay easily.
Congressmen's salaries need to increase by 10x.
What's wrong with that? "If you choose a life in government, you'll never be rich, but you may be powerful" seems like a perfectly acceptable situation.
We don't stop athletes who use the gym regularly from competing because all the guys using steroids also went to the gym a lot.
And you're conflating "being financially intelligent" with "being primarily motivated by profit and personal gain".
A conman is often "financially intelligent", too, but what they're inclined to do with that intelligence matters.
There's so much more to life and the world than the number on your portfolio for christs sake.
Restricting people only to government bond investments (the first line of my post, the point I was responding to) does not happen widely in industry.
Restricting people’s trades of a few stocks where they have insider knowledge does happen. I would be in favor of laws against congressional insider trading, too, but not laws forbidding all stock ownership or restricting them to government bonds as was proposed above. That’s just short sighted.
Neither the comment you replied to, nor the proposed law, suggest the limit should be solely government bonds, which is what you're arguing against in your comment, they both say government bonds OR publicly traded diverse stock funds, for example ETFs.
Maybe you still believe that's restrictive enough to be a problem, but considering many people, even the likes of Warren Buffet, consider the best investment advice to be either "just invest in ETF/funds that track the whole market" or "just invest in a mix of ETFs/funds and also some bonds", while nobody considers "just invest in government bonds" to be good advice, your argument would be a hell if a lot weaker if actually applied to what IS being proposed rather than pretending that the proposal only allows investing in government bonds.
The flip side is it also discourages anyone primarily looking to profit off it, rather than being interested in actual governance.
There are historical examples of what happens when lawmakers mandate high amounts of money creation. It doesn’t end with the people being better off. It usually destroys the economy.
[1] https://statisticalatlas.com/metro-area/District-of-Columbia...
If you’re in a situation where getting more wealth could endanger your power, it makes sense not to wealth-max since, again, what else could you buy with it? But you need to get into the “what else could you buy with it” regime for this reasoning to make sense.
Someone who only has basic needs gets there pretty early. But even the relatively unenlightened don’t need the second jet except, yannow, for power.
So it's better to encourage people without any morals?
I think we need politicians who have the financial sense to see that the government is built to serve people whether or not they're invested in the market. As it is now now we've completely failed the American people.
You're talking about HR 5106 [0] (aka the "Restore Trust in Congress Act"), currently being blocked by Republican House leadership, and actively facing a discharge position by the House rank and file (Republican included) to force a vote [1].
[0] https://www.congress.gov/119/bills/hr5106/BILLS-119hr5106ih....
[1] https://www.cbsnews.com/news/congress-stock-trading-ban-disc...
I don't know where the Overton Window is today, but it's a long way from Jimmy Carter's peanut farm.
Ironically, somewhere I was walking around on Sunday. Pretty place.
Source: https://www.govtrack.us/congress/bills/119/hr5106
It also blocks stock trading entirely for congressmen, which is dramatically different from what gp was suggesting.
The bill is sponsored by 37% of Democrats
22 Republican cosponsors out of 219 Republican representativs.
The bill is sponsored by 10% of Republicans.
I think you might be jumping to conclusions by calling it a bipartisan flop. Co-sponsorship is not the same as a vote, there may be people not on the sponsorship list who would vote for the bill.
The bill was introduced 3 months ago (43 days these last three months was a government shutdown) and not enough time has passed to determine whether the bill will be a "flop" or not.
I'm certainly not trying to seem like I'm jumping to any conclusions. But we should like to keep our definitions uniform throughout a given paragraph. Well, at least if we aspire to call ourselves rational.
Even "ETFs" are a big enough hole to drive a truck through in terms of performance, e.g., it's not hard to guess how an oil ETF will perform in response to certain geopolitical events.
We could also apply Presidential rules to all of them. The President has to essentially forgo all ability to manage his or her wealth during the time they are in office. Such shenanigans as they play must either be to benefit someone else, or a very long term play for when they are out of office. This is still what you might call "suboptimal" but it's an improvement, even just the "longterm" part. (We should be so lucky as for our politicians to be thinking about how to goose the longterm performance of our economy rather than how to make a couple million next week no matter what it does to everyone else.)
I think having a congressional required fund that the public could also invest in makes sense as well.
I’ve been thinking about an act to intentionally enrich members of Congress for reducing the deficit (e.g. a fraction of percent of savings certified by GAO goes to district and to member’s fund with a multi year cool off period, saving based on ratcheted down watermark).
The first allows constituents to reap the benefits of their member’s power, the second incentivizes members to be as financially motivated to not spend money as they are to spend money.
There needs to be more incentive to be wise with that money though. If a representative decides to “fall on their sword” and cut spending on local infrastructure projects, they enrich themselves while impoverishing their constituents. Other reps probably won’t jump in to save a district they don’t represent. I would worry that this would make politicians fleecing their neighbors even worse.
1. Only things that approximately match the contents of TSP funds or broader
2. Have to write down a 10b5-1 for the entire duration of your election plus one year, with a double cooloff period (6mo vs 3mo), and have to extend it within 3mo of each successful election.
The situation right now isn't just corrupting, congress-critters are labeled as idiots by their own if they don't actively take advantage of "perks" like free stock tips that would be illegal in any other context.
The "everyone does it" excuse is what keeps this house of cards up. And it is not partisan, both D's and R's inevitably become rich if they stay in the house for more than a couple of terms.
Fundamentally you can classify modern society into two groups: government and commercial citizenry.
The incentives of these two groups are misaligned and that is essentially the origin of all corruption.
The commercial citizen, his goal is to make money, compete and to do so by bending the rules and using any means possible.
The government, his goal is to be fair, to enforce and follow the rules, and to guard citizens.
When you combine these two groups the incentives collide. You get government officials who are supposed to be fair but instead they are incentivized by commercial interests so they make biased laws, take bribes and do all that shit.
To reduce corruption you really need to create societies made up of two different groups with two different sets of incentives.
Dictators are more immune to this effect because all of their commercial incentives are pretty much completely fulfilled as they own the whole country.
In a democracy the closest sort of thing I’ve seen to this is priesthood. Buddhism or becoming a monk is similar but these are not elevated leadership positions like priests.
Basically when you become a government official it should be like becoming a priest. You are removing yourself from commercial society. It changes everything. Your incentives are different and it even filters out all the bad actors.
Such a society can realistically exist. I think the unrealistic part is converting our current society into something like this.
The second potential issue is one of pay - the best of society can make far more in a commercial setting than in a government setting - barring corruption, of course.
These people who become priests do so for other reasons and they largely want to exit the commercial economy. That’s the type of people government should be made of. Under this system pretty much 100 percent of politicians wouldn’t have even become a politician.
https://www.allpastors.com/top-20-richest-pastors-in-america...
Yes, priesthood is perhaps not a traditional path toward achieving $100M+ net worth. Yet people have gotten there that way…
has it been shown that a salary would actually remove the incentives for corruption? maybe for some but greed is a strong incentive.
Sure, forbid them from making investments. What about “consulting” work? What about private company ownership?
What about their spouse? Are they also forbidden from all activities? Family members? In-laws?
I feel like there are too many ways of self-dealing that would be hard to prevent.
It should be a social stimga that voters care deeply about. But voters would have to first care to vote…
I don't have a great solution for the 2nd issue you pose though. Raising the pay of elected officials is often politically unpopular, but you're certainly right that one makes more in the private sector than as a junior congressperson.
So they aren’t really immune to sector changes (like a bill banning AI would crash it very heavily).
I'd go one step further: upon election you have to convert all equity assets to US bonds.
This conception of "citizen" is even more depressing to me than Homo Economicus. There are values aside from wealth, and not everyone is a money grubbing sociopath.
Conversely, if you somehow solve that, it brings forth a new problem: the "govenrment citizens" are now an alien society, with little understanding of lives of people they serve. To borrow your priest analogy, it's like Catholic priests giving marital advice to couples - it tends to be wildly off mark, as celibacy gives the priest neither experience nor stake in happy marriages.
My concern would be that the "skill" we're seeing isn't with using insider information, but with using their power to alter outcomes to make whatever investments they'd previously chosen become profitable post hoc. If they're causing our regulatory landscape to be change to pad their wallets, that's going to have a much greater effect on our overall system than just being able to make a trade a day earlier than the rest of us.
I am. I work at a company that trades publicly. My wife works at a firm. I can’t do anything with my stocks outside of three weeks a quarter. I can never buy options. My wife has to clear her positions with whatever department. If I have these obstacles, congress should absolutely have them — maybe more. Ideally they can trade index funds and that’s about it.
This jealousy is a minor issue, though. There's no reason for you to believe Congresspeople should have exactly the same limitations and opportunities that you have. This is in fact a discussion that involves limiting them from doing things that you would retain the right to do.
The problem is how they govern.
For me, if I can improve the lot of everyone by at least X%, but doing so means that some few people will actually get a benefit of 2X%, that's a darn good deal. Withholding the potential X% from those poor people just because it's not fair seems rather cruel. We may have the luxury of wanting things to be fair, but there are some people for whom those X% will make all the difference.
By that logic why have equality for anything? Why even have civil rights if you can just be like “that’s just the way it is, why should you be able to vote? I’ll vote for the best of all our interests”. It doesn’t work that way.
> For me, if I can improve the lot of everyone by at least X%, but doing so means that some few people will actually get a benefit of 2X%, that's a darn good deal.
In an altruistic society, maybe. But economic theory is based on the idea that everyone will try to do what’s best for them and not for the masses. Congress sets the laws - so they are more interested in benefiting themselves than anyone else. Therefore we need a forcing function, and one way would be to clamp down on insider trading.
They should be more accountable, not less.
Well, that's the problem, right there. We shouldn't be thinking about making new laws that they also won't subject themselves to. We should be thinking about shoring up the rule of law, and ensuring that they are always held accountable.
Unfortunately, today's partisan politics prevents that from happening. The partisans - on BOTH sides - behave as if it's more important that their own side appear faultless and all guilt falls on their opponent. So partisans ensure that those on their own side will get a free pass.
It's not the effect on the market you should be worried about. It's the effect on democracy. If you have a culture of people comfortable with doing very well thank you off the back of the broad knowledge they have access to that is not-quite-non-public-but-buried-in-the-minutes, then you are tolerating the first tier of the rot.
The second tier of the rot is insider trading.
The third tier is the insider trading that is happening when nobody cares, like in the current regime.
The third tier of the rot is the grift. You can see the grift happening now.
You have to go broken-windows-policy on this or you have nothing.
The SEC enforcement of Insider Trading laws is also simultaneously both ineffective and created high-profile wrong cases which get people with influence to further weaken it.
Seems to me the best solution to all of the above is to simply require ALL trades to be open and transparent with the ultimate beneficial owner and the trade available in real-time. Pharma scientists & execs start buying/selling their stock unusually? Easy to setup trackers so we know it in the same second and can also take advantage of their knowledge that their new drug trial succeeded/failed, and it will eliminate much of the insider-trading edge. A congressperson buys/sells a bundle of shares of a company in his state? Again, we see they're likely getting/losing contracts soon, and again, much of the margin disappears.
Traders would rapidly setup hedge funds and ETFs to ensure this happens in milliseconds, and much of the advantage and problems of insider trading being unfair disappear, along with a lot of enforcement cost.
Obviously just a concept, what are the holes?
You are trying to stop people from using knowledge for gain... In a system that is fundamentally designed to reward using knowledge for gain. Fully enforcing insider trading law requires slicing of categories and resolution of ambiguity that creates the same problems it does in the other knowledge market law: decisions that feel unfair even if the letter says they aren't, people getting away with things that feel wrong on a technicality, and the whole category Congress people fall into where it's impossible to do their job and not obtain enough market knowledge to be leverageable.
I don't have enough historical knowledge to know if this was always a problem and we just weren't sensitive to it or if past generations were more modest or magnanimous and either didn't take advantage of what they knew or took advantage of it and spread the wealth around, but I think we might be trying to fundamentally solve the wrong problem.
It is entirely possible that the problem is the asymmetry is the market creates themselves. There may simply be no better, more efficient solution than taxing the hell out of the rich, no matter how they got there.
https://www.nber.org/system/files/working_papers/w26975/w269...
Both papers could be true if congresspeople are worse than the public at picking stocks, but congressional leaders are just better than the average congressperson
It could be possible that someone in Congress has insider information about a specific industry that helps them, but not about a specific stock. For example, if I knew about specific legislation that would impact auto manufacturers I may have a better idea to get in or out of that sector without necessarily knowing if Ford will do better than GM.
To your point about meta-analysis it would also be useful to know if members are worse than normies at picking industries as well.
Real-estate investing is another corruption vector. One way to bribe a politician is to sell them a house at a million dollar discount. The optics become that the politician is a “savvy real-estate investor".
People who make/have more money also have more appetite for risk and also in general make more returns. Even without insider trading, being able to take a lopsided position on tech with the expectation that if it loses you still have a comfortable life, that is how the rich become richer.
You are basically comparing the CEO to middle layer management, and then what do you expect? You need to do a more balanced comparison than that to show an actual discrepancy. Or maybe get congress to dole leadership positions out at random and then compare?
- It’s not just representatives but their staff, family and friends. See the Covid scandals as an example.
- Often the information they’re privy to can come from their networks outside of government. The current transparency laws give us insights into their family members’ investments which is incredibly beneficial public knowledge.
- The current laws have no teeth and are not enforced well. Immediate disclosure should be required & automated for elected representatives, judges, family & staff within 24 hours. Late reporting should be immediate sale and loss of any profits.
1. Sometimes that the project is happening before everyone else 2. If the project will or will not be approved or stopped e.g. in committee 3. Various other classified things like Dept of Defense briefings (if the Army says it needs XYZ component and plans to buy 10 billion worth of them, then buy the company that makes XYZ component).
Based on the dollar amounts, no. What makes it noteworthy is it’s a massive corruption scandal.