Could we just not prohibit lawmakers from investing in particular stocks, but rather to only invest in the market as a whole (e.g. via ETFs) and/or in government bonds?
> Could we just not prohibit lawmakers from investing in particular stocks
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].
It's authored by a Republican congressman, and is a bipartisan flop, with only 100 total reps sponsoring. It's true that of those few who are sponsoring there are more Democrats, but overall most Democrats oppose which is also enough to block the bill, same as Republicans.
80 Democratic cosponsors out of 213 Democratic representatives.
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.
It's not a flop without a vote. I can agree with that definition. It's then not a "blocked" bill without a vote either. Right?
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.
Blocking it outright is probably more than what I want. I think if they can only invest in things like S&P500 funds that would suffice for me. Force them to invest more broadly in a way that it cannot interfere with the market.
Alternatively, instead of disclosing on a huge delay, have them disclose instantly. We have the mechanisms to do this nowadays.
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.)
Instant disclosure would allow ETFs, which is probably the best option.
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.
> 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).
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.
Restricting public servants to only government bond investments would be a great way to discourage anyone with financial sense from running for congress.
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.
It's not so challenging and it happens widely in industry: people are often heavily restricted in the range of trading they may conduct in cases where their business would give them insider knowledge, such as in certain parts of banks, accounting firms, credit rating agencies etc
> It's not so challenging and it happens widely in industry:
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.
You're creating a straw man (perhaps accidentally) which makes your argument seem such stronger than it is against the actual proposals.
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.
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.
Ha! The supreme court (what a joke) has said that it's cool to give "gratuities" after the fact to judges or lawmakers who do what you want. It's not a bribe, it's just a gift or a tip!
Well, currently we have a ton of Congresspeople who are primarily motivated by their "good financial sense" (for obvious reasons e.g. this study). So, I think we could do with a few more Congresspeople with less financial sense and more genuine motivation to improve the lives of their constituents.
> discourage anyone with financial sense from running for congress.
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.
Even the most disruptive proposals in these comments aren't banning representatives from being rich, it's just banning them from adding extreme amounts of additional wealth while in office.
It may be acceptable for them, but I'd prefer people who have financial sense in charge of the budget and people who are so power hungry as to forgo money kept as far from governance as possible
Only moreso than the counterfactual. The status quo only rewards those with financial sense who are willing to be a little corrupt, which undermines the effect. Really, we should just pay them 7 figures
And if you consider "I'm not as rich as I am physically capable of being" to be "punishment", you have absurd priorities and should not be in congress.
There's so much more to life and the world than the number on your portfolio for christs sake.
People have this mindset like they are the buddha or something, and then you show them a trick to save 25% on every amazon order, and they are all over like addict shown a pill stash. So dumb
> Restricting public servants to only government bond investments would be a great way to discourage anyone with financial sense from running for congress.
The flip side is it also discourages anyone primarily looking to profit off it, rather than being interested in actual governance.
People think that quality governance is all about the intelligence to know the best rules to decide for the greater benefit of society. Politicians behave badly because of incentive. Good rules would require correct incentive, not merely higher quality individuals. Intelligence doesn't dissuade corruption of power, if anything it accelerates it.
Unintended side effect might be that congress would use their power to make bonds a more profitable avenue of investment, creating a very reliable, high-interest retirement vehicle for average people (rather than getting into the roulette wheel of the stock market). Imagine if USG-backed 15% treasuries were a thing?
Where do you think the money for those 15% interest payments would come from?
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.
> would be a great way to discourage anyone with financial sense from running for congress.
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.
Right now congresspeople are only paid about $200k. People who want that position are likely to be people who plan to profit off of it in other ways, at the expense of the nation. We should pay congresspeople more, as well as increasing trading and lobbying restrictions, to help attract honest, capable candidates.
Agreed. The whole idea that they are in it for the “service” is a really naive idea. If we want honest hardworking and qualified people to do the job the salaries should be in the 500k to 1.5m (senate) range. Then knock out the corruption.
According to this link [1] 200k would put someone above the 80th percentile and not far below the 95th percentile in terms of household income for the DC metro area, so I don't see how that could be considered "underpaid", especially when you consider the benefits.
The type of person who gets elected to Congress is likely to be far above average in charisma/intelligence/skill, and hence underpaid relative to what they could attain in the private sector
I mean, it sounds dumb, but returns from further wealth are logarithmic; after a certain point, the only thing you can buy more of is power. And you’ve already got that, in this case!
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.
i'd support that if and only if it required congresspeople to divest from individual stocks. with perhaps some compromise like...maybe they could hold "total market" index funds, or are only able to trade once a year, or etc
> Restricting public servants to only government bond investments would be a great way to discourage anyone with financial sense from running for congress.
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.
>Running for congress is already kind
of a financially silly thing to do
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?
To what end? Most congressional actions that could conceivably lead to insider trading benefit aren’t directed at single companies anyway. They’re directed at sectors or policies which impact many companies, which is easily captured by ETFs.
If Congress is acting on singular companies, the congress people are usually smart enough to avoid obviously trading that singular stock.
> They’re directed at sectors or policies which impact many companies, which is easily captured by ETFs.
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."
That's why populist movements raise its head from time to time. It's the human's self-cleansing mechanism -- very damaging, and usually burn much more than necessary, but whatever.
More importantly, why would you want to restrict public servants only to low interest rate government bonds? That would select out most people with decent financial sense from taking the job.
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.
Because this topic makes people mad and makes politicians who oppose it look bad, which hurts electability. Not to mention it seems like non-elite politicians wouldn’t be affected, so for them this is an easy publicity boost.
