Tag Archives: campaignfinancereform

Some Cynical Investing in Washington

One of the problems that we have in the United States is policing some of the more self-interest driven actions made by our politicians. The average congressional member arrives in Washington rich, and leaves richer, and the climate in the nations capital and the laws governing politicians help that process. There are several reasons for this – money in campaign politics, lobbying, and others, but a key one is the investments that our representatives are able to make while knowing more about the workings of the world than the rest of us.

I recently read an article that analyzed a few investments of Congressional members in the context of their committee memberships, specifically around telecom. In many of today’s contemporary issues, including net neutrality, telecom mergers, and other major technology induced policy debates raging across the country, there will be clear winners and losers. Whether that is Facebook, Twitter, Google, Verizon, or Comcast, policy decisions made in Washington by Congress and the FCC will be worth big dollars to big companies. It seems incredibly corrupt for politicians to own investments in the areas that they will craft policy in such a direct manner.

In 2012, in the wake of the financial crisis (when it was possible for someone in Congress to sell Lehman Brothers before the rest of the world knew that it was imploding), Congress passed the Stop Trading on Congressional Knowledge (STOCK, how cheeky) Act in order to loudly and publically declare that Congress would no longer be able to insider trade on information that was available to them. An online database of disclosures, as the thinking went, would help citizens to monitor their representatives and prevent abuses and conflicts of interest. Of course, this only works if the information is easily accessible, which a later amendment “fixed” to make it much harder for the public to analyze the transactions of members. Call me cynical, but this is crony politics at its best, built from a bare desire to profit from their positions. Reminds me of some of the contracts-for-free-mansions deals circling around the Mexican Presidency right now…

In the private sector, there are restrictions and rules governing similar behavior. I cannot own a company’s stock, and have them as a client to which I render professional services. In accounting, consulting, and (likely?) law, there are significant barriers in place to stop financial transactions made with non-public information and importantly, effort is made to avoid conflicts of interest or even apparent conflicts of interest. It is important to have no financial asset that impairs objectivity or gives the sense that one has skin in the outcome of a project going a certain way. We have also had the scandals (e.g. Enron, Galleon) that have shown why these rules are important.

Why not the same for Congress, and members of the Executive and Judiciary that implement and adjudicate matters of law and regulation? If members of the FCC and the committees that govern it have stake in the major telecom companies, how can we have any faith that they will act in an unbiased matter for the good of all?

Our government is supposed to act in our collective interest, not for individual sectors or slices of our nation. Let us create a financial climate that incentivises the right actions. If high ranking members of our government were only allowed to own USD and Treasury bills, or some kind of pre-made basket of securities indexing the market as a whole (basically prohibiting picking individual stocks and investments), I’d bet you’d see them acting more in the public interest. Let’s bar them from holding assets with which they have incentives to support policies that enrich themselves.

What other more neutral investment options could we give Congress? Potentially a shared management endowment / money held in escrow and managed like some of our major universities? What could remove their perverse incentives most effectively? Narrowing their investment options so strongly, while probably the most enlightened option, is not likely to get into law anytime soon, so it would help to think of other similar schemes that might be used instead.

TED Talk – Reclaiming the Republic

Reclaiming the Republic

The attached TED talk was recently sent to me, and I think it warranted sharing – with some comments of course.

Lawrence does a good job of outlining the problem. Money in politics is akin to a cancer – candidates are in an arms race reaching ever deeper into the pockets of the very few to bankroll their candidacies. This of course gives undue political power to those interests, which increasingly control the electoral landscape. Some of the statistics are absolutely staggering. 132 people…

I think he is right, especially in the perspective that everyone knows that this is a problem. He is certainly not the first one to point out the symbiotic relationship between Capitol Hill and K Street, to the determent of the taxpayer as well as to pragmatic and effective policy. There are so many instances where the way that our electoral process is structured leads to sub-optimal outcomes – i.e. corn subsidies are unlikely to end anytime soon due to Iowa’s place at the top of the hierarchy of primary elections. Money in politics is one of the most unsightly issues that is so obviously one of the “first issues” that prevent real reform – in either direction, left or right.

However, I think his overview of potential solutions is terribly lacking in specifics and much oversimplified. Campaign finance reform has always been the the political “boondoggle” for many of the reasons mentioned in the TED talk, above all that the number one exit opportunity for a legislator is to join one of the big lobbying firms. However, it is a web of legislation, law, ethics, freedom, and public opinion – all of which need to be navigated to make any progress.

Dollars are one currency that we have typically regarded as political speech. Unless we reclassify speech as not including money, how can we limit it? If we limit dollars now, what does that mean for potential alternative “political currencies” down the road? Will someone with twitter follower numbers over a certain amount be subject to campaign law restrictions because of undue influence on the electoral process? The legal questions are much more complex than he seems to let on.

While it is not an easy problem to solve, it should definitely be a priority. I’m going to put some more thought into this one.