Arguments Over Stock Ban Reveal Greater Disconnect Between the Public and Federal Government
A study by the Pew Research center found that only 24% of Americans trust the federal government to do what is right “most of the time.” This percentage has significantly decreased from 60% in 2001 and 77% in 1964. This growing disconnect largely stems from disparities in wealth between politicians and the public. Source: Close Up Foundation
Last Wednesday, Speaker of the House Nancy Pelosi announced her support for a federal-government-wide ban on owning and trading stocks. This pronouncement goes against her previous declaration from December 15, when she stated, “We are a free-market economy. They [lawmakers] should be able to participate in that.” While this movement to limit congressional stock ownership has been gaining momentum recently, it is hardly new. A 2012 law called the Stop Trading on Congressional Knowledge Act (STOCK Act) supported by Pelosi calls for greater transparency within the economic actions of congressional members. The STOCK Act attempts to account for the fact that politicians’ atypical access to information often prompts an increased likelihood of insider trading.
Nonetheless, the popularity of potential legislation restricting the financial transactions of lawmakers has grown amongst constituents. This movement represents a greater debate over the status of politicians, and specifically legislators, in relation to the general public. In assuming heightened power and responsibilities, should politicians have to sacrifice common rights like participating in the stock market? Unlike many political issues that define the United States today, answers to this question are not divided equally along partisan lines.
Perceiving a rise in corruption, many politicians hope banning stock trading will improve the public’s perception of their integrity. Senators Raphael Warnock and Jon Ossoff both won key senate races in Georgia by accusing incumbents Kelly Loeffler and David Perdue of insider trading. These accusations alleged that the two had illegally traded stocks based on private briefings about coronavirus at the start of the pandemic. While the Justice Department closed its investigations on both cases, Warnock and Ossoff became the first Democratic senators to represent Georgia since 2005. These victories arguably resulted from public distrust in the financial intentions of Perdue and Loffler. In any case, greater access to information can often tempt politicians to manipulate this knowledge for their own personal gain.
A number of Democratic senators have also introduced a bill that specifically targets the financial activities of the judiciary. While the STOCK act requires certain measures of financial transparency from legislators, the judiciary lacks an equivalent level of financial accountability. In her revised statement last Wednesday, Pelosi noted, “It [the stock ban] has to be government-wide. The third branch of government, the judiciary, has no reporting.” Such assertions reflect greater populist attitudes, that the government has failed to recognize the preeminent needs of the general public. A study by the Pew Research center found that only 24% of Americans trust the federal government to do what is right “most of the time.” This percentage has significantly decreased from 60% in 2001 and 77% in 1964. This growing disconnect largely stems from disparities in wealth between politicians and the public.
On the other side of the issue, a number of lawmakers, especially Republicans in the Senate, have questioned the necessity of a stock ban. Some legislators, like Senator Chuck Grassley, argue that this move would disproportionately harm less-wealthy politicians. With American politicians already so dependent on raising an exorbitant amount of funds for campaigning, a blow to personal wealth could prevent potential candidates from running altogether.
Other politicians have argued that a stock ban would be a logistical nightmare, as their spouses would have to cease trading stocks as well. Senator Mitt Romney specifically addressed this issue, when he stated, “And how do you deal with spouses? You have spouses that are highly accomplished and that are working in businesses. Perhaps they’re actually in the world of stocks or trading stocks. How do you deal with that? So figuring out how to make this work without preventing people from serving is the challenge ahead.” Lawmakers like Romney continue to argue that the 2012 STOCK Act does enough in fostering financial transparency.
With no clear consensus on this issue, lawmakers remain divided on their role in the economy — as well as society in general. For some, politicians have the same right as any other citizen to participate in the free market. Others argue that they forfeit said rights when given access to classified information in order to represent the interests of their constituents. Given the growing disconnect between the public and the federal government, it would not be entirely surprising to see public support for the stock ban grow. Recent successes of Senators Ossoff and Warnock on such platforms further testify to the growing support for this legislation. Pelosi’s shift on the issue also solidifies the popularity of this trend.