The Moral Justification of a Ban on Congressional Stock Trading

In the weeks preceding the pandemic, (then) U.S. Senators Dianne Feinstein, Kelly Loeffler, James Inhofe, and Richard Burr sold hundreds of thousands of dollars in stocks. The market later crashed. Briefings on COVID-19 may have tipped them off to an impending economic downturn. These revelations, coupled with the lack of prosecution, have sparked a push to ban members of Congress from owning individual stocks.

Congress has flirted with taking this measure. During the winter of 2022, Senators Elizabeth Warren, Steve Daines, Marsha Blackburn and Debbie Stabenow introduced a bill in the Senate, while Representatives Pramila Jayapal and Matt Rosendale put forward a matching bill in the House of Representatives, and Senators Jon Ossoff and Mark Kelly introduced their own bill in the Senate. None came to a vote. Representative Zoe Lofgreen sponsored a third bill in September. However, it will not reach the floor until the “lame duck” session, if at all. All proposals share crucial similarities; each bars members of Congress, their spouses and dependent children from investing in individual companies, sectors or certain digital assets like cryptocurrencies. If they own these investments prior to entering office, they must either divest or place them into a blind trust.

These bills, however, may be insufficient. First, they only place restrictions on members of Congress, their spouses and dependents. Senator Burr’s brother-in-law sold at least tens of thousands of dollars in stock literally one minute after ending a phone call with the Senator. Second, the punishments take the form of fines or forfeitures of Congressional salaries. This salary is $174k. But this might pale in comparison to potential profits—Senator Burr may have sold up to $1.7 million in stock. Third, these proposals still leave room for significant profiteering. The S&P 500 dropped nearly 20% during February and March of 2020, only to reach all-time highs within a year. Carefully timed buying and selling of shares in diversified index funds, which these proposals allow, aided by Congressional briefings, could yield significant profits.

Regardless, these are practical concerns that carefully crafted legislation may solve. Let us assume that policymakers can succeed. Instead, I want to focus on the moral justifications available in this debate. Should we, morally speaking, ban lawmakers from having such investments?

One might argue that members of Congress, like other citizens, have rights. Among these rights is the right to property in the form of stocks. As soon-to-be-former Speaker Nancy Pelosi put it, members of Congress have a prima facie right to participate in the free market. We need a reason of significant moral weight to curtail this right.

So, some ground their objections to Congressional stock trading in fairness. As Sen. Ossoff stated, “Members of Congress should not be playing the stock market while we make federal policy and have extraordinary access to confidential information.” About 3 out of 4 voters surveyed agreed that members of Congress have an “unfair advantage” in the market. Members of Congress have access to non-public information. Thus, trading based on this information is unfair to the public. Since the nature of work in Congress requires access to this information, we can seemingly only address this unfairness by restricting investments.

However, something may be unfair without being objectionably unfair. For instance, elite athletes can earn significant wealth due to their natural endowments. These capabilities were distributed randomly, and not according to merit. Indeed, Michael Sandel argues that part of what we appreciate about athletes is that their skills are gifts, not the product of merit. Some might think that athletes are overcompensated, given that they play games for a job. But such objections typically appeal to the social utility of athletes’ professions, rather than the unfairness of how they attained their talents. Simply showing that the means by which someone gained an edge was unfair does not show that profiting from said advantage ought to be prohibited.

A better argument for restricting investments by members of Congress appeals to conflicts of interests. Congress regulates the economy. When its members gain financially from specific subsectors of the economy thriving, this may bias their judgment and alter their votes. For instance, members of the media have criticized Senator Joe Manchin for objecting to legislation aimed at combating climate change while profiting significantly from the coal sector.

Philosophers have argued literally for millennia that conflicts of interest must be managed, if not eliminated, for society to function well. In The Social Contract, Jean Jacques Rousseau, viewed conflict between the particular will, what one has an interest in as an individual, and the general will, what is good for everyone as a collective, as the fundamental tension in society. The legislator’s job, according to Rosseau, is to entice the public to match their particular wills to the general will. In the Republic, Plato argued that members of the ruling class should have no private property and instead share all goods in common. According to Plato, it is when the next generation of rulers, with deficient character, begin to seek personal wealth that the just society would decay. (Although it may be worth noting that Plato viewed democratic society as a degeneration from the ideal government.) I do not follow Plato in thinking that public officials ought to live communally, but the notion that restricting what they can own will make them better judges of what promotes the public good seems right.

However, while banning Congressional stock trades may reduce conflicts of interest, this will not eliminate such conflicts. After retiring from public office, many politicians begin new careers as lobbyists or members of corporate boards, and some take lucrative speaking engagements. Candidates for Congress raise vast sums of money – the highest fundraisers taking in tens of millions of dollars. During the 2022 mid-term cycle, Super PACs raised over 2 billion dollars and spent slightly more than half this amount. According to the FEC, these PACs “may solicit and accept unlimited contributions from individuals, corporations, labor organizations and other political committees.” Even if banned from owning stocks, members of Congress may still favor the interests of select groups for personal benefit; they might believe that their hopes for future re-election and employment depend on it. This could lead them to knowingly vote against legislation that would promote the public good or the interests of their constituents, undermining what ought to be the goals of their office.

Of course, eliminating all conflicts of interest would require significantly restricting what members of Congress may own. For instance, owning shares of a whole market index fund would produce a conflict of interest for a member voting on legislation which would blunt climate change, but slow economic growth over the next fifty years. Yet, restrictions capable of preventing this kind of conflict would certainly make Congressional offices unattractive posts. Prudent and competent would-be-leaders may instead seek other careers. As John Rawls states in Justice as Fairness, “…greater returns… serve, among other things, to cover the cost of training and education, to mark positions of responsibility and encourage persons to fill them, and to act as incentives.”

Although one might argue that incentives are unnecessary if all citizens view promoting the public good as a high priority, we are not (yet) in that society. Thus, we need to avoid disincentivizing individuals from seeking office. So, although eliminating certain investments by members of Congress will not end conflicts of interest, perhaps it is an imperfect solution for an imperfect world. Ultimately, given the steady downward trend of Americans’ trust in their government, taking this faulted measure to restore public confidence in elected officials may be better than waiting for the perfect one.

The Current Events Series of Public Philosophy of the APA Blog aims to share philosophical insights about current topics of today. If you would like to contribute to this series, email rbgibson@utmb.edu or sabrinamisirhiralall@apaonline.org.

Nicholas Kreuder

Nicholas Kreuder is a PhD candidate at Binghamton University. He currently teaches at Manhattan College and works as a news analyst for the Prindle Post. His dissertation research focuses on the harm of death, specifically, whether death causes a greater loss for humans than animals.