The people running for Congress campaign on doing what is best for the country. But is that what they do once they are elected?
Consider this: If a member of Congress must vote on a bill that will help the country but would not be good for their own financial interests, how will they vote?
A. They will vote for the good of the country.
B. They will vote to protect their own financial interests.
If you chose A, then you are incredibly naive. Most in Congress (almost all Republicans and far too many Democrats) would vote to protect their own financial interests. That's just a sad fact, and it's verified by a new study byJordan Carr Peterson and Christian R. Grose printed in the Legislative Studies Quarterly.
You can read the whole thing here. The study's conclusion is posted below:
In general, the results indicate that decision‐making in Congress regarding regulation and deregulation of the financial industry and economy depends on much more than the traditional political determinants of legislator behavior. Legislators’ financial self‐interest, and in particular the amount of their personal investments in the industries subject to regulation, oversight, and intervention, play a larger role than district characteristics and play a role that is relatively large even when compared to the impact of legislator party. These results suggest important normative considerations of how legislators' roles as representatives are impacted by their personal preferences. On these high‐profile votes in the lead‐up to and during the financial crisis, legislators relied on their private interests to make decisions. This is particularly significant in the context of the policy choices examined here, as they represented unusually large direct market interventions by Congress in the American economy. The deregulation of financial services, as well as the extension of hundreds of billions of dollars in toxic asset relief, are uncommon votes but extremely important for American society in the scope of economic consequences. That legislators were systematically more likely to support legislation based on their personal‐asset‐allocation choices implicates normative concerns regarding whether and when collective decision‐making by elected officials advances the public interest.
Political scientists know that legislators are self‐interested seekers of reelection and demonstrate self‐interest in other choices made in their capacity as representatives. What we argue is that they are also financially self‐interested. Members have the ability to consider their own personal preferences and personal financial interests when making decisions. Other scholars have argued that personal preferences and backgrounds of legislators, such as the race or religious affiliation of legislators, are associated with roll‐call choices. Our findings, though, are much more normatively troubling than this work on legislator personal preferences. When racial or religious minority legislators cast roll calls to express personal preferences, these roll‐call choices are often reflective of minority‐group status. When legislators consider their personal investments in making public policy decisions, this behavior simply benefits the legislators personally and other shareholders. Legislators making policy choices in their own financial self‐interest do so not to benefit marginalized racial or religious communities to which they identify, but instead to benefit financial interests. Legislator personal preferences based on financial self‐interest is more normatively concerning as it is driven by a public official’s personal economic bottom line.
We have presented a theoretical argument that is new in the literature: House members behave in ways that will help their personal financial interests. While it is unlikely they choose public service in order to protect their assets, once in office the drive for financial enhancement and protection is important. More research should be done on the financial holdings of members of Congress and their decisions, and more work is also needed to probe how frequently personal financial interests—separate from constituency or party—drive members’ decisions. According to our theory, decisions on which committees to serve, committee voting, roll‐call voting on other policies, and other policy actions by elected officials are likely influenced by elected officials' financial interests. Future research could also examine if legislators purchase stocks of companies in their home states or constituencies more frequently than elsewhere, perhaps as a signal to constituents.19Further, our empirical analyses are associational, given that personal financial investments are not randomly assigned to legislators. Thus, we must be cautious in our interpretation of the results, but we encourage future scholars to consider ways to more causally identify the empirical relationship between financial investments and policymaking, as well as to apply our argument to observational analyses of roll calls or other financial regulations happening before or after the era we examine.
Future research should also examine whether members of Congress are punished for this self‐interested behavior. Given reelection rates of incumbents, we may surmise they are not. Most US House members are electorally safe, and even with increasing partisanship in US House elections (Jacobson 2015), most members still win reelection. This electoral safety provides an opportunity for House members to vote in the interest of their stock market investments. Further, even though these were all major votes, the relative complexity of many issues in financial policy make it harder for constituents to observe and make the link between members' financial holdings and roll‐call votes. The transparency required since Watergate for House members to disclose their personal financial holdings is a good government reform; however, if constituents cannot observe and connect the roll‐call votes of members to their financial holdings, it allows for members to act on financial self‐interest.
Finally, this self‐interested behavior was legal. In 2012, the STOCK Act was passed. This Act mostly prohibits trading on inside information developed through their work in Congress. Of course, the associations between financial holdings and roll‐call voting we uncover here would not have necessarily been prohibited even by this Act. If a member has held an asset for some time and then votes for a bill that would increase the value of the stock asset, this would not be a violation of the law as it is not a trade based on inside information but instead a protection of existing assets. Further, it is not prohibited by law for members of Congress who are exposed to the stock market generally to allow this exposure to influence their policy decisions. Future policymakers may want to consider prohibitions against voting on bills when members own a very large amount of stock in firms or industries influenced by the bill, even if they are not actively trading such stock. On the other hand, prohibitions on equity ownership may deter many people from running for office. Policy proposals to limit the ability of members to vote in ways that enhance their financial interests may cause some good candidates on other dimensions not to run.
