Tag Archives: Congress

Congressional Insider Trading

A recent 60 Minutes segment and a new book claim that members of Congress from both parties have benefited financially from inside information obtained in the course of their legislative duties. Not surprisingly, the specific targets of these charges (Nancy Pelosi, John Boehner, and Spencer Bacchus) have denied doing anything illegal or unethical.

Of course, a major part of the story is that these legislators could not have done anything illegal, because there are no laws against insider trading by members of Congress. There are vague House ethics rules against profiting financially from their official positions, but the best I can tell the House ethics process has rarely if ever been used for allegations against congressional insider trading.

Obviously, I am in no position to evaluate the specific charges highlighted on 60 Minutes or the defenses offered by the individual legislators, but there is an excellent study by Jens Hainmeuller and Andy Eggers evaluating whether or not members of Congress earn excess returns on their stock portfolios. If insider trading were pervasive, one would expect congressional portfolios to outperform the broader market. But this is the exact opposite of what Hainmueller and Eggers find. In fact, legislators are generally bad investors. Their portfolios consistently underperform. My personal hunch is that members are often forced into weak investments for political reasons and that this works against maximizing the value of their portfolio. Hainmueller and Eggers find one important exception to congressional underperformance. Legislators do well with their investments in firms located in their districts. They find, counter to the presumed effects of insider trading, that these excess returns are not due to the timing of transactions, but to the superior selection of which local firms to invest.

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Brookings Report on the 110th Congress

Brookings has released a report written by Sarah Binder, Thomas Mann, Norman Ornstein and Molly Reynolds that reviews the performance of the 110th Congress and compares it to recent Republican-led congresses. To compare apples to apples, much of the report concentrates on the performance of the 110th compared to the 104th as both terms mark the ascendancy of a new partisan majority and the establishment of divided government.

The report is negative for the most part. Many of the positives of the 110th are faint praise comparisons with the era of Republican control.

The highlights after the jump.

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Catching Up

My earlier post on the continued high levels of polarization in Congress generated a few comments to which I thought I might respond.

First, both the left and right took some umbrage at how I presented the data. R Weeks protests that

Using the link to read the entire article, I find the information presented fails to support the headline used. It is apparent increased polarization is due to the continued drift right by Republican members of congress…Perhaps the headline should read “Republican Polarization?”

while Liberty responds that

I always have to smile when I hear that Republicans must moderate their positions and show “restraint” in order for everyone to get along. And if one is to believe this article, then Democrats are considered to moderates and reasonable and exhibit a non -polarizing effect in Congress. Ya, right. You only have to look at the number of Republicans representing the Northeast in the U.S. House of Representatives, ZERO, to observe an example of polarization. Good Grief!

It is generally a good sign when you offend both sides, because it means that you’ve also treated both fairly. But let me make a few additional points.

  • R Weeks is correct in that the preponderance of the evidence indicates that contemporary polarization is a reflection of the increasing conservatism of the Republican party. The position of the Democratic party has been relatively stable, pulled to the left only because its southern wing is now heavily African-American rather than white conservative. This is consistent with almost all of the political science research on the topic. In assessing blame for polarization, however, what we would really like to know is how the parties shifted relative to voters rather than to each other. If, for example, the electorate has moved sharply to the right over the past 30 years, the Democrats might be blamed for not going along. But comparing the conservatism of Congress with the electorate is a very methodologically-tricky thing to do, and there is much less consensus on this question. My personal view is that the electorate moved modestly to the right over the last generation (at least until the last 3-4 years) but not nearly as much as the Republican party did. So I do assign the Republicans a very large share, but not all, of the blame.
  • Conservatives and libertarians should not be too upset when they are blamed for polarization. After all, many on the right take great pride in transforming the Republican party into a conservative party. Of course that transformation led to polarization, and many conservatives think that is a good thing.

Second, King Politics adds the following to my analysis:

the breathless reporting by the MSM usually neglects to include how redistricting (generically) makes for less competitive general elections where the primary winner has to run to the wing of his/her party and not to the middle.

I’m going to dissent here. The MSM actually greatly exagerates the effects of redistricting. Keith, Howard, and I have the following paper under review:

Does Gerrymandering Cause Polarization?


Both pundits and scholars have blamed increasing levels of partisan conflict and polarization in Congress on the effects of partisan gerrymandering. We assess whether there is a strong causal relationship between congressional districting and polarization. We find very little evidence for such a link. First, we show that congressional polarization is primarily a function of the differences in how Democrats and Republicans represent the same districts rather than a function of which districts each party represents or the distribution of constituency preferences. Second, we conduct simulations to gauge the level of polarization under various “neutral” districting procedures. We find that the actual levels of polarization are not much higher than those produced by the simulations. We do find that gerrymandering has increased the Republican seat share in the House; however, this increase is not an important source of polarization.

Here’s a copy gerrymander38.pdf.

The Cabinet

That Obama is set to nominate so many former legislators to his Cabinet and senior White House staff provides a rare opportunity for comparing the ideological make-up of the new administration to that of Congress.

With the nomination of Hilda Solis to be Labor Secretary and Ray LaHood to be Transportation Secretary, there will be six former House and Senate members in the cabinet (including Clinton, Daschle, Salazar, and Richardson). Throw in Obama himself, Joe Biden, and Rahm Emanuel, we have a pretty good sample of former legislators to compare to the current composition House and Senate Democratic caucuses.

To gauge the differences between the administration and Congressional democrats, I use Keith Poole’s “common space” measurement of conservatism. This measure is an adjustment of DW-NOMINATE scores designed to facilitate comparison of the House and Senate. Each legislator is given a single conservatism score for her entire career ranging from around -1 (very liberal) to 1 (very conservative). One drawback is that these scores are only available up through the 109th Congress (2005-2006). So I can only compare the cabinet to the Democratic caucuses of that term. Another is that Bill Richardson’s score more than a decade old (but the rest continued to serve through the 110th Congress).

The following table list the conservatism scores for the administration as well as the House and Senate leaders and the medians of the caucuses.

Pelosi -.455
Solis -.451
Clinton -.359
Obama -.343
House Democratic Median -.329
Biden -.326
Emanuel -.323
Senate Democratic Median -.316
Daschle -.278
Richardson -.255
Reid -.251
Salazar -.220
LaHood .265

The evidence is pretty strong that the administration lies considerably to the right of the Democrats in the House, but is reasonably representative of Senate Democrats. But only Solis comes from the most liberal wing of the party. The center of the party is well represented in powerful positions by the president, vice-president, secretary of state, and WH chief of staff while the lower cabinet is filled with more moderate Democrats and a Republican. No wonder Nancy Pelosi is worried about being triangulated.

Of course, maybe the table is misleading because it only includes cabinet-designates who served in Congress. Maybe liberals and progressives are better represented in the other positions. Doubtful. Gates is a Republican. Teachers unions were disappointed with Duncan. Geitner is a Robert Rubin/Larry Summers protégé. Napolitano and Vilsack are red state governors. Shinseki is a hero to the left, but probably not of the left. Donovan appears to be a centrist who worked in both the Clinton and Bloomberg administrations. Holder is a corporate lawyer. So think I that leaves Stephen Chu as the only remaining cabinet member with views consonant with the progressive wing of the Democratic party.

There has been a fair amount of grumbling just below the surface about how poorly progressives have fared. Rick Warren’s invitation didn’t help matters. It will be interesting to see how long Obama can keep the lid on it before it boils over.