Tuesday, January 10, 2017

Financial Bias Versus Ideological Bias

by Michael Dorf

My latest Verdict column uses the occasion of the late discovery last week that CJ Roberts had a conflict due to stock ownership requiring recusal in a patent case, along with the confirmation hearings for executive officials who have not yet been fully vetted on potential conflicts as a hook for writing about measures short of a blind trust that can substantially mitigate conflicts of interest for government officials. I suggest that for most such officials--including justices--placing their intangible assets in a broad-based diversified portfolio works almost as well as a blind trust. I conclude by noting that this would work for President-elect Trump as well, were he willing to forgo the "corruption premium" that he gains by maintaining ownership in properties branded with his name.

Meanwhile, with the news that yet another gazillionaire--Trump son-in-law Jared Kushner--will be taking on a formal role in the administration, I want to make what might sound like a heretical suggestion: Although of course financial conflicts of interest are serious and should be avoided, I want to suggest that the reason we pay as much attention to them as we do amounts to a kind of laziness: financial bias is relatively easy to identify and contain, at least as contrasted with ideological bias, which is ubiquitous, potentially very dangerous, and yet considered totally legitimate.

Here's what I mean about the ease of identifying and containing financial bias. In a case between companies A and B, a justice who owns stock in A but not B has a clear potential bias for A. Likewise, a regulator who has a stake in one or more firms (or their competitors) that are potentially subject to regulation can be tempted to make decisions based on what is in her own personal financial interest rather than based on her judgment about what is best for the public, all things considered.

Seen in this light, it is at least a little bit odd that Republicans are pushing forward with confirmation hearings for Trump executive branch nominees without full conflicts/ethics vetting. After all, because Republicans are more likely to be sympathetic to the ideological policy agenda of Trump's nominees than are Democrats, one would think that Republicans would have more to fear from a cabinet or other high-ranking official whose judgment is derailed from its ideological track onto a track that serves the official's personal financial interest, which would not necessarily track ideology. And yet it is Democrats who are asking for delays while Republicans are pressing ahead.

Part of this is simply political theatre, of course. Confirmation hearings rarely benefit the subjects of those hearings. Democrats could use the hearings as an opportunity to question Trump's nominees about some of Trump's more outrageous statements and proposals, putting them in the difficult position of either agreeing with those positions or disagreeing, and thus causing political damage to Trump. Even Republicans who were not big supporters of Trump's candidacy don't want to play along.

But I want to suggest that the seemingly odd lack of interest in the possibility of ethical conflicts by Republican Senators is actually rational, because the bias created by ownership of stock in particular firms (or its equivalent) is relatively modest compared with ideological bias.

Most people with substantial wealth who go into government do so at financial cost, not for a financial benefit. They take a pay cut and are subject to rules that would not otherwise constrain them. They do so for a variety of reasons, including, for people in high-ranking positions, ego-gratification, a desire for power, and a genuine desire to promote their conception of the public interest, i.e., ideology. Except in the case of people who are thoroughly corrupt, ideology will typically be the most salient factor.

We can see this most clearly by noting how poorly the recusal practices of judges and justices match up with what we really care about. Think about some important case in which a key justice was recused or in which people clamored for recusal to no avail. The underlying ground for seeking recusal--a hunting trip with the Vice President, as in a case involving Justice Scalia, or participation in some aspects of a case as SG, as with Justice Kagan--was really quite silly. Everybody knew how the justices were likely to vote based on their priors, having nothing to do with the nominal basis for seeking recusal. In general, liberals want conservative justices recused from all cases and conservatives want liberal justices recused from all cases. We/they only use nominal conflicts opportunistically.

There's no reason to think that things work all that differently in other branches of government. Republican Senators are willing to move quickly past possible financial conflicts of interest of Trump's nominees because they rightly understand that ideology will be a much more important driver of how these nominees, if confirmed, will make decisions. To choose one fairly representative example, Republican Senators are counting on Andy Puzder to bash labor as Secretary of Labor because Puzder believes in bashing labor. They're confident that his ideological druthers for labor bashing will prevail over any countervailing interest that his ownership stake in Hardee's or some other firm might provide in any particular case.

To be clear, I'm not saying that the rules governing financial conflicts of interest are unimportant or should not be enforced. Keeping corruption out of government is vital because it's much harder to clean up a corrupt system than simply to maintain a non-corrupt system. And just because ideology is generally a more powerful motivator for the sort of wealthy person who takes a Cabinet position than the prospect of personal gain, we shouldn't assume that such a person would never succumb to a financial conflict of interest. Thus, even though Senate Republicans are making a rational calculation in rushing through Trump's nominees, everyone would be better served by a careful vetting of nominees' finances as well as their policy druthers.

7 comments:

Joe said...

no audio?

Michael C. Dorf said...

I have the flu so I took the week off to let my voice recover.

Joe said...

ah ... I do wonder why the writers don't just have students do these things but have some vegan soup and be well

CJColucci said...

In these cases, the financial and ideological biases are the same thing. There is no conflict.

Fred Raymond said...

Donald has indeed wasted no time in draining the swamp and then promptly refilling it with the most repugnant creatures yet seen. Mission accomplished.

Clearly, Donald does not intend to be President; he fully expects the office to entirely confirm to him as he is. Do not expect him to behave in any way different after January 20.

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