I created the Musings Category so that I can include shorter articles in my postings. When I have enough topics for a posting I combine them together in the form of a Randy’s Musings Article. For the most part the postings are just random articles.

Table of Contents

-Reforming or abolishing the Veterans Affairs Administration

-Elimination of pensions for Civil Servants and politicians

-Eliminating Insider Trading in our Government

-Reforming Security Clearance Issues

-Cleaning up the Lobbyist Debacle

-Dealing with campaign contributions, both individual and super packs

-Election Security

-Reforming or abolishing the Veterans Affairs Administration

I think vets should be able to use the same hospitals and doctors as the rest of us. With one caveat, they don’t have a deductible or premiums. This way, they don’t have to travel long distances for services or wait for appointments.

The debate around reforming or abolishing the Veterans Affairs Administration (VA) centers on whether to overhaul the existing system or dismantle it entirely and create a new one. Proponents of reform argue for streamlining processes, improving care delivery, and enhancing accountability within the VA. Abolitionists, on the other hand, propose shifting responsibility for veteran services to private entities, potentially leading to a more efficient and responsive system. 

Arguments for Reform:

• Efficiency and Accountability:Many critics point to the VA’s bureaucratic nature, lengthy wait times for benefits and appointments, and lack of accountability as major issues. Reforms aimed at streamlining processes, utilizing technology, and holding individuals accountable for performance are seen as crucial for improving services. 
• Improving Care Delivery:Proponents of reform suggest that the VA’s direct care system, while providing valuable services for certain veterans, can be inefficient and inflexible. Reforming the system to allow veterans greater choice in how and where they receive care, potentially including private sector options, could lead to better access and higher-quality care. 
• Cost-Effectiveness:Some argue that reforms, such as increasing the use of private providers and streamlining administrative processes, could lead to significant cost savings while maintaining or improving service quality. 

Arguments for Abolition:

• Private Sector Efficiency:Abolitionists believe that the private sector is better equipped to deliver services efficiently and effectively, offering a more streamlined and patient-centered approach than the VA’s often bureaucratic system.
• Reduced Costs:By shifting responsibility to private providers, some argue that the overall cost of providing veteran services could be reduced.
• Greater Choice and Flexibility:Abolitionists suggest that a private sector-driven system would offer veterans greater choice in how and where they receive care, allowing them to access services that best meet their needs. 

Key Areas of Debate:

• Privatization:The extent to which the VA should rely on private providers for healthcare and other services is a major point of contention. 
• Veteran Choice:Whether veterans should have the freedom to choose their own healthcare providers, including both VA and private options, is a key debate. 
• Accountability and Oversight:Ensuring that both VA and private providers are held accountable for the quality of care and service they provide is crucial. 
• Long-Term Funding:The financial implications of reform or abolition and the need for long-term funding stability are significant considerations. 

Examples of Proposed Reforms:

• The Veteran Choice Act:This legislation, passed in 2017, allows veterans to receive care from community providers when VA facilities are too far or if wait times are too long. 
• Project 2025:A proposed initiative that aims to overhaul the VA, including streamlining processes, reducing bureaucracy, and expanding the use of private providers. 
• The PACT Act:This act expands the eligibility of veterans to receive care and compensation for illnesses related to toxic exposure, placing an additional burden on the VA. 

It’s Time To Reform Veterans Affairs

America holds its warfighters to the highest standard, expecting them to defend our nation at a moment’s notice. In exchange, we pledge to support them after their term of service ends.

Unfortunately, that support has long fallen short of the mark. Despite its abundant funds, the Department of Veterans Affairs has consistently failed to provide adequate care for veterans—underscoring an urgent need for thorough auditing and reform.

Now Secretary of Veterans Affairs Doug Collins and the Department of Government Efficiency have a chance to bring that reform.

Under the Biden administration, VA executives received bonuses despite persistent and prevalent leadership failures—a policy that allowed bureaucrats to benefit while veterans suffered.

This meant that longstanding issues, like the backlog of disability claims, remained unaddressed. Some veterans were sent to unnecessary medical appointments, while others were denied essential follow-up care—a failure that tragically proved fatal for at least one veteran in 2022.

Despite receiving record-high funding, the VA remains riddled with inefficiency. In 2024, the VA’s budget totaled $307.75 billion—and the department requested a $32.9 billion increase for 2025. With this increase, the VA’s funding would have totaled $369.3 billion—money meant to enhance health care services and benefits.

Yet somehow, veterans still struggle to access basic health care and disability benefits. The VA’s claims system is a bureaucratic disaster, often leaving veterans waiting months or even years for benefits.

A 2022 VA watchdog report found that 68% of claims were mishandled due to VA representative errors and 38% of cases lacked proper documentation, directly affecting claim approvals.

These errors directly impact medical care and financial support. By 2022, the VA had 635,026 pending disability claims, with 152,560 backlogged for more than 125 days. This leaves veterans victims of a broken system.

But the VA hasn’t just mishandled claims; it has also mismanaged payments. A 2024 VA Office of Inspector General report found that errors in processing disability claims resulted in $100 million in incorrect payments, including $9.8 million in overpayments and $84.7 million in underpayments.

These failures largely stem from the inadequate training of VA claims processors. As of August 2024, one group found, most newly hired processors were trained virtually rather than in person—a fact that resulted in more errors. The Government Accountability Office found the same in July 2024.

Without proper training, the VA cannot effectively serve those who sacrificed for our country.

With the Trump administration now in office, things are sure to change. Already, Doug Collins has proposed using artificial intelligence to speed up claims processing—an innovative idea that may well help accelerate veterans’ access to care.

But other issues, like the VA’s failed transition to a new electronic health record (EHR) system, also demand attention.

A few years ago, the VA attempted to implement an Oracle-operated EHR system to modernize medical records. Overall, estimates suggest that the project will cost $50 billion or more over the next few years—but so far, people have failed to show how it will create a more reliable system.

Instead, when first implemented, this system became a disaster that caused major disruptions to patient care. The issues were so severe that the federal government paused its rollout in April 2023 due to system failures and safety risks.

According to one report, the new system may have contributed to a veteran’s accidental overdose. When the veteran missed an appointment, the system failed to classify him as a “no-show,” preventing rescheduling. No one followed up, and the veteran fell through the cracks.

All this from a system on which the VA is spending $50 billion or more.

Such errors practically beg for DOGE to step in.

Specifically, DOGE should start by examining this massive contract to determine whether Oracle’s deal is truly worth it or whether the VA should stick with VistA, its former system.

Arguments in VistA’s favor abound.

Many VA employees prefer VistA, stating that switching systems complicated their work, slowed claims processing and worsened the backlog. The RAND Corporation reported that VistA costs only $900 million annually to maintain—a fraction of Oracle’s projected $50 billion.

All this makes VistA a far more cost-effective and functional option—a fact DOGE could quickly discover. Then, it could help the VA work to improve and modernize VistA instead of throwing billions at a failing system.

The Biden administration’s VA failures demand immediate action—action the new administration is perfectly positioned to take. Collins and DOGE now have the opportunity to make the VA an agency that delivers results, eliminates inefficiency, and restores veterans’ faith in the system.

To Protect Service Members and Honor Veterans, Reform the VA

The Department of Veterans Affairs (VA) is never more than a few months away from scandal for the often-poor service it provides. Yet poor-quality service is not the agency’s greatest failing. The way Congress structures veterans benefits literally threatens the lives of active-duty service members.

The most notorious manifestation of poor quality at the Veterans Health Administration (VHA) is long waits for care. Long wait times persist because the VHA does not have a price mechanism to move resources from low- to high-value uses.

The VHA aims to schedule medical appointments within 14 days. In 2014, whistleblowers and watchdogs exposed that “more than 57,000 veterans have been waiting 90 days or longer for an initial medical appointment.” Actual waits were much longer because 60 percent of facilities falsified records to make wait times appear shorter. Veterans at a facility in Phoenix waited 115 days for appointments. One whistleblower claimed that 40 veterans died waiting for care.

Congress responded by offering to pay for care outside the VHA for such veterans. In 2019, the Government Accountability Office found the VHA was hiding that “veterans could potentially wait up to 70 calendar days to see a [non-VHA] provider.”

In 2021, more than 810,000 veterans were still waiting more than a month for appointments, while nearly 197,000 waited more than six months. More than 215,000 veterans waited more than four months for disability and pension benefits.

Privatization of the VHA would improve health care for veterans and nonveterans alike.

Rationing-by-waiting causes real suffering. Yet it is sort of a run-of-the-mill failure that plagues all socialized-medicine systems that completely banish prices, like Canada’s Medicare and the British National Health Service.

The VHA outdoes them all by threatening the health and lives of active-duty military personnel.

When Congress or the president commit troops to battle, the cost of providing veterans benefits to those troops rises. Veterans’ benefits are one of the most expensive financial costs of any military conflict. The VA reports that the present value of just the compensation and burial benefits that Congress has promised to current veterans—not including health care, long-term care, or life insurance benefits—reached $6.1 trillion in 2022.

If Congress funded those benefits at the moment it committed troops to battle, Members of Congress would approach that decision differently. Going to war would have required them to take the unpopular steps of spending less on other priorities or further increasing taxes. In marginal cases, pre-funding veterans’ benefits could prevent unnecessary wars or end them sooner.

That’s not how Congress operates. Instead of funding veterans benefits at the moment it commits troops to battle, Congress waits until those bills come due. That is often decades later. Disability payments, for example, typically do not peak until 30 to 40 years after the end of a military conflict.

This “pay as you go” approach allows Congress to ignore what may be the greatest financial cost of that decision. It literally makes it easier for Congress to send active-duty personnel off to their deaths. In marginal cases, such as whether to enter Iraq or when to leave Iraq and Afghanistan, it may well have changed the outcome.

Congress should improve veterans benefits while eliminating the current system’s perverse pro-war incentives.

Congress should pre-fund veterans benefits by increasing active-duty pay. Pay increases should be large enough to enable all military personnel to purchase a standard package of private life, disability, and health insurance comparable to what the VA provides. Pay increases should therefore vary according to the risks to which each service member’s job category exposes them. Service members could then choose among private insurers that compete to offer them the best deal.

Pegging salary increases to risk means that, when military action increases the risk of service-related illnesses, injuries, and death, military pay would automatically rise to keep pace with the greater risk and the resulting higher insurance premiums. Military personnel would draw on that coverage after they leave the service.

Privatization of the VHA would improve health care for veterans and nonveterans alike. The VHA is the largest integrated health system in the nation. Its financing and delivery system does not exist in most markets. Allowing the VHA to compete for non-veterans would force incumbent health care providers nationwide to improve on dimensions of quality where the VHA is strong and they are weak, like coordinating care, conducting effectiveness research, and offering conveniences like electronic communications, scheduling, and medical records.

Congress should then repair the damage the VA’s financing structure has done to current veterans by transferring ownership of the VHA to them. In 2021, the VA estimated the value of its physical capital and investments at $36 billion. Privatizing the VHA would transfer those resources to veterans—and give the VHA’s clients the choice of a health system run by veterans, for veterans.

The right reforms would deliver less war, fewer dead and disabled veterans, and better veterans’ benefits.

Project 2025: Changes to the Department of Veterans Affairs

The Trump administration’s plans for the Department of Veterans Affairs (VA) have reignited fierce debate over whether these moves represent a much-needed correction or an outright dismantling of essential services. While the administration frames these actions as a return to the VA’s core mission—serving veterans—critics warn that privatization, the elimination of diversity programs, and federal hiring freezes and cuts are leaving the agency understaffed, underprepared, and at risk of failing those who have served our country.

These changes also mirror the recommendations of Project 2025—a right-wing blueprint for reshaping the federal government that Trump himself has publicly distanced from. Yet, his administration’s early actions suggest otherwise.

Loyalty Tests and Political Purges

On day one, Trump signed an executive order reclassifying thousands of career civil servants, making them at-will employees subject to dismissal for perceived disloyalty. Shortly after, the Senate confirmed former GOP Rep. Doug Collins—a staunch Trump ally and 2020 election denier—as VA Secretary. These steps are aligned with the political and operational changes proposed in Project 2025 to establish political control over the VA.

Despite reassurances from Acting VA Secretary Todd Hunter on January 21 that critical healthcare positions would be exempt from Trump’s government-wide hiring freeze, uncertainty remains.

Jenny Mattingley, vice president of government affairs at the Partnership for Public Service, warns that replacing career officials with political appointees and gutting the VA staff risks undermining VA expertise in areas critical to veterans’ healthcare.

It’s also clear that preserving “critical healthcare positions” does not mean preserving the quality and speed of care. “Government serves the public,” Mattingley explained. “When you think about Veterans Affairs or national security, those have real implications… It’s, do we have the HR staff? Do we have the data folks? Do we have all the adjacent pieces that make an organization work? There’s a lot of impact to just doing good business if you start arbitrarily cutting folks.”

No Department is an Island

The VA insists that core services remain unaffected, but that promise is difficult to uphold when layoffs and budget cuts ripple across interconnected programs. Many programs are overlapping or interdependent, such as medical research for veterans. Cuts being made to the National Institutes for Health (NIH) affect many VA studies and treatment research. A VA scientist overseeing five studies on terminally ill patients described her department as a “skeleton crew” that will likely disband when their contracts expire in the coming months. “We can’t effectively proceed with the research any longer,” she told NBC News anonymously, fearing retaliation.

Already, the VA has terminated over 1,000 employees, who were abruptly fired on February 13, including service-disabled veterans and military spouses, leading House Democrats to demand transparency and justification. Those fired were probationary employees—with two years or less on the job, depending on the position.

Perhaps the most chilling revelation concerns the Veterans Crisis Line, an essential suicide prevention service. Though VA Secretary Doug Collins insisted that the cuts would not affect the hotline, reports surfaced that at least a dozen crisis line employees had been fired before at least two were reinstated after political intervention by Democratic lawmakers. With veteran suicide rates increasingly and alarmingly high—6,407 veteran suicides were recorded in 2022—this disruption is not just reckless; it is dangerous.

Secretary Collins has attempted to downplay these firings, posting on social media that reports of cuts to critical services were a “whopper.” But if the administration is eliminating the very employees who deliver healthcare and benefits, how can those services remain intact?

The Fallout for Veterans as Patients and Employees

The Office of Personnel Management’s most recent (2021) report on veteran employment in the federal government shows that more than 30% of the country’s 2.2 million federal employees are veterans. The Trump administration’s plan to shrink the size of the government threatens the employment of many of these veterans.

The VA has long struggled with severe staffing shortages, particularly in medical roles. A 2024 inspector general report found that out of 139 veterans’ healthcare facilities surveyed last year, only two were free of critical staffing shortages. Yet, instead of addressing this crisis, the administration’s policies seem to be exacerbating it.

New hires have already seen their job offers rescinded. Supervisors initially froze hiring, then reversed course, allowing limited exemptions—leading to confusion and discouraging potential applicants. Coupled with the VA’s lower-than-private-sector salaries, this uncertainty weakens the agency’s ability to recruit and retain qualified professionals.

Another executive order issued on day one that fulfills a promise of Project 2025 requires eligible VA employees to return to full-time, in-office work, affecting nearly 96,000 workers—20% of VA staff. Secretary Collins defends the move, but critics note that remote work policies predate COVID and were implemented to address VA staffing shortages. Many remote employees, including Veterans Crisis Line staff, now face logistical challenges as their designated facilities lack space to accommodate them.

As these upheavals continue, employees—many of them veterans—are left wondering whether they will have jobs when the dust settles.

Privatization: A Step Toward or a Step Too Far?

The most contentious debate in VA policy has long been the push toward privatization. Now, the administration and Republican lawmakers are accelerating that shift.

Sen. Jerry Moran (R-Kan.) and Rep. Mike Bost (R-Ill.) introduced the Veterans’ ACCESS Act, expanding private-sector VA care under the 2018 MISSION Act. The bill aligns with Project 2025’s playbook, which prioritizes privatization. But is this what veterans want?

Evidence suggests otherwise. In a 2024 VA satisfaction survey, 80.4% of veterans expressed trust in the agency, with 91.8% specifically trusting VA healthcare. Yet, Community Care spending—the funding mechanism for privatized VA healthcare—has ballooned by 15-20% annually. This redirection of VA dollars to the private sector weakens direct VA care while handing profits to private healthcare providers. If this trajectory continues, veterans will be left in the same broken healthcare system the rest of the country struggles with—stripped of the specialized care the VA was designed to provide.

Furthermore, the private healthcare system is already overburdened. A recent VA Office of Inspector General audit raised concerns that increased reliance on Community Care could erode the VA’s direct care system, limiting options for veterans who prefer VA services. For example, with half of U.S. counties and 80% of rural counties lacking a single psychiatrist, funneling more veterans into an unstable private sector risks exacerbating gaps in care.

The stakes are especially high as the VA’s patient load expands. The PACT Act, which provides care for veterans exposed to toxic burn pits, has driven an influx of nearly 400,000 newly enrolled veterans. Shrinking the VA at this moment defies logic.

The Human Cost of Political Experiments

The Trump administration argues that its VA restructuring is necessary to eliminate inefficiencies and direct taxpayer dollars toward veterans. But the growing outcry from researchers, frontline workers, lawmakers, and veterans themselves suggests otherwise.

If the administration’s goal is truly to serve veterans, it must answer these pressing questions:

• Why were service-disabled veterans and crisis hotline workers among those terminated?
• How will the VA address its widening staffing crisis?
• What safeguards exist to ensure that political purges do not endanger critical services?

These are not partisan concerns. They are questions of competence, responsibility, and honoring the nation’s promise to those who have served.

Veterans don’t need political fights. They need care. And they need it now.

-Elimination of pensions for Civil Servants and politicians

If employees in the private sector no longer get pensions, why should they pay for government workers to get these pensions? We have to either pay social security or set up our own 401Ks to get a retirement.

Republican Senators Introduce Legislation to Eliminate Federal Pensions

Senators Richard Burr (R-NC) and Tom Coburn (R-OK) introduced the Public-Private Employee Retirement Parity Act, S. 644, a bill to eliminate federal pensions for all new government hires starting in 2013. Under the deceptively named bill, new employees would no longer receive the pension portion of the Federal Employees Retirement System (FERS). Instead, workers would receive only the Thrift Savings Plan (TSP) portion of FERS in addition to their Social Security.

In a statement released shortly after introducing the bill, Burr claimed that federal retirement benefits are excessive, and must be brought in line with those in the private sector. Unfortunately for Senator Burr, the facts tell a much different tale. When examined closely, it becomes clear that this bill has little to do with parity, and much more to do with unfairly targeting federal employees.

Claims that federal pension benefits are inflated are at best, wrong, and at worst, outright lies. In fact, federal workers’ pensions represent only a modest portion of the larger federal retirement picture. For example, a career federal employee who retires with a final salary of $50,000 dollars per year and 30 years of service will receive a pension of merely $15,000 per year – hardly an exorbitant figure by any measure.

The reason that federal pension benefits are so modest is because they were effectively cut in half in 1983, when the government moved from the old Civil Service Retirement System (CSRS) to FERS. From then onward, new employees received the smaller pension benefit, in addition to the 401(k) style TSP account and Social Security. Often referred to as the “three-legged stool” of federal retirement, these three small pieces coalesce to create the modest retirement plan currently available to government employees.

The result of this legislation would be to destroy federal retirement security and severely hamstring the government’s efforts to recruit the next generation of federal workers. With a retirement wave expected to hit the workforce in the coming years, slashing retirement benefits will make it much more difficult to recruit doctors, intelligence analysts, scientists, and other highly-sought-after workers into the federal service.

“These Senators think they can pit young federal employees against the old,” said Randy Erwin, NFFE Legislative Director. “They want to drive a wedge in the federal workforce so that we will not rise up collectively and make them answer for their shameless attacks on federal employees. But we will not stand for that. An attack on one is an attack on all. We are going to make sure that this divisive piece of legislation goes down in flames.”

The Civil Service pensions reform that would save taxpayers £5bn

If England sees that there is a problem with pensions, than maybe we should think twice about it as well.

Labour could save the taxpayer billions by reforming gold-plated Civil Service pensions, new analysis shows.

Chancellor Rachel Reeves is planning radical changes, including sacking 10,000 staff, to reduce the cost of Government spending by £2bn a year by the end of the decade.

However, the plans will not target pensions, despite official figures revealing that switching staff to a defined contribution scheme could save £5.1bn a year.

The Taxpayers Alliance campaign group said it was time to take on the “sacred cow” of public sector pensions and trim the fat from Britain’s bureaucracy.

According to the scheme’s 2023-24 annual report, the Civil Service paid £5.8bn in pension contributions at an average of 27.3pc of staff salaries.

Civil servants paid in just 5.6pc on average during that time, and receive inflation-linked pensions for life when they retire.

However, Telegraph analysis of the figures shows that sweeping reforms to the system could generate huge savings for the taxpayer.

If civil servants were moved to a defined contribution scheme and received the 3pc minimum that private sector workers are entitled to, pension contributions would reduce by £5.1bn a year.

Even if employer contributions were only reduced to 17.8pc of salary, the state would still save £2bn a year.

Despite this, contributions for staff were increased to 29pc across the board from last April.

Replace the Federal Employees Retirement System Pension With Larger Government Contributions to the Thrift Savings Plan for New Employees

August 29, 2017

Option from: 

• Options for Changing the Retirement System for Federal Civilian Workers

Mandatory Spending

Function 600 – Income Security

Replace the Federal Employees Retirement System Pension With Larger Government Contributions to the Thrift Savings Plan for New Employees

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

In 2016, the federal government spent $91 billion on retirement benefits for most of its civilian employees: $70 billion for Civil Service Retirement System (CSRS) pensions for civilian retirees and their survivors; $13 billion for Federal Employees Retirement System (FERS) pensions for civilian retirees and their survivors; and $8 billion for contributions to the Thrift Savings Plan (TSP). Those expenditures were partially offset by $3 billion in revenues from employees’ contributions to the CSRS and FERS pension plans.

Under current law, the government’s net cash outflows for the federal civilian retirement systems (that is, the systems’ outlays minus their revenues) are projected to grow by an average of about 2.8 percent annually between 2018 and 2027. Over a longer time horizon—75 years—they would decline sharply as a share of gross domestic product (GDP)—from 0.48 percent of GDP in 2016 to 0.13 percent of GDP in 2091, the Congressional Budget Office projects. Also, the composition of that spending would change. By the 2060s, CSRS would be almost completely phased out. Almost all spending would be on the pensions provided through FERS and on contributions to TSP.

CBO analyzed two policy options that would replace the FERS pension plan with larger government contributions to TSP for new employees:

• Eliminate the pension and increase the government’s TSP contribution to 8 percent, plus up to a 7 percent match
• Eliminate the pension and increase the TSP contribution to 10 percent

To Fund Tax Cuts for the Rich, Politicians Propose to Slash Pensions and Eliminate Pensions

Politicians are reaching into the pockets of public servants, including law enforcement officers, to help fund tax cuts for the wealthiest of all Americans. 

The House Budget Committee July 19 approved the 2018 budget plan and sent the bill to the full House with three proposed cuts to federal employees’ pensions: 

1. Eliminate defined benefit contributions, or pensions, for ALL newly hired federal employees.  
2. Reduce government contributions into current federal employees’ pensions by requiring employees to contribute more. 
3. Eliminate supplemental payments to employees who retire before age 62, such as law enforcement agents and firefighters. (The supplement was created because many law enforcement officers, due to the physical demands of their jobs, have to retire early before they become eligible for Social Security, which is part of their retirement package. The supplement bridges the gap)  

According to the budget resolution – a budget blueprint telling the authorizing committees how much they can spend – the committees can decide what they want to cut, but they have to come up with at least $32 billion. There is no ceiling, so they could cut as much as they want.  

‘Shameful Way’ 

AFGE President J. David Cox Sr. calls slashing the civil servants’ retirement to fund tax cuts for the rich is “a shameful way to govern the country.” 

“The budget is a slap in the face to all of the workers who care for our veterans, guard our borders, support our military, and keep our air and water clean,” Cox said. “Taking away retirement income from our law enforcement officers, many of whom are veterans, is particularly venomous.” 

While federal employees played no role in the creation of the deficit, politicians time and again use “deficit reduction” as an excuse to scapegoat our public servants and line the pockets of millionaires and billionaires. 

Rep. John Yarmuth, House Budget Committee ranking member, immediately issued a statement rejecting the resolution. 

“Americans deserve a budget that prioritizes their families, their communities, and their securities,” Yarmuth said. “Unfortunately, “[this] budget fails them at every turn. It embraces the worst extremes of the Trump budget, sacrificing nearly every investment that helps American families get ahead in order to give huge tax breaks to millionaires and corporations.” 

We can’t let this happen to us 

Members of Congress should be working to protect the interests of ordinary Americans, not just the billionaires on Wall Street. This budget blueprint is another example of how our policy has been hijacked by special interests and their allies in Congress. 

Call and tell your member of Congress to reject these immoral cuts. Your representative needs to hear from all of us, not just their wealthy, well-connected friends. 

Social Security:Coverage of Public Employees and Implications for Reform

Social Security covers about 96 percent of all U.S. workers; the vast majority of the rest are state, local, and federal government employees. While these noncovered workers do not pay Social Security taxes on their government earnings, they may still be eligible for Social Security benefits. This poses difficult issues of fairness, and Social Security has provisions that attempt to address those issues, but critics contend these provisions are themselves often unfair. The Subcommittee asked GAO to discuss Social Security’s effects on public employees as well as the implications of reform proposals.

Social Security’s provisions regarding public employees are rooted in the fact that about one-fourth of them do not pay Social Security taxes on the earnings from their government jobs, for various historical reasons. Even though noncovered employees may have many years of earnings on which they do not pay Social Security taxes, they can still be eligible for Social Security benefits based on their spouses’ or their own earnings in covered employment. To address the issues that arise with noncovered public employees, Social Security has two provisions–the Government Pension Offset (GPO), which affects spouse and survivor benefits, and the Windfall Elimination Provision (WEP), which affects retired worker benefits. Both provisions reduce Social Security benefits for those who receive noncovered pension benefits. Both provisions also depend on having complete and accurate information on receipt of such noncovered pension benefits. However, such information is not available for many state and local pension plans, even though it is for federal pension benefits. As a result, the GPO and the WEP are not applied consistently for all noncovered pension recipients. In addition to the administrative challenges, these provisions are viewed by some as confusing and unfair. In recent years, various Social Security reform proposals that would affect public employees have been offered. Some proposals specifically address the GPO and the WEP and would either revise or eliminate them. Such actions, while they may reduce confusion among affected workers, would increase the long-range Social Security trust fund deficit and could create fairness issues for workers who have contributed to Social Security throughout their working lifetimes. Other proposals would make coverage mandatory for all state and local government employees. According to Social Security actuaries, mandatory coverage would reduce the 75-year actuarial deficit by 11 percent. It could also enhance inflation protection, pension portability, and dependent benefits for the affected beneficiaries, in many cases. However, to maintain the same level of spending for retirement, mandating coverage would increase costs for the state and local governments that sponsor the plans, and would likely reduce some pension benefits. Moreover, the GPO and the WEP would still be needed for many years to come even though they would become obsolete in the long run.

Pension Panic Fueled by Anti-Worker Politics?

It’s a common refrain in local papers: State faces pension funding crisis! Retiree benefits out of control! Public pensions bog down taxpayers! Pension costs seem to loom over so many state and local budget battles like a sinister sword of Damocles, a dark reminder of Big Government’s tyrannical profligacy.

Should we panic? Well, according to a new report by the Pew Center on the States, 61 cities face a collective fiscal retirement burden of more than $210 billion, in part because consistent underfunding of benefits leaves yawning gaps in long-term cost projections. The report surveyed all U.S. cities with populations over 500,000, along with the most populous city in each state. Some cities are doing better than others in maintaining funds, but gaps persist, according to Pew’s estimates for fiscal years 2007-2010, especially in municipalities where local governments have lacked the ​“fiscal discipline” to keep up pension fund contributions – a situation exacerbated by the Great Recession.

But different political actors have different motives for expressing alarm over pension gaps. In some cases, dubiously calculated figures have inflated public concern. 

Sometimes, politicians frame cost-cutting proposals as if ​“generous” benefits themselves are the problem, as opposed to officials failing to uphold the commitments they’ve made to civil servants.

In New Jersey, brazenly conservative Governor Chris Christie has pushed through short-term austerity measures that ostensibly shore up pensions by shifting costs onto beneficiaries, increasing employee contributions and freezing vital cost-of-living adjustments. But the long-term liabilities remained unresolved. Shortly after Christie trumpeted his pension fix, the New Jersey Star Ledger noted that liabilities would spike again after the stopgap measures petered out, warning, ​“because the state won’t be making full pension payments, the gap will swell again to $58 billion by 2019, according to the state’s estimates.”

While such fixes may be temporary, they threaten to bring lasting pain for labor. After lawmakers approved benefit reform legislation in 2011, the Communications Workers of America blasted the plan as ​“anti-worker and anti-union” because it not only attacked benefits, but contained provisions that eroded unions’ collective bargaining rights, potentially undermining their leverage in future contract talks.

Proposals by far-right groups such as Americans for Tax Reform, however, make Christie’s scheme look modest. Some pension alarmists have put a nuclear option on the table. Delicately ignoring the global chaos unleashed by financial markets in recent years, conservative groups have seized precisely this moment of crisis to push for more dependence on the ​“free market” as a fix for troubled public benefits systems.

In Louisiana, pension troubles have prompted Governor Bobby Jindal to move toward dismantling altogether defined-benefit pensions (which provide stable long-term income in retirement) in favor of a more unstable, market-oriented system of 401(k)-type benefits. According to one actuarial analysis by the Louisiana State Employees Retirement System, this reform could backfire on both public workers and the state, because eligibility restrictions would make the plan fail to meet a ​“Social Security equivalency test.” Since the current system of benefits effectively serves as a replacement for Social Security, a new scheme that falls short of that could ultimately heap extra costs on the state.

Other states, including California, along with some cities, have explored or implemented 401(k)-style restructuring schemes to replace traditional pensions.

The Pew report does not explicitly endorse 401(k)-type plans as a blanket solution but flags it as one potential reform idea. At the same time, Pew researchers point out that healthcare costs, not pensions, could pose an even larger fiscal burden. That healthcare funding ​“cliff” raises a broader debate about the role of the state and employers (which are one and the same in the case of civil servants) in providing for workers’ and retirees’ health.

The bottom line is that pension reform can be a political Trojan horse. The reaction to pension crunches reflects political priorities that are often hostile to workers. Across the country, governments have opted to protect their financial commitments to bondholders on at the expense of their commitments to future retirees and unions, who have seen benefits frozen or sharply cut.

More reasonable analyses by progressive economists show that public-sector benefits tend to offset relatively low wages, so the overall compensation package is fair and by no means lavish, as right-wingers like Christie suggest.

Monique Morrissey, an economist at the labor-oriented Economic Policy Institute, takes a different approach than anti-government politicians. In some cases, she acknowledges, state budget problems may require cuts or force renegotiations in benefit plans. But in her opinion, completely abandoning defined-benefit pensions (which are, on balance, a good value for workers) is pennywise and pound foolish. ​“With very few exceptions, all of the cities and states where there are severe problems, it’s because the politicians for many years have neglected to make the pension payments. And this really doesn’t have much to do with the pensions or the public sector workers,” she tells Working In These Times. ​“It doesn’t reflect the pensions being too lavish or being expensive or being unaffordable or anything to do with that. What it reflects is simply that this is one way of getting around balanced budget rules. And certainly some of these cities that are flagged as having problems are chronic offenders.”

Meanwhile, pensions are going the way of the dinosaur in the private sector and politicians are whipping disgruntled citizens into a bitter rage toward civil servants who have managed to hold onto a modicum of hard-earned retirement security.”>

Instead of dismantling public sector benefits, local governments might address budget deficits by, say, making the tax system more progressive. As with many of the cries of ​“crisis” coming from the right, the obsession over public pension ​“unsustainability” too often takes a real problem of governments failing to uphold public promises and spins it into a false problem of workers supposedly demanding too much.

Accounting, Politics, and Public Pensions

Defined benefit pension plans offer politicians a convenient way to satisfy public employee demands while providing the means to defer budgeted cash payments and hide the accumulation of public debt from taxpayers. The authors describe how this plays out in practice and how accounting standards facilitate such activity. The accounting profession, and Governmental Accounting Standards Board (GASB) in particular, could do more to inform taxpayers about the state of public finances. The longstanding failure to do so, the authors argue, allows public debt to accumulate until a crisis is reached.

A Political View of Public Pension Debt

Empirical research indicates that both political parties share responsibility for the current pension crisis (S. Anzia and T. Moe, “Polarization and Policy: The Politics of Public Sector Pensions,” Legislative Studies Quarterly, vol. 42, no. 1). More importantly, the Pew Research Center (“The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow,” March 2014) reports that unfunded state and local pension debt has been steadily increasing since 2000.

The authors argue that current governmental pension accounting rules allow politicians to defer public employee compensation, effectively providing needed services while obscuring the cost from taxpayers. This is a win-win situation for politicians and public employee labor unions. Deferred compensation can appear in many forms, but defined benefit plans have become widely accepted in government. These plans provide politicians a very flexible means of financing staffing resources off the balance sheet. Defined benefit plans appeal to employees because they typically promise annuity payments for the life of the individual. In order to secure the guarantee, employees may also demand that politicians establish sinking funds to finance the promised future payments and place those resources in a separate entity (i.e., a trust fund), outside the reach of future politicians. This off–balance sheet arrangement thus serves the purposes of both public employees and politicians. Control of the trust fund can be negotiated.

Taxpaying voters, who ultimately judge the activities of politicians, should be aware of these contracts and obtain assurances that they are fair and equitable. To this end, actuaries provide the government with estimates of projected benefit obligations (PBO) and the annual required contributions (ARC) necessary for the sinking fund prepared in accordance with actuarial standards of practice. Auditors subsequently provide the public assurances that financial disclosures are audited in accordance with Generally Accepted Government Auditing Standards.

Professional external actuary and auditor services are traditionally selected and paid by the managers of the pension trust fund. To the extent that all parties operate in good faith under enforceable contract provisions, and the actuarial estimates prove to be reliable, the rights of all parties will be reasonably protected and the system will appear sound. However, even the best-laid plans may go awry when unexpected events happen.

Budgeted pension contributions are generally guided by the ARC, which can be reduced on demand through a variety of actuarial procedures. Changing the expected rate of return on plan assets and the discount rate used to value liabilities is one method. Higher estimated future earnings reduce the need for current cash contributions, so higher expected rates of return result in lower ARCs. If the expected rates of return fail to materialize, the accumulated unfunded pension debt grows. The growing balance of unfunded pension debt over the last decade calls into question the actuarial assumptions used to calculate the ARC and PBO, as well as the willingness of politicians to currently fund them.

Government officials hire the actuaries that develop the pension assumptions and calculate the estimated ARCs. They also hire the auditors who attest to the reliability of these calculations, but audit standards allow auditors to rely on the work of outside experts, such as actuaries. These professional fees can ultimately present a conflict of interest when politicians offer to pay for actuarial calculations supporting reduced funding. Regulation and professional codes of conduct are expected to mitigate this risk, but the calculations are complex and compliance is difficult to ascertain. Having multiple expert parties involved also helps to diffuse responsibility for any errors in judgment.

Difficulty and Variability in Public Pension Accounting Standards

In 1978, the Pension Task Force Report on Public Retirement Systems determined that stakeholders were often unaware of actual pension costs. In 1986, GASB issued Statement 5, which prescribed some common disclosure requirements so users could assess the funded status of public pension plans using a common approach. The board updated the standards in 1994 with GASB 25 and GASB 27, which allowed state and local governments to use one of six actuarial cost methods to determine their actuarial liability—that is, the present value of compensation that was deferred to future years. These included entry age, frozen entry age, attained age, frozen attained age, projected unit credit, and the aggregate actuarial cost methods.

The method of attribution is important because it has a direct bearing on the value of the resulting pension liability, funded status, and required contributions. Under unit credit approaches, the projected benefit is based on a consistent formula, such as total service periods times some percentage of future salary times the fraction of service earned to date. Assumptions regarding the projection of service periods, percentages allowed, and future salaries vary. The entry age methods calculate the benefit on a level basis of earnings or service between the beginning of employment (entry age) and the assumed retirement date; again, assumptions vary.

Under the unit credit approaches, contributions tend to increase as employees near retirement, whereas the amount or percentage of pay contributed under the entry age approaches tends to stay consistent throughout an employee’s tenure. Actuarially, this is because a “unit credit” of retirement benefits attributed to a particular period has a lower present value the further away in time it is from when the benefit is actually paid.

Attained age methods have the same actuarial liability as the unit credit methods, but different contribution rates. The standard contribution rate for attained age methods is based on the average age of active members as a group, rising or falling as the average age of the group increases or decreases. The frozen methods allocate the excess of the projected benefits over the sum of the assets plus a frozen unfunded liability on a level basis between the valuation date and assumed exit of a group as a whole, not as the sum of individual allocations. The aggregate methods use a technique similar to the frozen methods, but do not include the frozen unfunded liabilities. The aggregate method is unique in that the unfunded portion of benefits, even those from past service, is allocated as future normal costs resulting in no current net unfunded liability.

In addition to the methods used to project future liabilities, there are several associated assumptions regarding expected investment rates of return, contribution rates, rates of projected salary increases, inflation rates, and so forth. The difference between the present value of the projected liability and fund investments is the net funded position of the pension plan.

Flexibility in accounting methods and assumptions create the opportunity for employers to reduce or eliminate current required contributions, creating a “contribution holiday.”

All actuarial approaches require the discounting of projected liabilities to the present value using a settlement rate and an assumption of the expected investment rates of return in contributed funds. Typically, these are the same rate, but they may be selected independently. Obviously, the higher the assumed rates are, the larger the investment pool grows and the lower the net projected liabilities will be.

Special asset valuation (smoothing) methods are also frequently used to strike a balance between an investment portfolio’s current market value and a theoretically more realistic value that accounts for volatile securities held for long periods. GASB standards simply state that asset valuation should reflect some function of market value, which may include cost, current market value, or an average of market values over several years.

Differences between actual and assumed rates of return, or changes in future benefits, result in actuarial gains and losses that are amortized into expense and contribution rates over time. The intent is to smooth the differences between actual and assumed results, creating a stable pattern for contributions.

Flexibility in accounting methods and assumptions create the opportunity for employers to reduce or eliminate current required contributions, creating a “contribution holiday.” It was not until after the 2009 financial crisis, when the market value of pension assets declined dramatically, that GASB made the standards stricter. In June 2013, GASB issued Statement 67, An Amendment of GASB Statement No. 25, and Statement 68, An Amendment of GASB Statement No. 27. However, even these standards have been criticized as overly complicated and burdensome (C. Eucalitto, “GASB’s Ineffective Public Pension Reporting Standards Set to Take Effect,” American Legislative Exchange Council, 2013; A. Biggs, “Proposed GASB Rules Show Why Only Market Valuation Fully Captures Public Pension Liabilities,” Financial Analysts Journal, vol. 67, no. 2, pp. 18–22, 2011). For example, these new standards prescribe the calculation of a “blended” discount rate, which can be characterized as a sliding scale where better funded plans are allowed to use higher discount rates. Therefore, plan discounts rates will vary along with their funded ratios, resulting in reduced consistency and comparability among plans. This also reduces the usefulness of the disclosures to investors and creditors.

A Taxpayer View of Public Pension Debt

In a democratic society, policy makers should be accountable to those affected by the rules they promulgate. This requires institutions and processes to gather input or feedback from the citizenry. When the voters have difficulty evaluating an issue because of its complexity, they rely on established professions for their specialized knowledge. In this respect, the accounting profession has a mandate to administer complex accounting issues, such as public pensions, with the public’s interests in mind. Democratic principles also suggest that the accounting profession has a responsibility to determine what the public interest is through an honest and deliberative process.

The stated mission of GASB is, in part, to “guide and educate the public, including issuers, auditors and users … through a comprehensive and independent process that encourages broad participation” (FAF 2013, 2). Furthermore, GASB Concept Statement 1 (1987) specifically identifies taxpayers as a defined user group and says that the reports should be understandable. Therefore, not only does the public have a right to know what is taking place with public finances, it has a right to expect understandable disclosure.

According to a recent working paper (Bushee, Gow, and Taylor, “Linguistic Complexity in Firm Disclosures: Obfuscation or Information?,” 2016), linguistic complexity consists of two latent components; obfuscation and information. The obfuscation component increases information asymmetry by imposing cognitive burdens of the reader. Ten years ago (F. Li, “Annual Report Readability, Current Earnings, and Earnings Persistence,” Journal of Accounting and Economics, vol. 45, p. 221–247, 2008), a positive correlation was found between the use of complex language and poor performance in financial disclosures. When this concept is applied to pension disclosures, it suggests that complexity may delay taxpayer understanding.

Criticism of GASB.

GASB is aware of public criticism regarding public pension standards, yet in the authors’ view, it has failed to appropriately respond. A review of public comment letters submitted during the policy formulation period for GASB Statements 67 and 68 reveals an absence of participation by average citizens and a noticeable frustration by those who did participate. The authors retrieved 1,024 comment letters from the GASB website and coded them into NVivo qualitative research software by submission wave, letter number, and interest group. These results indicated that that only 74 letters were submitted by individuals or groups representing the general public. The results are consistent with previous research indicating low public participation by individuals in the accounting standards setting process. This documented lack of participation suggests that the profession does not receive a representative cross-section of concerns about public pension disclosure from the voting public.

Pension accounting disclosures are so complex that average taxpayers are unable to understand their meaning.

The lack of participation by institutional investors (seven letters) also reveals the irrelevance of GASB disclosures. Investors and creditors appear to rely on credit ratings agency models that adjust pension debt using consistent and comparable discount rates and attribution methods (Moody’s Investor Service, “Moody’s Announces New Approach to Analyzing State, Local Government Pensions; 29 Local Governments Placed under Review,” Global Credit Research, April 17, 2013). Fitch Ratings was the only credit agency that commented on the GASB statements. Although they did not advocate a specific method or discount rate assumption, they supported a solution that would minimize the potential for managerial opportunism in the application of accounting standards, thereby increasing comparability.

Failing the Public Interest

The authors’ analysis suggests that politicians use public pensions to satisfy the demands of public employees while retaining the flexibility to choose when to actually fund them. Pressure from other interest groups for spending priority crowds out prudent funding and complex accounting disclosures effectively hides this result from average voting taxpayers. It is only after required cash payments for pension benefits create a crisis by cutting into basic services that the public becomes aware of the consequences of the accumulating debt.

The accounting profession has failed to provide the public with understandable information by circulating pension accounting disclosures that are so complex that average taxpayers are unable to understand their meaning. As long as this cycle continues, public pension debt will continue to accumulate. Some may criticize the authors for not providing a solution, but useful, relevant, and understandable disclosure is its own solution. On the issue of unfunded public debt, the accounting profession must stand by taxpayers, and its own principles, if it is to serve in the public interest.

-Eliminating Insider Trading in our Government

f it is illegal for private citizens to engage in insider trading, why do politicians get away with it? I know it’s because they write the laws.

Introduced in Senate (03/07/2023) This bill prohibits specified executive branch officials and others from holding or trading certain investments (e.g., individual stocks and related financial instruments other than diversified investment funds or U.S. Treasury securities).

Introduced in Senate (03/07/2023)

Eliminating Executive Branch Insider Trading Act (Note this only impacts the Executive Branch from insider trading, what about Congress?)

This bill prohibits specified executive branch officials and others from holding or trading certain investments (e.g., individual stocks and related financial instruments other than diversified investment funds or U.S. Treasury securities).

Covered individuals include the President, the Vice President, each executive branch officer or employee at or above a specified pay grade, each member of a uniformed service at or above a specified pay grade, each officer or employee in any other position determined by the Office of Government Ethics to be of equal classification to such positions, and the spouse of any such individual.

The prohibition does not apply to assets held in a qualified blind trust. Any profit made in violation of the prohibition must be disgorged to the Treasury and may subject the individual to a civil fine.

The Department of Justice may bring a civil action in U.S. district court against any covered individual who violates this bill’s prohibition.

The Government Accountability Office, at specified intervals, must (1) audit compliance by a representative sample of covered individuals with this bill’s requirements, and (2) report the results to the supervising ethics committees.

Stopping members of Congress from trading stocks

When members of Congress trade stock while in office, they abuse the public trust. Our laws need to be strengthened to correct weaknesses dealing with insider trading.

The problem:

When members of Congress trade stock while in office, they abuse the public trust — and often their positions. Legislators receive classified information to make better decisions for the health and welfare of the public. Yet, all-too-often, they leverage this insider knowledge for personal profit, or to make money for their donors.

Avoiding corruption or the appearance of corruption — and breaching the public trust — is the exact reason why we have laws like the STOCK Act in place. However, this law needs to be strengthened to correct weaknesses dealing with insider trading.

Solutions: 

The TRUST in Congress Act (H.R. 345) would prohibit members of Congress from trading stock while in office and require members of Congress to place their holdings in a qualified blind trust. A similar bill has also been introduced in the Senate. Congress should seize this momentum and pass into law commonsense ethics reform that will combat corruption and the appearance of corruption.

Rules for what makes a qualified blind trust are already spelled out, and require assets to be managed by an independent person instead of the beneficiary or their friends, family, or campaign.

Issue One has also strongly encouraged members of Congress to divest themselves of their publicly traded stocks and commodities when taking office, or place their assets in a diversified mutual fund.

Such measures would not only increase public confidence in the motivations behind the public officials’ decisions, but also protect the public officials themselves from these accusations.

Rep. Roy reintroduces bill to prevent Members of Congress from trading stocks

Rep. Chip Roy (TX-21) and Rep. Seth Magaziner (RI-1) announced the bipartisan reintroduction of the TRUST in Congress Act to ban Members of Congress and their families from engaging in insider trading.

“The American people should have faith that Congress is at work for the good of the country, not for their own bank accounts. For years I have been working to address the problem of stock trading in Congress, first introducing the bipartisan TRUST in Congress Act with Rep. Abigail Spanberger back in 2020,” said Representative Roy. “Now that Abigail has retired, I am proud to reintroduce this critical and bipartisan legislation alongside my friend Rep. Magaziner (D-RI). We have a long road ahead to address this Congress, but we can and should fix the problem during this term. We have the will and the mandate of the American people to do this. Let’s deliver.”

The Transparent Representation Upholding Service and Trust (TRUST) in Congress Act would require Members of Congress, their spouses, and dependents to place certain investment assets into a qualified blind trust while serving in office. That way, Representatives and Senators cannot leverage their power as public servants to line their pockets.

“Trust in Congress is at an all time low, but we can strengthen the integrity of our government by ensuring Members of Congress are serving their constituents and not their stock portfolios,” said Rep. Seth Magaziner. “I am proud to introduce this bipartisan, commonsense bill with Representative Chip Roy to ban Members of Congress — and their families — from trading individual stocks, so that we can hold Washington accountable to the people it serves.” 

The bipartisan TRUST in Congress Act has been endorsed by many key advocacy and government accountability organizations, including the Project on Government Oversight (POGO), National Taxpayers Union, Public Citizen, Protect Democracy, Government Accountability Project, Taxpayers Protection Alliance, Issue One, Citizens for Responsibility and Ethics in Washington, and Americans for Prosperity.

Specifically, the TRUST in Congress Act would:

• Require all Members of Congress, and their spouses and dependent children, to put certain investment assets into a qualified blind trust within 180 days after the enactment of this legislation. New Members of Congress, and their spouses and dependent children, would be required to place covered investments into a qualified blind trust within 90 days of assuming office. Affected individuals can remove assets from the blind trust 180 days after the Member leaves Congress.
• Require all Members to either 1) certify to the Clerk of the House of Representatives or the Secretary of the Senate that they have established a blind trust to include covered investments or 2) certify to the Clerk or the Secretary that they do not own any covered investments. The status of these certifications would be made publicly available by the Clerk of the House of Representatives and the Secretary of the Senate.
• Define covered investments as the following: a security, commodity, future, or any comparable economic interest acquired through synthetic means such as the use of a derivative.
• Clarify that the following do not qualify as covered investments for the purpose of this bill: a widely held investment fund (such as a mutual fund) or a U.S. Treasury bill, note, or bond. These investments would not have to be placed in a blind trust.

A Dilemma of Self-interest vs. Ethical Responsibilities in Political Insider Trading

Abstract

Political insider trading has brought substantial attention to ethical considerations in the academic literature. While the Stop Trading on Congressional Knowledge (STOCK) Act prohibits members of Congress and their staff from leveraging non-public information to make investment decisions, political insider trading still prevails. We discuss political ethics and social contract theory to re-engage the debate on whether political insider trading is unethical and raises the issues of conflict of interest and social distrust. Empirically, using a novel measure of information risk, we find that senator trades are associated with substantially high levels of information asymmetry. Moreover, based on inside political information, senators earn significant market-adjusted returns (4.9% over 3 months). Thus, our results do not support the prediction made by social contract theory and thereby provide a potential resolution to the ongoing debate on banning stock trading for members of Congress.

Keywords: Politician’s insider trading, STOCK Act, Social contract theory

Introduction

Concerns about politicians’ insider trading are not new.1 Scandals relating to members of Congress using their offices for private financial gains date back to at least 1968 and have plagued both political parties (Barbabella et al., 2009). However, the evidence from the literature on politicians’ investment performance is mixed and provides a range of diverse views on whether or when a politician acts on inside information.2

In April of 2012, the United States Congress passed the Stop Trading on Congressional Knowledge Act (STOCK Act) which made it clear for the first time that the laws against insider trading also apply to members of Congress and their staff members (Belmont et al., 2020). The STOCK Act prohibits members of Congress and their staff from exploiting non-public information “derived from such person’s position” or “gained from the performance of such person’s official responsibilities” as a means for financial gain (Mesiya, 2021). The STOCK Act also requires members of Congress, the President, Vice President, and all Cabinet members to report any trades exceeding $1000 within 45 days of the transaction. However, there have been many publicized instances where the STOCK Act’s mandates may have been compromised. For example, between early February and early April of 2020, during the height of the COVID-19 pandemic, twelve senators made 227 stock purchases worth as much as $98 million, and the thirty-seven members of the House made 1358 trades worth as much as $60 million (Fandos, 2020; Mesiya, 2021). Furthermore, not a single member of Congress has been prosecuted under the STOCK Act since its passage almost a decade ago, suggesting certain ineffectiveness and even failures of the STOCK Act (Fandos, 2020; Mesiya, 2021). Nevertheless, it is not our primary goal to assess whether the STOCK Act is an ultimate failure or success.

The main purpose of this paper is two-fold. First, we aim to re-visit the issue of political insider trading by developing a sound ethical framework that integrates political ethics (also known as political morality, the practice of making moral judgments about political action by political agents) and social contract theory. Political ethics not only forbid political leaders to do things that would be inappropriate in private life but also require them to meet higher ethical standards than would be necessary for private life. For example, they may have less of a right to privacy than ordinary citizens and no right to use their office or connections for personal financial benefit. Ultimately, at the core of concern here are issues arising from “conflict of interest.”3 Politicians’ insider trading can be a harbinger of conflict of interest as it can create distrust between shareholders and between the firm and its shareholders. In addition, considering politicians’ fiduciary duty to the general public (Blau et al., 2021), politicians’ insider trading may signal the existence of the conflict of interest between themselves, the firms, and other stakeholders. Social contract theory was given its first full exposition by Hobbes (1651) and is associated with modern moral and political theory (Locke, 2003; Rousseau, 1987). Social contract theory views politicians’ ethical or moral obligations as emanating from a societal agreement to form a society where all stakeholders live in harmony. Social contract theory suggests that ethical political insiders should not violate any of the following four moral propositions, i.e., fairness, harmlessness, honoring property rights, and fiduciary relationships. Thus, according to social contract theory, trading by politicians or regulators on non-public information per se should not be considered unethical based on various moral arguments unless such trading raises concerns associated with conflict of interest.

Second, we aim to use the lenses of political ethics and social contract theory to interpret the results of an empirical analysis of financial market dynamics surrounding the electronic stock transactions of U.S. Senators. Specifically, we investigate the performance of stocks purchased by senators and the amount of informed trading occurring around their trades using a novel information asymmetry measure recently developed by Yang et al. (2020). Our results show that senator trades generally beat the S&P 500 over different intervals ranging from 1 week to 3 months following the trade. Additionally, and most importantly, our tests reveal that periods around senator trades are characterized by high levels of information asymmetry, consistent with the notion that senators’ connections with access to knowledge on legislative or lobbying activity may drive such informed transactions. These findings call into question the ethics of insider trading by U.S. senators.

Politicians’ preferences for stocks could be motivated by the engagement in quid pro quo relations with firms (Tahoun, 2014), and therefore their asset holdings may reflect latent corporate connections.4 Furthermore, while trading by members of Congress or their staff was not exempt from the federal securities laws (including the insider trading prohibitions) prior to the STOCK Act, there were distinct legal and factual issues that could arise in any investigations or prosecutions of such cases.5 The STOCK Act was intended to minimize potential conflicts of interest among politicians, firms, and investors, increase transparency, and combat insider trading by preventing politicians from benefiting based on market-moving information ahead of general investors. However, as discussed in Levinthal (2021), many members of Congress did not fully comply with the STOCK law as recently as 2021, prompting ethics overseers to push for banning lawmakers and politicians from trading individual stocks. Furthermore, the passage of the STOCK Act did not stop the practice of sharing political information with firms impacted by such information but also with financial intermediaries.6 Such practice is legal because it allows politicians to solicit feedback from relevant parties on prospective legislation (Kim, 2013b). An unintended consequence (and the subject of recent debate) is the potential transfer of private political information to individuals who can profit from it without having to disclose it publicly. Indeed, there is recent empirical (Gao & Huang, 2016) and anecdotal evidence7 that valuable political information gets transmitted in the market, supporting the notion that a political intelligence industry plays an important informational role.

Although the STOCK Act prohibits non-public information for profit in the first place, political insider trading keeps evolving as financial markets, financial technology, and the associated laws keep changing (Aktas et al., 2008; Blau et al., 2021; Kim, 2013a, 2013b, 2013c; Moore, 1990; Ziolkowski, 2020) indicating the difficulty in finding consensus among business ethicists, financial economists, and policy-makers. In contrast to social contract theory’s dimensions of fairness and level-field information access to all market participants (Klaw & Mayer, 2021; Salbu, 1995), we postulate that political insider trading by the Senate is associated with conflict of interest and can therefore increase social distrust.

Consistent with the view that senators’ purchases are often driven by superior information, our results show that stocks purchased by senators outperform the market over the 3 months following the date of the trade.8 Their abnormal return that exceeds the return of the S&P 500 index is about 4.9% over the 3-month period. Moreover, we show that periods around senator trades’ dates are associated with high levels of information asymmetry (AIV). This implies that many more people are trading around these dates, likely on the same congressional knowledge. Interestingly, AIV around senators’ stock transactions is significantly greater than AIV around earnings announcement days. The degree of information asymmetry around senator stock purchase dates is also associated with the senator’s personal characteristics (including age, tenure, and committee membership) and the legislative activity of both the senator and the Congress overall. Many of the same factors also explain the buy-and-hold market-adjusted returns of stocks purchased by senators. The evidence clearly shows that politically informed trading manifests itself in stock prices. In addition, our findings suggest that politicians’ transactions reveal latent and politically informed trades by others who do not have to file. Thus, the results of informed trading we document should be viewed as a lower bound of the extent of political insider trading in the U.S. Senate. In addition, the evidence of elevated levels of information asymmetry around politician trades is consistent with the notion that there is greater potential for conflict of interest. Therefore, our combined evidence does not support the social contract theory.

Summary and Conclusions

This paper suggests that political insider trading is unethical as it appears to expropriate other stakeholders’ expenses by exploiting information advantages gained through political position or connection (Bhattacharya & Daouk, 2002; Christensen et al., 2017; Gao & Huang, 2016). Its unethical nature is mainly due to conflict of interest and could raise social distrust.

We analyze electronic filings of stock trades made by senators in compliance with the STOCK Act to test whether politicians and their networks (i.e., staff, lobbyists, other- home state- legislators, and others) use political insider information in their investment decisions. First, we confirm politically informed trading by employing a buy-and-hold return analysis for stocks purchased by senators, a departure from the synthetic portfolio analysis used in prior studies. Moreover, we propose a modification of the abnormal idiosyncratic volatility (AIV), initially introduced by Yang et al. (2020), to measure the extent of information risk associated with periods around politicians’ trades. This approach allows us to capture possible (mis)use of inside political information for a much broader set of political actors, who may possess the same information as the senators in our sample but are not required to file reports on their stock trades. Thus, using the AIV measure is a noble method in that we are able to estimate the degree of politicians’ information asymmetry and test the validity of the social contract theory.

We show that information asymmetry associated with stocks traded by senators is, on average, relatively high (3.6%) and driven by the senator’s access to legislative information acquired by being an effective legislator or member of an important committee. The results suggest that the social contract theory is not supported by the results in our information asymmetry tests. In addition, our analysis confirms that information risk is elevated (attenuated) on days when there is a lot of legislative (lobbyist) activity. Lastly, we show that investing in the stock of a company headquartered in the senator’s state can yield high and significant returns, especially for more extended holding periods. Moreover, these trades are associated with significantly lower levels of AIV, suggesting that perhaps senators refrain from sharing value-relevant information with a broader set of associates.

Overall, our results showing high AIV around politicians’ trades support the view that senators’ use of inside political information represents only the tip of the iceberg. Many more legislators, politicians, and selected market participants have access to the same information but do not file their returns. We also believe that our results could shed more light on the puzzle of observed negative AIV values associated with some earnings announcements. If we purge periods surrounding politicians’ trades, obtaining a cleaner measure of AIV around corporate information events such as earnings announcements might be possible. Finally, our evidence refutes the social contract theory’s view of political insider trading. It suggests that there needs to be further discussion and deliberation leading to legislation further improving the STOCK Act.

-Reforming Security Clearance Issues

I think part of the corruption in our government is the Security Clearance Issue. Once the politician or agent, employee is no longer employed by the government they should lose their clearance. Also, why should the President still get security briefings after he leaves office? What is the reason for it.

Security Clearance Reform

Current Status

Since IRTPA and E.O. 13467, the SecEA has instituted a variety of reform efforts to improve background investigation and adjudication timeliness, improve the quality of information used to make security clearance decisions, compile system-wide metrics, and assess and oversee personnel security program implementation across the executive branch. With increasing cybersecurity threats and incidents, and large classified information leaks coupled with background investigation backlogs, there will be the need to drive continuous and future security clearance reforms.

As the SecEA, the DNI is the champion for reform activities that include the issuance of guidance, training, oversight, and implementation assessment that are vital for standardizing and improving Executive Branch personnel security programs. The Director of the National Counterintelligence and Security Center (NCSC) serves in support of the DNI’s role as SecEA to develop, implement, oversee and integrate personnel security initiatives throughout the U.S. Government.

Recent reform activities have focused on the following:

• The 2010 Intelligence Authorization Act (IAA) requires the President to submit an annual report on security clearance determinations to Congress and directs this report to include the number of U.S. Government employees and contractors who hold a security clearance at each level. SecEA gathers performance metrics government-wide on the timeliness of personnel security investigations, adjudication and reciprocal actions.
• The SecEA issues Executive Correspondence and Security Executive Agent Directives (SEADs) as a primary means of disseminating national security policy and requirements in order to institutionalize reform initiatives, provide a foundation to government-wide personnel security policies, and conduct oversight of processes related to security clearances and sensitive national security positions.
• In 2012 the Federal Investigative Standards (FIS) were jointly issued by Security and Suitability Executive Agents. FIS is a critical security clearance reform initiative that established new federal investigative criteria to conduct background investigations to determine eligibility for logical and physical access, suitability for U.S. Government (USG) employment, eligibility for access to classified information or to hold a sensitive position, and fitness to perform work for or on behalf of the USG as a contractor employee.
• SecEA considers Agency Head requests for delegated authority, or modification of their existing authority, to conduct personnel security investigations and adjudications.
• Ensuring reciprocal recognition among the USG agencies for eligibility of access to classified information and eligibility to hold a sensitive position, including acting as the final authority to arbitrate and resolve disputes involving the reciprocity of investigations and eligibility determinations.
• Reducing the backlog of periodic reinvestigations (PR). The SecEA issued guidance directing agencies to prioritize out of scope background investigations and focus on their required PRs. The FY 16 Omnibus Appropriation, H.R. 2029-673 requires the DNI to develop a plan to eliminate the backlog of PRs.
• Expansion of eAdjudication (electronic adjudication) to other types of national security and suitability investigations offers the opportunity to improve clearance processing and permit adjudicators to focus on investigations presenting adjudicative issues.
• The Quality Assessment Standards (QAS) were approved by the PAC on 22 January 2015. The QAS Implementation Plan was approved 1 April 2016, which identified separate milestones for Departments and Agencies (D/As) that are only assessing the quality of background investigations (BIs) and those D/As that are responsible for conducting BIs and assessing their quality.

20 years of clearance reform: From intelligence reform to Trusted Workforce

The Intelligence Reform and Terrorism Prevention Act was signed on Dec. 17, 2004, and the landmark legislation was designed to reform intelligence processes and address gaps highlighted in the wake of the 9/11 terrorist attacks. 

But 20 years after the legislation was passed, the key security clearance reform issues included continue to be problematic today. 

Here are four key areas of clearance reform issues we continue to talk about:

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Timeliness: Security clearance processing times are an issue that just won’t go away. IRTPA mandated that 90% of all clearances should be completed within an average of 60 days. Somewhere along the way, that benchmark shifted to 80 days for Top Secret clearances and 40 days for Secret clearances. 

But as of the fourth quarter of FY2024, we’re far from meeting even those adjusted targets. The average time to process 90% of Top Secret clearances stands at 169 days, while Secret clearances take an average of 68 days. These delays ripple through national security operations and talent retention. Interim clearances can save the day for Defense Department applicants, but because they’re not used in the IC, onboarding timelines for national security careers remain an issue to accomplishing the mission.

Single Investigative Agency: Here’s some history—before December 2004, Defense Security Service personnel performed clearance investigative work using the Office of Personnel Management’s systems. In February 2005, DSS investigators officially moved to OPM. At that time, OPM handled 95% of federal background investigations, with a small fraction left to a dozen or so other agencies. 

Fast forward to today: the Defense Counterintelligence and Security Agency has taken OPM’s place as the lead agency, conducting that same 95% of investigations, with the remaining agencies still handling a small slice of the pie. Today we’re closer to a single investigative agency with DOD taking over both the technology and the investigation missions. It’s another reason why the success of the National Background Investigation Services is so important. 

Which segueways us into our next security clearance reform initiative –

Single Clearance Database: Despite years of talk, NBIS remains a fragmented system of systems. With new oversight and accountability, there is hope that NBIS may finally be getting its sea legs – but it’s a critically important mission and it will take all hands on deck to ensure DCSA can get the job done. 

Clearance Reciprocity: There’s been some progress in reciprocity, but that progress has largely been a one-way street – for applicants entering into DOD from other agencies. Reciprocity into the IC remains an issue, with SCI and special access programs making the process more complex. The Government Accountability Office has highlighted how this is an issue: federal agencies simply don’t trust each other and their investigative processes. This undermines mobility for cleared personnel and slows down mission-critical operations.

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That’s the depressing news – when it comes to the major muscle movements of clearance reform, we have been talking about the same issues for two decades. It’s an issue that spans generations and administrations. But, here’s the good news. IRTPA was the single largest security clearance reform effort – until Trusted Workforce 2.0. 

Trusted Workforce 2.0 is the most extensive and transformative initiative in the history of U.S. security clearance policy. And unlike IRTPA which attempted to create benchmarks and accountability, TW 2.0 marked the first policy overhaul of the reform effort since the 1950s. Its emphasis on modernization, technology, and policy standardization sets it apart from any prior effort and has the possibility of addressing each of the four issues that have been reform priorities since IRTPA (emphasis on possibility – this is a work in progress).

With more than 40 policies updated in the past several years and a new administration set to take leadership, now is the time to continue to put extra gas in the tank to ensure we’re not just talking about failed reform 20 years from today but marking progress. Steps to ensure we’re doing it include:

Accountability Around Implementation: Forty policies have been updated – but it’s up to the individual agencies running security programs to actually implement those policies. Streamlined communication and continued prioritization of the security clearance process by Congress will be important to ensuring security clearance reform isn’t just policy – it’s practice. And we need to keep the Performance Accountability Council Program Management Office pushing that policy forward and educating agencies and contractors on implementation.

Streamlining Processes and Harnessing Technology: Security clearance processing times are unacceptably slow. And the process is unacceptably obtuse. Applicants are often left with little to no clue about where they stand in the process. The government can do better. We need to prioritize implementation of the Personnel Vetting Questionnaire, which will streamline the onboarding process. And work toward NBIS components that enable applicants to gather basic information about the process. If NBIS can’t do it, it’s time to enable the IT systems that can. The fact that bemoaning security clearance processing times has been a topic for 20 years points to systemic issues. Trusted Workforce can streamline processes, but that won’t happen if individual agencies set up roadblocks or fail to implement new technologies. 

Increasing Workforce Size and Mobility: We talk often about the size of the cleared workforce – and it’s typically someone bemoaning the number of people with security clearances in the wake of the latest breach. Contract requirements place constraints on the number of qualified workers in the talent pool, in a talent pool that is already constrained. Security clearance reform has for too long focused on reducing the number of individuals with access to classified information while taking no steps to reduce the deluge of classified information created. The costs of maintaining classified information remain difficult, and lack of agency consistency in how figures are reported is something highlighted by the Information Security Oversight Office. The threats aren’t shrinking. And neither should the workforce addressing them without better data to demonstrate how we’re also reducing the amount of classified info we create, and not just the workforce that supports it. 

Some missions are so important and complex they’re always under construction – the security clearance process may be one of those. But there are plenty of new problems to solve. Let’s start fixing the ones we’ve known about for far too long so we can keep innovating and improving – not sitting stuck in the way back machine of clearance reform.

The Urgent Need for Security Clearance Reform

“I wish you had a security clearance so I could tell you what’s really going on.” It’s what those of us working on cutting-edge defense and intelligence technologies hear regularly, and it captures the problem of America’s outdated security clearance system.

Born out of the post-World War II era, the U.S. security clearance system was designed for a different time — one of monolithic, slow-moving threats and a government monopoly on foundational research. However, in today’s world of rapid technological change, this once-effective system has become a major roadblock. It hinders the creative potential of our brightest minds and leaves investors in the dark, unable to direct resources towards critical national challenges.

The contemporary clearance system has four main levels: Top Secret/Sensitive Compartmented Information (TS/SCI), Top Secret (TS), Secret (S), and Confidential (C). Each level grants access to increasingly sensitive information, with TS/SCI being the highest. Obtaining a clearance involves a lengthy background investigation process that can take months or even years.

The problem? Modern technological advancements often occur in weeks, even days. Today’s entrepreneurs succeed by rapidly testing product ideas with users, iterating until they achieve product-market fit. But product-market fit is unattainable when the core customer is prohibited from articulating their true needs.

Because of the slow-moving clearance process, tech entrepreneurs and investors are often shut out of substantive discussions with defense and intelligence leaders. They are forced to make crucial product decisions without access to specific, timely insights into the government’s actual problems and pain points.

The outdated security clearance process compels public servants to communicate in frustratingly vague terms to the uncleared. “I can’t read you in” becomes a conversation stopper. Government officials, too, find themselves constrained by this setup, unable to effectively signal where private sector innovations could be most impactful. As a former senior CIA executive confided to me, the clearance quagmire suffocates collaboration between government agencies and commercial enterprises, leaving even top leaders hamstrung.

The system also creates a bias towards established incumbents with existing clearances. The large prime contractors with security credentials effectively have a monopoly on defense and intelligence innovation.

The problem is compounded when working with allies. Since classification systems differ across countries, we cannot easily share requirements with even our closest partners for joint technology development. This hampers our ability to collaborate effectively with key partners like Japan and the U.K. on critical national security innovations.

Some targeted disclosure mechanisms — like ad hoc “executive briefings” — do exist. In these settings, officials can verbally share classified details with company leaders in secure rooms. But these mechanisms are underutilized and insufficient for aligning mission needs with external innovation.

The Pentagon claims to desire the private sector’s agility and innovation, yet it maintains internal systems that stifle the very communication required to tap into that dynamism. The result is diffuse investment, solution-starved agencies, and a failure to run faster than our adversaries. The situation is untenable, and if unresolved, will harm America’s national security.

It’s time for a fresh approach. The White House and Congress should overhaul the clearance system for the 21st century. Establish expedited paths for pre-vetted entrepreneurs and investors to gain access to specific, less sensitive problem sets. Enable cleared founders to swiftly test product concepts with warfighters and intelligence officers. Create agile feedback loops to guide private-sector innovation.

Through targeted transparency, we can ignite a free exchange of ideas between our most innovative minds and our most important missions. Founders can achieve genuine product-market fit, delivering immense value. Empowered investors can channel more capital to startups addressing government needs. And our nation can leverage its greatest strength: the creativity of free citizens driven to safeguard our future.

Gov Security Clearances: Should They Remain “at level” for Ex-Employees?

In light of recent events, I am very concerned about the state of security at the government level here in the United States. We are in the habit of granting high level security clearances that remain in effect once an employee of the government leaves their post. Am I the only one that is concerned about this? What do we do when our employees leave? We evaluate and reform their “security clearances”, so to speak. We revoke privileges, etc. to ensure that our sensitive information remains secure. Shouldn’t we, as a nation, require security clearances to be revoked or revised when someone leaves their post? If we have secret information that so requires a high-level security clearance then shouldn’t that level of trust be revised upon the departure of the government employee?

Top-secret: Select few retain active security clearance after leaving official capacity

It is a longstanding tradition that some high-ranking, former senior officials from past presidential administrations retain active security clearances after leaving their official capacities.

Such is the case with the former intelligence officials whose security clearances President Donald Trump is considering revoking for what he says was using their security access for political and personal gain.

That some former officials, including those in defense, intelligence, diplomacy and law enforcement retain active security clearances runs contrary to the security clearances of other government employees who leave their jobs (without incidents of alleged misconduct), which become deactivated after a short period of time.

Reasons for retaining former officials’ active security clearances vary, but is common so they can share information about past events or foreign governments with the incoming administration. Former officials also may be called upon by other agencies for consultation.

The risks associated with allowing former officials to retain active security clearances include the chance that they could leak sensitive information, either by accident or on purpose, or that they could use their clearances to obtain information that they could use to publicly criticize the current administration.

There are three levels of security clearance: confidential, secret and top-secret, and the intent of security clearances is to benefit the government, not the individuals who possess them. To retain an active clearance, an employee must have a sponsor (e.g., the government or company holding a facility clearance and sponsoring the employee) and he or she may only access information on a need-to-know basis.

An employee with any alleged misconduct who loses or quits their job while an incident is being investigated will lose their clearance. If they cannot find a new sponsor, their clearance remains revoked or suspended. Those with revoked or denied clearances must wait at least one year from the final decision to reapply. Individuals with expired or inactive clearances can apply to reactivate their clearances once they have a new sponsor, i.e., employer.

Unfortunately, there are currently long waits processing security clearances. Due to background checks and severe backlogs, top-secret security clearance processing times took an average of 534 days and secret and confidential security clearances took 221 days, as reported in the first quarter of 2018. More than 700,000 individuals are currently awaiting security clearance-related background checks and processing.

The president does not have to submit to background checks or go through any security clearance processes, instead receiving full access to top-secret materials upon assuming the presidency.

The authority to issue or revoke clearances is rooted in the U.S. Constitution’s Article II investment of power in the president as the “Commander in Chief of the Army and Navy of the United States” and is independent of any explicit grant of power from Congress.

Although there is no precedent of a president revoking—or granting or denying—security clearances, the president has the authority to revoke the clearance of any of the 4.1 million current security clearance holders, sidestepping Department of State Adjudication Guidelines, which are generally used to assess eligibility for a security clearance.

The Adjudication Guidelines are used by the Department of Defense to determine information about an individual, past and present, favorable and unfavorable, when assessing new and existing security clearances. When someone’s history shows evidence of unreliability or untrustworthiness, questions arise whether the individual can be relied on and trusted to exercise the responsibility necessary for working in a secure environment where protection of classified information is paramount.

Executive Order 12968, adopted in 1995, established uniform policies for allowing federal government employees access to classified information. It details standards for disclosure, eligibility requirements and levels of access, and administrative procedures for granting or denying access and for appealing determinations.

The Debate Over U.S. Security Clearances: What to Know

President Trump’s revocation of a former CIA director’s security clearance has stirred up a debate about access to government secrets, free speech, and democratic norms.  

Former CIA Director John Brennan has been one of President Donald J. Trump’s harshest critics. “Reckless,” “treasonous,” and “disgraced demagogue” are among the words he’s applied to Trump in recent weeks. The revocation of his security clearance raises questions about access to government secrets and the role of the executive in controlling that access.

What’s Happening?

Trump stripped Brennan of his clearance last week, stating that Brennan’s “lying and recent conduct” was “wholly inconsistent with access to the Nation’s most closely held secrets and facilitates the very aim of our adversaries, which is to sow division and chaos.”

The White House is now considering similar actions against other former U.S. officials who it says have “politicized and, in some cases, monetized” their security clearances. The president has also targeted a current Justice Department official, Bruce Ohr, whose wife worked for a firm that did opposition research on Trump.

The Debate

Many legal analysts and intelligence experts say that Trump’s decision to revoke a clearance for political purposes—and not based on any explicit security violation—is unprecedented. Trump has violated a core democratic norm, critics say.

Furthermore, the president’s actions could have a chilling effect on those who disagree with him. Trump’s removal of Brennan’s clearance is “an attempt to stifle free speech” that is “clearly a signal to other former and current officials,” wrote a bipartisan group of senior intelligence veterans. Other critics think the opposite may be true—that Trump’s actions may encourage leaks and other acts of dissent.

As for Brennan, some argue he has proven himself untrustworthy and that his rhetorical attacks on the president went beyond the pale, particularly given his involvement in the counterintelligence investigation of Trump’s presidential campaign. Even detractors of Trump say Brennan’s sharp criticism feeds the administration’s claims about a so-called deep state. Others opine that clearances should sunset with government employment.  

Most legal experts say the president has broad authority to control access to national security information; however, that power is limited, they say, and in summarily revoking Brennan’s clearance, Trump may have violated his constitutional rights to free speech and due process.

The Facts

Here are some facts that are beyond debate.

What is a security clearance?

Government agencies grant clearances at three levels: confidential, secret, and top secret, which is what Brennan had. Holders are eligible to view classified national security information only on a need-to-know basis.

Who holds them?

Government workers or private contractors who deal with national security and foreign policy matters often must obtain a security clearance. Security clearances are required for many lucrative private-sector jobs. Except in rare cases, a holder must be a U.S. citizen. Those who serve in elected positions laid out by the Constitution, such as the president and members of Congress, can access classified materials without such clearances.

How many are there?

More than four million people have U.S. security clearances.

Is a clearance difficult to obtain?

The process includes a detailed background investigation and can take several months to more than a year. Holders must be reinvestigated at least every five years.

What are grounds for being denied or losing clearance?

The government uses thirteen criteria in screening: allegiance to the United States; foreign influence; foreign preference; sexual behavior; personal conduct; financial considerations; alcohol consumption; drug involvement; psychological conditions; criminal conduct; handling of protected information; outside activities; and use of information technology systems.

Why do ex-officials keep clearances?

Many private citizens who served in high-level government positions maintain their clearances because they may be called back into public service, as either an employee or consultant, to discuss classified matters with their successors. For instance, former CIA Acting Director John McLaughlin said his clearance was vital when he was invited back, on a voluntary basis, to the agency to chair a committee on counterterrorism.

-Cleaning up the Lobbyist Debacle

Lobbying is one of the most significant issues in our government. Until it is finally addressed, government corruption will not go away.

Time to get serious about cleaning up lobbying!

A Better Way To Fix Lobbying.

–Dealing with campaign contributions, both individual and super packs

There needs to be reform in campaign contributions. There can’t be any more super pacts.

Reform Money in Politics

Americans are fed up with the role of big money in political campaigns. The Brennan Center’s solution: small donor public financing to put power back in the hands of individuals.

The campaign finance system is broken. Super PACs and shadowy nonprofits give enormous sway to the super-wealthy and big corporations. The Brennan Center is working to build a better system, pushing for public financing that matches small donations with public money, and regulations to eliminate illegal foreign spending. And we are waging a long-term fight to overturn misguided Supreme Court rulings that weaken crucial protections.

Fixing the Federal Election Commission

Repairing the broken agency charged with enforcing federal campaign laws.

The problem:

The Federal Election Commission (FEC), the nation’s top election watchdog, is mired in gridlock and lacks the budget, staff, and teeth to enforce our nation’s campaign finance laws. Created in 1974, the FEC is charged with enforcing federal campaign laws to prevent corruption and the appearance of corruption. However, the agency was intentionally structured from the beginning to be weak, and throughout the years, it has become increasingly less effective and mired in partisan division.

Our campaign finance laws only work if they are enforced. The unfortunate reality is that federal laws about money in politics are regularly violated, and when the FEC recognizes a violation, the agency usually takes very little meaningful action. Because the commission has an even number of Republicans and Democrats, it deadlocks 3-3 on most major decisions.

Solutions: 

The Restoring Integrity to America’s Elections Act has been introduced with bipartisan support in multiple sessions of Congress. The bill is designed to restructure the FEC and ensure it can effectively enforce the law.

Key provisions in the bill would:

1. Change the number of commissioners. By reducing the number of commissioners from six to five and permitting no more than two members to be affiliated with the same party, the FEC would become a more effective enforcer of ethics and election laws. The commission would have the authority to initiate, defend and appeal civil actions, conduct investigations, issue advisory opinions, and change or amend regulations.
2. Create a blue ribbon panel to recommend commissioners. To help ensure the president nominates a highly qualified appointee, a nonpartisan Blue Ribbon Advisory Panel is needed to publicly recommend potential nominees to the FEC for the president’s consideration.
3. Strengthen the FEC chair. The bill also directs the president to appoint a chair, subject to confirmation by the Senate. The chair would have administrative powers and the power to order written reports, administer oaths, and handle witnesses and evidence.
4. Eliminate never-ending holdovers. Currently, FEC commissioners can serve long after their term has expired while they wait for a replacement commissioner. Instead, commissioners would serve a single six-year term and may not remain in office in holdover status for more than one year.
5. Improve enforcement. The bill clarifies that the FEC may be represented by agency attorneys before the Supreme Court and allows those who respond to requests before the FEC to appear at hearings.

Getting Big Money Out of Politics

Whatever issue brings you to politics – whether it’s climate change or gun violence, student loans or prescription drug prices – there is a reason why our country hasn’t been able to make progress: corruption. 

Money slithers through every part of our political system, corrupting democracy and taking power away from the people. Big companies and billionaires spend millions to push Congress to adopt or block legislation. If they fail, they turn to lobbying federal agencies that are issuing regulations. And if they fail yet again, they run to judges in the courts to block those regulations from taking effect. 

But before all of that – before the legislative process even starts – lobbyists and billionaires try to buy off politicians during elections. Candidates and elected officials often spend hours and hours a day doing “call time” with big donors, instead of learning about policy and working for their constituents. They jet across the country, going from one closed-door fundraiser to another, hearing about the woes and challenges of being a billionaire or corporate CEO. And they court lobbyists and billionaires who can open the doors to thousands of dollars in PAC contributions or millions in super PAC spending.

Much of this corruption of our representative democracy is perfectly legal, courtesy of the Supreme Court. The Supreme Court has declared that money is speech and corporations are people, and it has struck down many efforts to get big money out of politics. As a result, since Citizens United, in 2010, outside groups have more than tripled their spending on political campaigns. During the 2016 election alone, outside organizations spent a whopping $1.4 billion on elections, and nearly $181 million of those funds remain untraceable because they were spent by dark money organizations. Many of the companies engaged in this kind of outside political activity are significantly influenced by foreign sources. 

With money comes time, access, and the corruption of our representative democracy.

Enough is enough.

It’s time to get big money out of politics.

In my campaign, I’ve pledged not to take money from federal lobbyists or PACs of any kind. Not to take contributions over $200 from fossil fuel or big pharma executives. Not to give ambassadorships to wealthy donors or bundlers. And I’m not doing call time with rich donors or giving special access to rich people in exchange for contributions to my campaign. 

Today, I’m announcing that in addition to these policies, I’m not going to take any contributions over $200 from executives at big tech companies, big banks, private equity firms, or hedge funds. And when I’m the Democratic nominee for president, I’m not going to change a thing in how I run my campaign: No PACs. No federal lobbyists. No special access or call time with rich donors or big dollar fundraisers to underwrite my campaign.

“My campaign is and will continue to be a grassroots campaign – funded by working people chipping in a few bucks here or there.” – Elizabeth Warren

As our nominee, I will ban corporate contributions to our Convention and direct the Democratic National Committee to return to the Obama standard and reject lobbyist and PAC money. 

We will do this – and we will also do everything we can to build our party infrastructure and strengthen Democratic candidates across this country. In 2018, I gave or raised nearly $11 million to state and local candidates and parties. Throughout the primary, I have worked to help our national and state parties – and I will continue helping the Democratic Party and Democratic candidates so we have the resources not just to beat Donald Trump but also to win back Congress and state legislatures all across the country. 

I’m proud to be running a grassroots-funded campaign for president, and I hope my fellow candidates for the Democratic nomination will do the same. But however we choose to fund our campaigns, I think Democratic voters should have a right to know how the possible future leaders of our party are spending their time and who their campaign is rewarding. 

That’s why I’m also calling on every candidate in this race to disclose any donor or fundraiser who has a special title on their campaign, including national and regional finance committee members and bundler designations, and to disclose the dates and locations of their fundraising events and the names of every person who appears on a host committee on invitations tied to those events. 

If Democratic candidates for president want to spend their time hobnobbing with the rich and powerful, it is currently legal for them to do so – but they shouldn’t be handing out secret titles and honors to rich donors.

Voters have a right to know who is buying access and recognition – and how much it costs. 

Of course, voluntary changes aren’t going to be enough to clean up the corruption in our elections. That’s why when I’m president I’ll implement a comprehensive plan to permanently eliminate big money from our politics and return it to the people.

My plan has has three parts: 

• End the corrupt system of money for influence,
• Expand disclosure of fundraising and spending, and 
• Put power back in the hands of the people.

We can take immediate legislative action and make big, structural changes to how campaigns are financed. But to truly end the corruption of our democracy, we must also pass a constitutional amendment to overturn the Supreme Court’s disastrous decisions in Citizens United and Buckley v. Valeo. A constitutional amendment will allow Congress to regulate election spending, establish public financing as the sole way to finance elections, and bring an end to the era of big money in politics.

END THE CORRUPT SYSTEM OF MONEY FOR INFLUENCE

Even under current restrictive Supreme Court decisions, Congress can pass campaign finance laws to prevent the possibility of quid pro quo corruption, including restricting how much money can be given to candidates for office. My anti-corruption plan seeks to shut down avenues for money to exert a corrupt influence on elected officials. When it comes to campaign dollars, we need additional restrictions:  

• End the practice of federal candidates taking corporate PAC money. Right now, candidates for federal office can accept contributions from political action committees that are set up by corporations, even though they can’t take contributions from corporations directly. My plan will make it illegal for corporate PACs to contribute to federal candidates. 
• Ban Foreign Corporate Influence in American Elections. Federal law prohibits foreign individuals from contributing to campaigns and thereby influencing American elections. But a loophole in federal law allows foreign-owned or foreign-funded companies to influence American elections. This concern is real. Reporters have described how foreign corporations are using this loophole to influence American elections. My plan would close this loophole and ban foreign controlled and influenced companies from spending in American elections by prohibiting U.S. subsidiaries of foreign companies, firms that have 1 percent ownership by a single foreign entity or 5 percent ownership by multiple foreign entities, and trade associations that receive money from those entities, from spending money in American elections. 
• Ban the Consideration of Campaign Donations in the Selection of Ambassadors. For decades, administrations of both political parties have appointed big donors and bundlers to ambassadorial posts around the world. These donors are usually not experts in the country, region, foreign policy, or anything else relevant to the job – but they are donors. I have pledged not to participate in this practice. My plan will make it the law by prohibiting campaign donations and political spending from being a consideration in the selection of an ambassador.
• Close the Loopholes for Single Candidate Super PACs. Billionaires are currently allowed to donate $2,800 to a campaign, but they can contribute unlimited amounts to a Super PAC as long as they do not coordinate with the campaign. To sneak around the coordination ban, Super PACs are sometimes run by a candidate’s former staffers or others with a close relationship to the candidate. My plan would close this loophole and consider it coordination if a Super PAC is run by a person with political, personal, professional, or family relationship to candidate. 
• Ban Lobbyists from Donating, Bundling, and Fundraising for Candidates. When individuals who are paid to influence politicians also funnel money into the campaigns of those same politicians, that sounds like legalized bribery. My anti-corruption plan seeks to end the corrupting influence of lobbyists throughout our government, including by banning lobbyists from donating, bundling, and fundraising for candidates.
• And because political spending doesn’t end on Election Day,  we must also enact strict contribution limits and disclosure requirements for inaugural committees. President Trump’s inaugural committee raised nearly $107 million from giant corporations and wealthy donors – and the Chair of Trump’s inaugural committee is now under federal investigation for allegedly misspending funds and selling favors to wealthy donors, including members of foreign governments. I’ve supported a bill to require disclosure of inaugural spending. My plan will also ban corporations and lobbyists from donating to inaugural committees and place contribution limits on donations – so we never have to endure an ethics disaster like Donald Trump’s inauguration again.

EXPAND DISCLOSURE OF FUNDRAISING AND SPENDING

The system of money for influence is helped, at every stage, by secrecy. Presidential campaigns keep secret whole systems of recognition and special access events. Online political advertising isn’t disclosed the same way as TV and broadcasting, creating openings for foreign influence.

Dark money groups can spend and spend without ever making clear who their donors are. Under my plan, that will change.

• Require disclosure of major donors, bundlers, and finance events in presidential campaigns. Right now, candidates for president spend much of their time courting wealthy donors behind closed doors, and then secretly rewarding those donors with titles and recognitions for raising big sums of money from their wealthy friends. Voters who want to know what secret honors are given out – and to whom – or where fancy big dollar events were hosted don’t have any way to find out. Under my plan, presidential campaigns will have to disclose all donors and fundraisers who are given titles, including national or regional finance committees and bundling achievements. They’ll also be required to disclose who is on host committees and invitations for fundraisers and the dates and locations of those fundraisers. If a campaign wants to have events at the homes of big bank executives or reward bundlers with inner-circle status, they can do that – but voters should know. 
• Update campaign finance laws to address online political advertising. In the lead up to the 2016 election, Russian nationals and Kremlin-connected businesses spent money on an expansive effort to use internet ads to influence American public opinion. Under current law, many of these ads were completely legal. My plan would modernize campaign finance law for the digital age by including internet ads in rules regulating electioneering communications, requiring large platforms to keep a “political file” with information about ad buys, just like TV and radio broadcasters do, and requiring large platforms to make reasonable efforts to prevent illegal ad buys by foreign nationals.
• Bring dark money into the light. Citizens United cleared the way for massive super PACs and dark money organizations that funnel hundreds of millions of dollars into our politics on behalf of largely unknown donors. Every organization that makes an election-related expenditure – including dark-money organizations – should be required to promptly disclose their large donors. And super PACs and other dark money groups must provide enough information about the sources of their money that the American people can trace it back to the ultimate individuals and entities that are funding them – not just the shell organizations used to conceal those sources.

PUT POWER BACK IN THE HANDS OF THE PEOPLE

Right now, our system of funding elections allows individuals and PACs to donate huge sums of money – collectively tens of thousands of dollars – to candidates and parties. And with money comes time, access, and the corruption of our representative democracy. We need to empower ordinary people through a small-dollar public financing system that gives candidates an incentive to spend more time courting working people, rather than just big donors. But it’s not just individuals who spend money on politics: we can make corporations more accountable to workers and shareholders for their political spending. And of course, to make sure power stays in the hands of the people, we need a Federal Election Commission that can actually enforce election laws. 

• Establish a 6-1 Publicly Financed, Small Dollar, Matching Funds Program for Candidates and Parties. My plan will include a public financing program that would give a 6-1 match for small dollar contributions, less than $200. The program will be funded by penalties coming from corporate malfeasance and major tax crimes.
• Lower Contribution Limits to Individuals and Political Parties. Federal law limits how much individuals can contribute to campaigns, political parties, and other FEC-regulated organizations (like PACs). The current limits are high: $2,800 per election for individual donations to campaigns and $35,500 per year for individuals’ donations to national parties and more than $100,000 to special party accounts. My plan would drop the limit to $1,000 for campaign contributions and to $10,000 for contributions to political parties. Lowering contribution limits, combined with 6-1 matching funds for small dollar contributions, will shift incentives for candidates: it will make it less valuable to spend time raising money from big dollar donors and more valuable to spend time with ordinary voters. 
• Establish Public Financing for National Party Conventions. Every four years, the major parties gather at their national conventions. But these conventions have long been funded by corporations and the wealthy. My plan would establish public financing for the national conventions of major political parties.
• Empower Workers and Shareholders to Approve of Corporate Political Activities. My plan also gives workers and shareholders more power in the political activity of American companies. Workers and shareholders should have a greater say in how and when companies choose to wade into politics. That’s why my Accountable Capitalism Act requires 40% of corporate board members to be elected by workers, and both 75% of shareholders and 75% of the board to approve of any political action taken by the corporation. 
• Enhance FEC Enforcement. Right now, the Federal Election Commission (FEC) is badly broken. In late September, in the midst of the Trump-Ukraine revelations, FEC Chair Ellen Weintraub proposed confirming that it is a crime to ask for foreign assistance for a campaign’s benefit – even when the value of the benefit is “difficult to ascertain.” Republican Commissioner Caroline Hunter objected to this memo being added to the FEC’s weekly digest, leaving Weintraub to post the reminder on Twitter. An agency that can’t even remind people of the law isn’t one that will be able to enforce it. Part of the problem is the FEC’s design: the FEC is generally evenly divided between Democrats and Republicans and needs a majority to proceed with enforcement actions or write regulations. At present, the FEC doesn’t even have enough commissioners to take any action: it has effectively shut down, right as the campaign season gears up, leaving us exposed when the need for oversight is greatest. My proposal would restructure the FEC by reducing the number of commissioners from six to five, and requiring one member to be an independent. We should also give the FEC expanded power to impose fines and increased resources for staff to conduct investigations, and give either party the ability to go to federal court if the FEC fails to pursue an enforcement action in a timely fashion. Finally, my plan would reinstate the authority of the FEC to conduct random audits. The FEC originally had the power to conduct random audits, but this power was removed in 1979. Now, the FEC can only make audits where there are obvious errors, which usually means that those without the resources to hire lawyers and compliance staff get audited. 

Our democracy shouldn’t be bought and paid for by the wealthy and powerful. It belongs to all of us. When we use our voices and our votes, we can make real change – big, structural change.

That’s why getting big money out of politics and addressing corruption in Washington are so important. These reforms make it possible to do everything else we need to do – from addressing climate change to forgiving student loans. Getting big money out of politics is a critical part of fighting corruption, and it will help give us a government that truly is of the people, by the people, and for the people. 

Campaign Contributions and the Ethics of Elected Officials: Regulation Under Federal Law

Summary

Allegations of political corruption often involve questions regarding a public official or candidate’s use of campaign funds or the relationship between campaign contributors and the candidate or official. A common concern is that a particular individual, private organization, company, or other entity “bought”—through large campaign contributions widely distributed—particular official favors, official acts, or official forbearance from officers or employees of the federal government. These issues have been highlighted in several high-profile cases over recent years. In 2016, the Supreme Court clarified the boundaries of federal political corruption statutes in McDonnell v. United States, in which it examined which actions taken by public officials could be considered “official acts.”

In an effort to curb corruption in the political process, Congress has enacted laws that regulate campaign contributions made to federal office candidates. The Federal Election Campaign Act (FECA) regulates contributions in three general ways, by establishing limits, source restrictions, and disclosure requirements. Source restrictions include prohibitions on contributions from government contractors, foreign nationals, and the general treasuries of corporations and labor unions (corporate and labor union political action committee (PAC) contributions are permitted). Further, the law prohibits the converting of campaign funds for personal use; that is, it bans contributions from being used to fulfill any expense that would exist “irrespective” of the candidate’s campaign or federal officeholder duties. Courts have generally upheld these regulations in order to maintain the integrity of the democratic process by protecting against quid pro quo corruption and its appearance. In addition to civil penalties, it is notable that FECA sets forth a range of criminal penalties.

In addition to the direct federal regulation of campaign contributions, a number of federal political corruption provisions prohibit federal officials from receiving personal benefits that are related, in certain ways, to their official acts. Among some of the most common concerns raised in political corruption cases are bribery, illegal gratuities, and extortion. Laws criminalizing these activities bear upon the relationship of official acts to otherwise lawful contributions: The prohibition on bribery precludes officials from accepting contributions in exchange for performance of an official act. The prohibition on illegal gratuities does not require that the contribution be made in exchange for the official act, but instead precludes officials from accepting contributions made because of the official act. The prohibition on extortion precludes officials from using their position to demand contributions in exchange for official action. Additionally, a number of political corruption cases involve charges of so-called “honest services” fraud, alleged when public officials engage in schemes that deprive the public of honest services of government officials.

This report provides an overview of federal campaign finance and public corruption laws that may be relevant to the political campaigns of elected officials, including discussion of provisions that could be implicated in cases involving the misuse of campaign funds or malintent of campaign contributions.

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Allegations of political corruption often involve questions regarding a public official or candidate’s use of campaign funds or the relationship between campaign contributors and the candidate or official. A common concern is that a particular individual, private organization, company, or other entity “bought”—through large campaign contributions widely distributed—particular official favors, official acts, or official forbearance from officers or employees of the federal government. These issues have been highlighted in several high-profile cases over recent years. In 2016, the Supreme Court clarified the boundaries of federal political corruption statutes in McDonnell v. United States, in which it examined which actions taken by public officials could be considered official acts.

This report provides an overview of federal laws regulating campaign contributions and their acceptance by elected officials. It examines various aspects of campaign finance law, including limits, source restrictions, and disclosure requirements on campaign contributions, as well as the prohibition on converting campaign funds for personal use. It also analyzes various public corruption laws that prohibit bribery, illegal gratuities, extortion, and honest services fraud in the context of campaign contributions.

Overview of Campaign Finance Regulation

Contributions to Candidates

The Federal Election Campaign Act (FECA) regulates campaign contributions in federal elections. FECA defines a “contribution” to include money or anything of value given for the purpose of influencing an election for federal office. A contribution can be distinguished from an “expenditure” in that a contribution involves giving money to an entity, such as a candidate’s campaign committee, while an expenditure involves spending money directly for advocacy of the election or defeat of a candidate.

Generally, FECA regulates contributions in three ways, by establishing limits, source restrictions, and disclosure requirements.

Limits and Prohibition on Contributions Made in the Name of Another

FECA provides specific limits on how much individuals can contribute to a candidate, and these limits are periodically adjusted for inflation in odd-numbered years. For example, in the 2015-2016 election cycle, an individual could contribute up to $2,700, per election, to a candidate.

Of importance, the law also prohibits contributions made by one person “in the name of another person,” and bans candidates from knowingly accepting such contributions. This provision serves to prevent an individual, who has already contributed the maximum amount to a given candidate, from circumventing contribution limits by giving money to someone else to contribute to that same candidate. Regulations promulgated under FECA further specify that a corporation is prohibited from reimbursing employees for their campaign contributions through a bonus, expense account, or other form of compensation. In general, the Supreme Court has upheld reasonable limits on contributions as a means to prevent quid pro quo corruption or its appearance by combating improper influence on candidates by contributors. Quid pro quo corruption involves an exchange of money or something of value for an official act.

Source Restrictions

Referred to as “source restrictions,” federal campaign finance law contains several bans on who may make contributions to federal candidates.

Ban on Corporate and Labor Union Contributions

FECA prohibits contributions by corporations and labor unions from their own funds or “general treasuries.” Candidates, however, are permitted to accept contributions from separate segregated funds or political action committees (PACs) that are established and administered by such entities. Although the Supreme Court in 2010, in Citizens United v. Federal Election Commission, invalidated the federal ban on corporate treasury funding of independent expenditures, it did not appear to affect the ban on corporate contributions to candidates and parties.

Ban on Federal Contractor Contributions: “Pay-to-Play” Prohibition

Another type of source restriction—known as a “pay-to-play” prohibition—is the ban on federal candidates accepting or soliciting contributions from federal government contractors. Pay-to-play laws generally serve to restrict officials from conditioning government contracts or benefits on political support. This FECA prohibition applies at any time between the earlier of the commencement of contract negotiations or when the requests for proposals are sent out, and the termination of negotiations or completion of contract performance, whichever is later. FECA regulations further specify that the ban on contractor contributions applies to the assets of a partnership that is a federal contractor, but permits individual partners to make contributions from personal assets. The ban also applies to the assets of individuals and sole proprietors who are federal contractors, which includes their business, personal, or other funds under their control. The spouses of individuals and sole proprietors who are federal contractors and their employees, however, are permitted to make contributions from their personal funds. As with corporate direct or “treasury fund” contributions, FECA provides an exception to the ban on government contractor contributions. That is, the law permits candidates to accept contributions from PACs that are established and administered by corporations or labor unions contracting with the government.

In 2015, a unanimous en banc U.S. Court of Appeals for the D.C. Circuit upheld the ban on campaign contributions by federal government contractors, limiting the application of its ruling to the ban on contractors making contributions to candidates, parties, and traditional PACs that make contributions to candidates and parties. The 11-judge court held that the law comported with both the First Amendment and the equal protection component of the Fifth Amendment. According to the court, the federal ban serves “sufficiently important” government interests by guarding against quid pro quo corruption and its appearance, and protecting merit-based administration. The court further determined that the ban is closely drawn to the government’s interests because it does not restrict contractors from engaging in other types of political engagement including fundraising or campaigning. In January 2016, the Supreme Court declined to hear an appeal to the ruling.

Generally, allegations of pay-to-play corruption involve charges that businesses or other entities will not be considered for government contracts or other governmental benefits unless those private entities make campaign contributions to the controlling political party or public officials. Pay-to-play can be viewed as a more subtle form of political corruption because it may involve anticipatory action, and potential future benefits and conduct, as opposed to any explicit, current quid pro quo agreement or understanding. Over the last several decades, it has seen more relevance at the state and local governmental level, rather than at the federal level, and is often facilitated by a complicit political culture within a governing jurisdiction.

There appear to be at least two factors contributing to the prevalence of allegations and instances of pay-to-play corruption at the state and local level, but not at the federal level. First, since 1940, federal contractors or those negotiating for federal contracts have been expressly prohibited from making campaign contributions to federal candidates, political parties, or campaign committees. Although enactment of the 1940 law was in direct response to allegations of dunning contractors to contribute to the coffers of the controlling political party, there have been relatively few instances of such corruption at the federal level since the original enactment of the prohibition. As the D.C. Circuit observed in its 2015 ruling:

More recent evidence confirms that human nature has not changed since corrupt quid pro quos and other attacks on merit-based administration first spurred the development of the present legislative scheme. Of course, we would not expect to find—and we cannot demand—continuing evidence of large-scale quid pro quo corruption or coercion involving federal contractor contributions because such contributions have been banned since 1940.

In addition, in contrast to certain state contracting procedures, federal contracting requirements and regulations generally stress competitive selection of vendors, and attempt to protect the federal procurement and contracting process from political or partisan influences.

Ban on Foreign National Contributions

FECA also prohibits candidates from accepting contributions, made directly or indirectly, from foreign nationals. This prohibition includes all foreign citizens with the exception of those who have been admitted as lawful permanent residents of the United States (i.e., “green card” holders). FECA regulations further specify that foreign nationals are prohibited from directing or participating in the decision-making process of entities involved in U.S. elections, including decisions regarding contributions.

In a series of advisory opinions, the Federal Election Commission (FEC) has provided specific guidance for compliance with the prohibition on foreign nationals making contributions. For example, the FEC has found that a U.S. corporation that is a subsidiary of a foreign corporation may establish a PAC that makes contributions to federal candidates as long as the foreign parent does not finance any contributions either directly or through a subsidiary, and no foreign national participates in PAC operations and decision making, including regarding contributions. In 2012, the Supreme Court summarily affirmed a three-judge federal district court panel ruling that upheld the constitutionality of the prohibition on foreign nationals making campaign contributions. The district court held that for the purposes of First Amendment analysis, the United States has a compelling interest in limiting foreign citizen participation in American democratic self-government, thereby preventing foreign influence over the U.S. political process.

Disclosure Requirements

Under FECA, candidate campaign committees must register with the FEC and comply with disclosure requirements. Such requirements include filing periodic reports that include the total amount of all contributions received, and the identity of any person who contributes more than $200 during a calendar year. The Supreme Court has generally upheld the constitutionality of disclosure requirements as substantially related to the governmental interest of safeguarding the integrity of the electoral process by promoting transparency and accountability.

Coordinated Communications Treated As Contributions

It is important to note that a communication—such as a political advertisement—that is made in “coordination” with a candidate’s campaign or political party may be treated as an in-kind contribution. Therefore, it may be subject to FECA’s regulation of contributions, including limits.

The regulatory line between coordinated communications and independent expenditures is based on Supreme Court precedent. In various rulings, the Court has determined that the First Amendment does not allow any limits on expenditures that are made independently of a candidate or party. According to the Court, the “constitutionally significant fact” of an independent expenditure is the absence of coordination between the candidate and the source of the expenditure. Individuals, political parties, PACs, Super PACs, and other organizations can engage in unlimited independent expenditures. Furthermore, as a result of the Court’s ruling in Citizens United, corporations and labor unions can also engage in unlimited independent expenditures from their own funds or “general treasuries.”

FECA regulations set forth detailed criteria establishing when a communication by an organization will be considered coordinated with a candidate or a party and thereby treated as a contribution. The regulations include “content” and “conduct” standards. The “content” standard addresses the subject and timing of a communication, and does not require that a communication contain express advocacy (i.e., expressly advocating the election or defeat of a clearly identified candidate, using terms such as “vote for,” “elect,” or “vote against”). For example, an “electioneering communication,” which is a type of issue advocacy, can satisfy the content standard. By definition, electioneering communications merely “refer” to federal office candidates; they do not require express advocacy. The “conduct” standard addresses interactions between the organization paying for the communication and the relevant candidate or party. Among other factors, the “conduct” standard can be met if the communication is created at the “request or suggestion” of a candidate or party; the candidate or party is “materially involved” in decisions regarding the communication; or the communication is created after “substantial discussions” between the funder of the communication and the candidate or party.

Prohibition on Conversion of Campaign Funds for Personal Use

In addition to the provisions relating to campaign contributions, FECA also prohibits the converting of campaign funds for personal use. Specifically, the law considers a contribution to be converted to personal use if it is used to fulfill any commitment, obligation, or expense that would exist “irrespective” of the candidate’s campaign or duties as a federal officeholder. Examples of such expenses include home mortgage, rent, or utility payments; clothing purchases; noncampaign-related car expenses; country club membership; vacation; household food; tuition payment; admission to sporting events, concerts, theater, or other entertainment not associated with a campaign; and health club fees.

Criminal Penalties

While FECA also sets forth civil penalties, this report addresses the law’s criminal penalties. Generally, FECA provides that any person who knowingly and willfully commits a violation of any provision of FECA that involves the making, receiving, or reporting of any contribution, donation, or expenditure of $25,000 or more per calendar year shall be fined under Title 18 of the United States Code, or imprisoned for not more than five years, or both. If the amount involved is $2,000 or more per calendar year, but is less than $25,000, the law provides for a fine under Title 18, or imprisonment for not more than one year, or both. Notably, FECA provides specific penalties for knowing and willful violations of the prohibition on contributions made by one person “in the name of another person,” discussed above. In addition to the possibility of fines being imposed, for violations involving amounts over $10,000 but less than $25,000, violators could be subject to imprisonment for not more than two years; and for violations involving amounts over $25,000, imprisonment for not more than five years.

In most instances, the U.S. Department of Justice initiates the prosecution of criminal violations of FECA, but the law also provides that the FEC may refer an apparent violation to the Justice Department for criminal prosecution under certain circumstances. Specifically, if the FEC, by an affirmative vote of four, determines that there is probable cause to believe that a knowing and willful violation of FECA involving a contribution or expenditure aggregating over $2,000 during a calendar year, or a knowing and willful violation of the Presidential Election Campaign Fund Act or the Presidential Primary Matching Payment Account Act has or is about to occur, the FEC may refer the apparent violation to the U.S. Attorney General. In such instances, the FEC is not required to attempt to correct or prevent such violation.

Campaign Contributions and Official Government Acts

In addition to the campaign finance laws discussed above, a number of federal political corruption provisions impose restrictions on the use of campaign contributions to influence official acts by elected officials, including bribery; illegal gratuities; extortion; and honest services fraud. These laws generally may penalize both the contributor for giving the unlawful contribution as well as the official for receiving the improper contribution.

The political corruption provisions discussed within this report have a number of overlapping elements and often arise within the same case of alleged corruption. Bribery is perhaps the best known of the political corruption crimes, barring an official from accepting a thing of value in exchange for being influenced in the performance of an official act. Illegal gratuities are considered a lesser included offense of the bribery prohibition, barring an official from accepting a thing of value given because of an official act. Extortion has been described as the other side of the coin from bribery, barring an official from demanding a contribution in exchange for an official act. The scope of prohibition on honest services fraud has been limited to apply only to situations that involve bribery or kickbacks that result in public officials engaging in schemes that could be seen as depriving the public of honest services expected from government officials. Because of the common elements of these crimes, a decision—like that announced by the Supreme Court in McDonnell—regarding what constitutes an official act by an elected official has broad implications in this area of law generally, even though that case deals with personal gifts to a public official rather than campaign contributions.

Bribery

Under federal law, public officials generally cannot receive private benefits in exchange for actions taken in their official capacity. Specifically, the federal bribery statute provides criminal penalties for any federal “public official” who “directly or indirectly, corruptly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally or for any other person or entity, in return for … being influenced in the performance of any official act.”

By definition, a bribe need not be only for the official “personally,” but may be sought “for any other person or entity” (18 U.S.C. §201(b)(2)), such as, presumably, a campaign committee or political party. Thus, campaign contributions to or for federal candidates could be the “thing of value” in a bribe, and can be implicated in a bribery scheme if the other elements of the crime of bribery are present. Examination of campaign contributions as potential violations of the prohibition on bribery raises three relevant issues: whether the individual is a public official; whether there was a corrupt nature to the agreement (an explicit quid pro quo agreement); and what conduct constitutes an official act.

Candidates As “Public Officials”

Congress has defined “public officials” within the scope of the prohibition broadly to include a Member of Congress or Delegate; an officer or employee of the United States; or any person acting for or on behalf of the United States or any of its departments, agencies, or branches. Notably, the prohibition also applies to individuals who have “been selected to be a public official,” meaning any individual who has been nominated or appointed or officially informed of future nomination or appointment. The statutory definitions do not expressly include candidates for public office, but may include Members-elect since the law covers Members of Congress “either before or after such official has qualified.”

Campaign Contributions As Quid Pro Quo Arrangements

Unlike other criminal provisions that require simple criminal intent (an intent to commit the prohibited act), the federal prohibition on bribes requires a specific intent to be shown—that the transaction be “corrupt.” Thus, allegations of bribery must prove existence of some corrupt or wrongful agreement or bargain, which is often described as a quid pro quo—something given in exchange for something received. In order to meet this standard, the bribe must be shown to be the thing that is the “prime mover or producer of the official act” performed or agreed to be performed. The fact that bribery requires such an agreement in advance is one reason why the Supreme Court has noted that bribery is among the least subtle and most blatant forms of public corruption. While such an agreement must be present, it does not appear necessary that it be stated verbally or written. Otherwise, as noted by the U.S. Court of Appeals for the Ninth Circuit, public officials could escape liability “with winks and nods, even when the evidence as a whole proves that there has been a meeting of the minds to exchange official action for money.”

Identification of a quid pro quo or corrupt agreement in the context of campaign contributions depends on the specific details of the transaction. There must be evidence of some agreement directly linking the motivation for the official act to the contribution, but contributions made merely to create a favorable relationship with the donor without an express or implied agreement are not bribes. In other words, a situation in which a donor contributes money to a public official’s campaign and the official later makes an official act that is favorable to a donor does not provide sufficient evidence to constitute a quid pro quo. However, if a public official were to indicate an intention to support legislation or policy in exchange for a campaign contribution to his or her political committee, the public official has been influenced to do the act in return for the campaign contribution, in violation of the bribery statute.

Courts have recognized the significance of this element when examining contributions as potential bribes. The nature of campaign contributions inherently implies a relationship between the donor and candidate in which the donor expects that the candidate will act in the donor’s interests (either material or policy interests). Without a corrupt bargain or quid pro quo arrangement, campaign contributions given to a candidate or official merely as support, or in appreciation for certain official positions or votes taken, as is the case for many or most campaign contributions, are not considered to be bribes. As one federal judge has explained, campaign contributions may be distinguished from bribes as a matter of reciprocity and resulting obligations. Campaign contributions to candidates for public office are associated with some expectation of reciprocity—that the donor’s interests will be represented favorably in the official’s votes. However, lawful campaign contributions, unlike bribes, “do not express or create overriding obligations.”

Performance of an “Official Act”

One of the required elements of the bribery statute is that a thing of value is received or sought in return for being influenced in an “official act.” An “official act” is defined in the bribery statute to mean “Any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity, or in such official’s place of trust or profit.”

Although the term “official act” often is interpreted broadly to include any decisions and actions on governmental matters taken by an official within his official capacity, even if such duties are not prescribed by statute or regulation (such as those activities established by settled practice), there generally must be some action affecting a governmental matter pending or to be brought before a government official. In the legislative branch context, an official act could encompass more than purely “legislative” acts such as voting on legislation, and could reach certain other so-called “representational” actions typically performed by a Member’s office for constituents where some governmental or official matter is involved. Thus, recommending the adoption or rejection of a particular official policy, or intervening on behalf of a private party before another public official or agency on an official governmental matter, most likely would involve “official acts.”

Campaign contributors may often consider making contributions to secure an opportunity for access or a personal meeting with a public official, raising questions as to whether special access to and the meeting with a contributor by a public official, particularly an elected official, constitutes an “official act” prohibited by the bribery statute. As a general matter, merely meeting with a constituent or other private individual by the recipient public official likely would not involve any specific decision, duty, or other official act. The Department of Justice has explained in congressional testimony that “The courts that have addressed the issue have held that such access in exchange for political contributions is not an ‘official act’ that can provide the basis for a bribery or extortion prosecution.” In United States v. Carpenter, the court expressly found that “granting or denying a lobbyist access to present her views” to a legislator did not constitute an “official act” of the legislator; and in United States v. Sawyer, the court found that “the desire to gain access, by itself,” does not amount “to an intent to influence improperly the legislator’s exercise of official duties.”

Being available for and showing deference toward contributors—particularly generous contributors—by offering special, more regular, or greater access for such contributors may be described as an unavoidable, even if unpleasant, reality in the world of political fundraising. It has been described by one federal judge as a kind of “access” payment which is permitted in practice in our form of private funding of campaigns for elective office. “Granting or denying access to an elected official’s time based on levels of contributions,” noted the court in Carpenter, appears to be conduct that should not be criminalized because it is, as expressed by the Supreme Court, “unavoidable so long as election campaigns are financed by private contributions,” and has “long been thought to be well within the law.” The court in Carpenter noted specifically that “[e]lected officials must ration their time among those that seek access to them and they commonly consider campaign contributions when deciding how to ration their time.” While such explicit connections between contributions and personal access may offend Americans’ sense of equal representation, fairness, and egalitarianism—and may also violate specific congressional ethics rules—it appears that it has not been considered to rise to the type of corrupt bargain that involves an official act.

The question of whether particular “access,” as well as arranging meetings with other public officials, would constitute official acts of a public official, or be outside of that realm for bribery and other public corruption statutes, was clarified by the Supreme Court in 2016. In McDonnell v. United States, the Court unanimously defined a more limited scope of enforcement for federal public corruption laws than had been advanced by federal law enforcement authorities. The Court vacated the conviction of former Virginia Governor Robert McDonnell, who a federal jury had found to have traded official favors for lavish personal gifts and loans from the maker of a dietary supplement who had sought, among other things, state testing of the supplement and inclusion of the supplement in the health insurance plan for state employees. On appeal, the U.S. Court of Appeals for the Fourth Circuit found that the acts of the former governor that were at issue in the case constituted official acts under the relevant corruption statutes. These acts included (1) setting up a meeting with state officials to look into state-sponsored drug trials at state higher educational facilities; (2) hosting a product launch for the supplement at the governor’s mansion that sought to “encourage universities to do research on the product”; and (3) sending emails “to push for state university research” on the supplement. However, the Supreme Court held that these actions, which afforded the constituent access to certain state officials, absent other evidence of prohibited corrupt activity, were beyond the scope of the prohibition on trading personal favors for official acts under the bribery statute. According to the Court, a meeting, event, or call itself could not meet the threshold of an official act for purposes of the bribery statute. The Court also held that arranging meetings, hosting events, or calling other officials must be coupled with an effort to “pressure or advise another official on a pending matter” that would result in an official decision or action. The Court explained that “official acts” must relate to formal exercises of governmental power; must be specific and focused (not merely broad generalities about policy); and must involve a decision or action by a public official, which may include using the official’s position to exert pressure on or advise another official to take action.

Illegal Gratuities

Federal law also prohibits illegal gratuities, which are included within the federal bribery statute as a lesser included offense. The prohibition on illegal gratuities penalizes public officials who, other than as provided by law for the discharge of official duties, seek or accept something of value “personally for or because of any official act performed or to be performed by such official.” Notably, like the bribery statute, the offering or giving of an illegal gratuity to a public official is also prohibited, meaning that the statute regulates behavior both on the part of the donor and the recipient (the public official). The issues under the illegal gratuities clause would involve whether there is the requisite intent—which is less than the corrupt intent required for bribery—and whether the thing of value offered or received is for that public official personally.

Lesser Intent Than Bribery

The prohibition on illegal gratuities closely resembles the prohibition on bribery but differs in the requisite intent of the parties. While bribery requires a corrupt intent, an illegal gratuity does not, meaning it does not require evidence of an express or implied quid pro quo. That is, unlike bribes, there is no requirement to demonstrate an intent to influence or be influenced. A thing of value received even after the official act is performed, as a “thank you” or in appreciation for doing an act that would have been done in any event regardless of the donation, might still constitute an illegal gratuity. To be considered a bribe, on the other hand, the donation must be shown to be the “prime mover” influencing the act.

The Supreme Court expanded on the distinction between the intent for bribery and the intent for illegal gratuities, explaining:

The distinguishing feature of each crime is its intent element. Bribery requires intent “to influence” an official act or “to be influenced” in an official act, while illegal gratuity requires only that the gratuity be given or accepted “for or because of” an official act. In other words, for bribery there must be a quid pro quo—a specific intent to give or receive something of value in exchange for an official act. An illegal gratuity, on the other hand, may constitute merely a reward for some future act that the public official will take (and may have already determined to take), or for a past act that he has already taken.

Although no specific illegal bargain, or “corrupt” intent, in receiving an illegal gratuity need be shown, there is a criminal intent required of an illegal gratuity which would distinguish this wrongful receipt of a payment from a mere gift unrelated to any official act, or from a lawful campaign contribution given to an elected public official “because of” his stand, vote, or position on an issue. The intent has been described by one court as the knowledge that one is being compensated or rewarded for a particular official act or acts:

[U]nder the gratuity section, “otherwise than as provided by law … for or because of any official act” carries the concept of the official act being done anyway, but the payment only being made because of a specifically identified act, and with a certain guilty knowledge best defined by the Supreme Court itself, i.e., “with knowledge that the donor was paying him compensation for an official act … evidence of the Member’s knowledge of the alleged briber’s illicit reasons for paying the money is sufficient.”

Contributions for the Public Official Personally

The lower standard of intent for illegal gratuities may seem to imply a higher risk that a campaign contribution may violate the prohibition, because such a contribution may be given or accepted based on a donor’s perception of the candidate’s official acts. However, in the case of an otherwise lawful campaign contribution given for or because of an official position, official vote, or other official act of a government officer, the donation or the receipt of such a campaign contribution generally is not considered to be an illegal gratuity. Such payments are not considered to have been received or sought with the requisite intent to compensate the public official personally for his acts, as they are not received by the official himself but rather by another entity or person for campaign or other similar political uses.

Improper contributions to campaigns therefore are more likely to be scrutinized under campaign finance laws, as discussed earlier in this report. Generally, under federal campaign laws all federal candidates are required to have a principal campaign committee to which campaign contributions are given or transferred, and from which they are expended, under authority of the committees’ treasurers, for campaign or other designated purposes. Furthermore, as discussed earlier, federal law specifically prohibits candidates from converting campaign contributions to their own personal use. Therefore, it may be difficult in the case of campaign contributions to candidate committees to show that the money donated was received by the official with the requisite criminal intent to be “personally” compensated or rewarded for or because of an official act. The U.S. Court of Appeals for the District of Columbia has confirmed that “[A] public official’s acceptance of a thing of value unrelated to the performance of any official act and all bona fide contributions directed to a lawfully conducted campaign committee or other person or entity are not prohibited by 201(g) [now 201(c)].”

If facts are developed, however, that contributions or payments directed to a third party or entity “for or because of” official acts done or to be done by a public official, were used or expended in a manner to financially enrich or financially benefit the official personally, then it might be argued that such funds were received personally even if originally directed to a third-party entity. Contributions to a committee or any third party, therefore, which are used, for example, to pay for personal living expenses of a public official, a personal car, or other personal expenses such as transportation, clothing, food, or the college tuition for one’s child, might arguably be considered payments for the official personally. In the United States v. Brewster case, the court found that the monies given ostensibly as campaign contributions were given by a lobbyist to a sham committee which was merely the “alter ego” of the Senator. That committee did not report or keep records such as other political committees under the federal law at that time and the Senator freely drew funds from it for his own personal use. Therefore, the campaign contributions could be considered illegal gratuities received by the Senator.

Extortion

Separate from, but related to the offenses of bribery and illegal gratuities, a federal law known as the Hobbs Act prohibits the interference with commerce by way of extortion. While the bribery and illegal gratuity provisions prohibit public officials from seeking or accepting contributions related to official acts, extortion prohibits public officials from using their position to demand contributions. Extortion is defined as the “obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence or fear, or under color of official right.” Federal courts have noted that the crime of extortion and the crime of bribery under federal law “are really different sides of the same coin,” and that the intent requirements of the two federal offenses are parallel.

Demands by elected public officials on private citizens for payments, such as for campaign contributions, even when the payments are to be made to third parties such as campaign committees, may fall within the extortion provisions when there is some wrongful use of one’s official position to induce or coerce the contribution. As stated by one court, the Hobbs Act would “penalize those who, under the guise of requesting ‘donations,’ demand money in return for some act of official grace.

Required Quid Pro Quo

The Supreme Court has found that elected officials who ask for bona fide campaign contributions would only violate this law when there is evidence of a specific quid pro quo, similar to the bribery statute. The Court noted in McCormick v. United States, that the mere nearness in time of official acts by a recipient public official and campaign contributions from the beneficiaries of those acts does not evidence “extortion” under the law, and is an “unrealistic assessment” of the requirements of the crime, particularly in light of how “election campaigns are financed by private contributions and expenditures.” Rather, the Court found that the statute would be violated by a request from an elected official to a member of the public for a voluntary campaign contribution “only if the payments are made in return for an explicit promise or undertaking by the official to perform or not to perform an official act,” where the “official asserts that his official conduct will be controlled by the terms of the promise or undertaking.” The Court explained:

Serving constituents and supporting legislation that will benefit the district and individuals and groups therein is the everyday business of a legislator. It is also true that campaigns must be run and financed. Money is constantly being solicited on behalf of candidates, who run on platforms and who claim support on the basis of their views and what they intend to do or have done. Whatever ethical considerations and appearances may indicate, to hold that legislators commit the federal crime of extortion when they act for the benefit of constituents or support legislation furthering the interests of some of their constituents, shortly before or after campaign contributions are solicited and received from those beneficiaries, is an unreal assessment of what Congress could have meant by making it a crime to obtain property from another, with his consent, “under color of official right.” To hold otherwise would open to prosecution not only conduct that has long been thought to be well within the law but also conduct that in a very real sense is unavoidable so long as election campaigns are financed by private contributions or expenditures, as they have been from the beginning of the Nation.

In a similar vein as the bribery provision, the making of campaign contributions, either on one’s own initiative or in response to a request from an official or the official’s campaign, with the mere hope or expectation that one might be treated favorably in the future because of one’s generosity and support in making such campaign contributions, does not provide the necessary quid pro quo or corrupt character for an extortion charge:

… The explicitness requirement serves to distinguish between contributions that are given or received with the “anticipation” of official action and contributions that are given or received in exchange for a “promise” of official action. … When a contributor and an official clearly understand the terms of a bargain to exchange official action for money, they have moved beyond “anticipation” and into an arrangement that the Hobbs Act forbids. This understanding need not be verbally explicit. The jury may consider both direct and circumstantial evidence, including the context in which a conversation took place, to determine if there was a meeting of the minds on a quid pro quo. …The explicitness requirement is satisfied so long as the terms of the quid pro quo are clear and unambiguous.

The U.S. Court of Appeals for the Seventh Circuit, upholding certain extortion convictions of former Illinois Governor Rod Blagojevich under the Hobbs Act, noted that the quid pro quo required for an extortion with regard to payments or contributions to a politician does not have to be “demanded explicitly” because the “statute does not have a magic words requirement.”¹²³ The court noted that “[f]ew politicians say, on or off the record, ‘I will exchange official act X or payment Y'” and that non-verbal understandings “can amount to extortion under the Hobbs Act.”

Honest Services Fraud

Corruption in the political process is also subject to prohibitions under the federal wire and mail fraud statutes. These statutes proscribe schemes to defraud that are carried out using wire communications or the mail. After a 1987 Supreme Court decision limited the wire and mail fraud laws only to schemes to deprive someone of tangible benefits, Congress amended the law in 1988 to add specifically that a “scheme or artifice to defraud” may include a scheme to deprive another of the “intangible right of honest services.” This provision has been commonly referred to as the prohibition on honest services fraud.

The honest services fraud provision was initially unclear in scope, however. Generally, it might have been applied to public officials who participate in any scheme or activity which could be seen as depriving the public of the honest, unbiased services that the public should receive from their government officials. As such, it became a common charge in a wide range of public corruption cases by federal prosecutors, particularly as these federal prosecutors targeted alleged corruption at the state and local level. In 2010, though, the Supreme Court clarified application of the provision while narrowing its scope in Skilling v. United States. The Court upheld the statute, finding that it was not unconstitutionally vague, by narrowing its application to schemes in which there is shown to involve either bribery or kickbacks.

More recent consideration of honest services fraud in courts has clarified its application related to bribery cases. For example, a federal court has held that the government does not have to prove an “explicit” quid pro quo bribery scheme (when the thing of value transferred or offered is not a campaign contribution), but rather may prove such intent as “inferred” from the evidence. In 2016, the Supreme Court reaffirmed the required link between bribery and honest services fraud in the case of former Virginia Governor Robert McDonnell (discussed earlier in this report)—who had been charged, in part, under the honest services fraud statute. The Court applied precedents under the bribery statute, and used the express bribery statutory definition, to determine if acts engaged in by the public official should be considered “official acts” of that public official.

–Election Security

Without secure elections, we will not have a free society. The key is paper ballots (we just can’t secure the electronic voting) and photo ID verification.

Voting System Security Measures

Physical Security of Voting Locations and Election Facilities

United in Security: How Every State Protects Your Vote

States have transparent, accountable elections.

Federal law requires election officials to retain ballots and other election-related material for 22 months after a federal election in case a recount or investigation needs to take place.

Every state allows members of the public or political party designees to be poll watchers and observe tabulation or other election processes.

47 states require election offices to strive for partisan balance among poll workers.

Election officials have procedures to maintain and document the location and status of ballots and voting equipment, ensuring that all elements of the election system are accounted for.

States confirm the accuracy of voting equipment.

Every state has a process for testing and approving voting equipment. Most states rely on a federal testing and certification program that has been in operation for almost 20 years.

Election officials in every state test voting equipment before every election to verify the equipment is working as intended.

Voting machines must meet federal standards for minimizing errors.

Voting systems must produce a paper record for audits and recounts.

48 states conduct a post-election audit. That audit might involve recounting a sample of ballots by hand to confirm that the outcome was correct.

95% of voters in 2024 will likely vote on a ballot with a voter-verifiable paper trail.

States ensure that only eligible votes are counted.

Voters must meet federal and state eligibility requirements in their jurisdiction in order to register to vote.

States must maintain voter registration processes that allow only eligible voters to vote, and to vote only once.

Perpetrators of election fraud and voter intimidation are investigated and prosecuted, and face jail times and hefty fines.

Overview

The security of our nation’s elections is important for several reasons, including to ensure voters have the ability to vote, preserving the confidentiality of voters’ selections, and protecting the integrity of each election outcome. NIST conducts research into election system cybersecurity challenges and identifies standards, guidelines and technologies that can improve the security of these systems. To keep up with the evolution of technology, NIST helps to develop innovative security technologies that enhance the nation’s ability to address current and future election security challenges. NIST is known for establishing cybersecurity standards and guidelines in an open, transparent and collaborative way. Collaboration with the election community (e.g., election officials and election vendors) and federal partners (i.e., the U.S. Election Assistance Commission) is important to NIST because engagement with these groups helps ensure guidance is relevant to those who are key to keeping elections in operation. When developing election security guidance, NIST considers accessibility, usability, and any potential impact on voters and election officials.  

NIST performs research that examines the following:

• Threats to election systems
• Standards for securing election systems technology
• Implementation guidance for applying security best practices to election systems/technology

NIST partners with the following agencies:  

• CISA  – provides a suite of security services 
• EAC  – election administration support 

Resources

-Reforming or abolishing the Veterans Affairs Administration

heritage.org, “It’s Time To Reform Veterans Affairs.” By Wilson Beaver; cato.org, “To Protect Service Members and Honor Veterans, Reform the VA.” By Michael F. Canon; thefulcrum.us, “Project 2025: Changes to the Department of Veterans Affairs.” By Kristina Becvar;

-Elimination of pensions for Civil Servants and politicians

nffe.org, “Republican Senators Introduce Legislation to Eliminate Federal Pensions.” yahoo.com, “The Civil Service pensions reform that would save taxpayers £5bn.” By Rob White; cbo.gov, “Replace the Federal Employees Retirement System Pension With Larger Government Contributions to the Thrift Savings Plan for New Employees.”; afge.org, “To Fund Tax Cuts for the Rich, Politicians Propose to Slash Pensions and Eliminate Pensions.”; gao.gov, “Social Security:Coverage of Public Employees and Implications for Reform.”; inthesetimes.com, “Pension Panic Fueled by Anti-Worker Politics?” By Michelle Chen; cpajournal.com, “Accounting, Politics, and Public Pensions.” By Steven W. Thornburg, PhD, CPA and Kristen M. Rosacker, PhD, CPA;

-Eliminating Insider Trading in our Government

congress.gov, “Eliminating Executive Branch Insider Trading Act.”; issueone.org, “Stopping members of Congress from trading stocks: When members of Congress trade stock while in office, they abuse the public trust. Our laws need to be strengthened to correct weaknesses dealing with insider trading.”; roy.house.gov, “Rep. Roy reintroduces bill to prevent Members of Congress from trading stocks.”; pmc.ncbi.nlm.nih.gov, “A Dilemma of Self-interest vs. Ethical Responsibilities in Political Insider Trading.” By Jan Hanousek Jr, Hoje Jo, Christos Pantzalis, Jung Chul Park;

-Reforming Security Clearance Issues

dni.gov, “Security Clearance Reform.”; govexec.com, “20 years of clearance reform: From intelligence reform to Trusted Workforce.” By Lindy Kyzer; realcleardefense.com, “The Urgent Need for Security Clearance Reform.” By Evan Loomis; community.spiceworks.com, “Gov Security Clearances: Should They Remain “at level” for Ex-Employees?” By Caur Johndod Habanero; tullylegal.com, “Top-secret: Select few retain active security clearance after leaving official capacity.” By Anthony Kuhn; cfr.org, “The Debate Over U.S. Security Clearances: What to Know.” By Jonathan Masters;

-Cleaning up the Lobbyist Debacle

transparency.org, “Time to get serious about cleaning up lobbying!”; Issues in Governance Studies, “A Better Way To Fix Lobbying.” By Lee Drutman;

-Dealing with campaign contributions, both individual and super packs

brennancenter.org, “Reform Money in Politics.”; issueone.org, “Fixing the Federal Election Commission: Repairing the broken agency charged with enforcing federal campaign laws.”; elizabethwarren.com, “Getting Big Money Out of Politics.”; congress.gov, “Campaign Contributions and the Ethics of Elected Officials: Regulation Under Federal Law.” By Jack Maskell;

-Election Security

http://www.eac.gov, “Voting System Security Measures.”; cisa.gov, “Physical Security of Voting Locations and Election Facilities.”; bipartisanpolicy.org, “United in Security: How Every State Protects Your Vote.”; nist.gov, “Election Security.”;

Randy’s Musings
https://common-sense-in-america.com/2021/04/02/randys-musings/
https://common-sense-in-america.com/2021/04/13/randys-musings-2-0/
https://common-sense-in-america.com/2021/10/22/randys-musing-3-0/
https://common-sense-in-america.com/2021/10/05/randys-musing-4-0/
https://common-sense-in-america.com/2021/11/12/randys-musings-5-0/
https://common-sense-in-america.com/2021/11/23/randys-musings-6-0/
https://common-sense-in-america.com/2021/12/17/randys-musings-7-0/
https://common-sense-in-america.com/2022/12/30/randys-musings-8-0/
https://common-sense-in-america.com/2024/04/16/randys-musings-9-0/
https://common-sense-in-america.com/2024/11/22/randys-musings-10/