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Policy Solution

Strengthening Presidential Ethics Law

Key Fact: Since the 1970s every president until Trump placed his assets in a “blind trust” that hid their contents from him and was administered by an independent trustee.

Published: December 13, 2017

Marked by conflicts of interest and ethical lapses, the first year of the Trump presidency has fueled debates about our system of federal ethics system in Washington and across the nation. This report lays out a  comprehensive policy agenda outlining steps Congress can take to address to prevent self-dealing by the country’s top leaders. It identifies three main solutions towards eliminating most pressing gaps in the country’s federal ethics system: closing the presidential loophole, bolstering disclosure requirements for high-ranking officials and strengthening ethics enforcement.

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As is well known, President Donald J. Trump has decided to maintain ownership and effective control of his far-flung businesses despite potential conflicts of interest. This decision broke with norms to which his predecessors of both parties had adhered for more than forty years. But it was not illegal. This paper explains why Congress must make it a priority to deal with presidential conflicts of interest and related gaps in our system of government ethics regulation, and sets forth three key priorities for reform.

Americans have worried about high-level self-dealing by government actors since the founding era.  When it comes to the president, however, it has never been clear how the law should address this problem. Before he took office, Mr. Trump himself famously declared that the president “can’t have” a conflict of interest. That is legally true, at least to the extent that the president and vice president are exempt from federal conflict of interest rules that prohibit officials from participating in certain government matters where they have a financial interest.  And while the Constitution itself contains express prohibitions on the president accepting certain questionable gifts or other payments — known as the foreign and domestic “Emoluments Clauses”  — nobody had ever tried to enforce these provisions in court until now. 

Before Mr. Trump was elected, these issues rarely drew significant attention. Among other reasons, presidents took voluntary steps to avoid even the appearance of impropriety. For example, since the 1970s every president until Mr. Trump placed his assets other than “plain vanilla holdings” (personal residences, cash, treasury notes, shares in diversified mutual funds, etc.) in a “blind trust” that hid their contents from him and was administered by an independent trustee. They did so because they understood that even the appearance of decisions tainted by financial self-interest undermines the president’s legitimacy. 

But such steps were entirely voluntary. And while the president is subject to certain disclosure rules under the federal Ethics in Government Act (EIGA), loopholes in those rules make it comparatively easy to avoid full disclosure of assets, sources of income, and debts that could impact official decision-making.
Even if there were stronger rules, moreover, it is unclear who would enforce them. The Office of Government Ethics (OGE), which sets the rules for other Executive Branch personnel, has relatively little enforcement authority and no real independence from the president. And even if OGE had more power and autonomy, it lacks the resources to do very much. The office has fewer than 80 employees and a $16 million budget.

Long ignored by many in Washington, these issues are now hotly debated. Notable experts — including the most recent OGE director — say that the current federal ethics regime simply does not work in key respects.  But how should it be reformed?

The surge of interest in government ethics on the part of members of Congress and reform advocates has not yet translated into a coherent policy agenda. The problem here is not a lack of generally-applicable standards: Federal conflict of interest rules are actually quite detailed. They have been in place in some form since the Progressive Era, with significant expansions in the wake of Watergate and other scandals in the 1970s and 1980s.  But the federal ethics regime has a gaping loophole at the very top, and suffers from inconsistent enforcement given the absence of a strong regulator.

To deal with these problems, we need a package of legislative reforms. The package should include three key components:

Close the presidential loophole. Congress should amend the federal conflict of interest statute to cover the president and vice president, just as parallel laws in the states and in peer democracies cover governors, presidents, and prime ministers. Contrary to prevailing assumptions, there is a strong constitutional case that Congress has the power to do so.

Such a change is unlikely to keep the executive branch from functioning effectively. After all, presidents going back more than four decades took voluntary steps to avoid potential conflicts without any appreciable impact on their official duties. While the president and vice president should not necessarily be subject to the exact same conflict rules as other officials, neither should they continue to receive a free pass from generally-applicable ethical standards.

Expand the scope of financial disclosure. Congress should also amend federal ethics disclosure requirements for high-level officials to include, among other things, the income, assets, and debts of any closely-held (non-publicly-traded) business in which the official or an immediate family has a substantial interest.  Currently, these entities are mostly exempt from disclosure, allowing significant potential conflicts to escape public scrutiny.

Improve administration and enforcement of federal ethics law. Congress should also provide for better administration and enforcement of federal ethics law in the executive branch. To start, it should afford OGE the same autonomy from the president that it has conferred on other independent agencies, clarify that OGE’s rules are binding on all executive branch officials, and enhance the agency’s oversight over ethics officials in other federal agencies. It is also critical to step up civil enforcement of federal ethics law, either by creating a new enforcement division within OGE or assigning civil enforcement to a separate body. These changes will require funding increases relative to OGE’s current miniscule budget.

Certain elements of these reforms are already part of various bills pending before Congress. They could easily be combined into a single package. Together, they would represent a significant step toward fixing the most pressing shortcomings in federal ethics law and enforcement. That in turn would help to renew our nation’s longstanding commitment to the ideal of public service as a public trust, leaving our democracy stronger in the years to come.

Strengthening Presidential Ethics Law