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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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INTRO­DUC­TION

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