President-elect Trump tweeted early November 30 “that legal documents are being crafted which take me completely out of business operations.” Will this suffice to resolve concerns about the potential conflicts of interest that could arise during his presidency? While the answers of the anti- and pro-Trump camps are predictable (a heated, vitriolic “no” and an equally heated, vitriolic “yes” respectively) for others the answer will turn on two issues:
1) What conduct they understand the conflict of interest rules prohibit, and
2) Whether they think Trump’s removing himself “completely” from his businesses is enough to prevent it.
Media coverage about conflict of interest since Trump’s election has been so colored by opposition to Trump generally that those trying to fairly evaluate Trump’s plan are likely confused about both issues. Herewith a guide to both to help fair-minded citizens evaluate the Trump plan.
What Conflict of Interest Rules Are Meant to Prohibit. The purpose of the conflict interest laws is to prevent government officials from engaging in self-dealing, that is, making decisions that put their financial interests ahead of the national interest. The classic example of self-dealing, and the one which motivated passage of the first conflict of interest statute in 1863, is when a government contracting officer awards a contract not to the company best able to do the work but to one she, her spouse, or friend or relative owns. A second is where a regulator issues a regulation to increase the profitability of a firm he has an interest in rather than to further the general welfare.
The blind trust, divestiture, and disclosure provisions are all prophylactic measures, meant to prevent officials from finding themselves in a position where they might be tempted to favor their own interests or, in the case of the disclosure statutes, to warn them, their supervisor, and the public of situations where they might. (Trump’s claim in a New York Times interview that he is exempt from the conflict of interest laws has injected more confusion into the discussion. If one defines “conflict of interest laws” narrowly to mean just the blind trust and divestiture provisions, he is; if one defines the term to encompass the disclosure provisions, he is not.)
Prophylactics Are the Problem. For the first 100 years the federal conflict of interest law was in force, judging whether an employee was in compliance was straightforward. If, as what prompted the 1863 law, a War Department official had awarded a supply contract to a firm he or she secretly owned, the vice was clear. What has complicated matters is extending the law, or its “spirit,” to cover those elected to public office. The problem lies with the prophylactics. Requiring Defense Department employees to either sell off their stock in arms makers or decline, in the words of the current version of the self-dealing statute, “to participate personally and substantially” in decisions that would affect that stock is easy. But how does one apply this rule to those who, by voting in Congress or presiding over the Executive Branch, “participate personally and substantially” in matters affecting every industry and every part of the economy?
Although one could adopt the same rule for them, Congress has repeatedly rejected this option for itself, asserting it is inconsistent with a basic premise of a representative democracy: that voters may choose a candidate precisely because of his or her financial interests. The classic examples are Oklahoma electing an oilman to the Senate and Iowa a farmer to Congress. Requiring an oil state Senator or Iowa farmer to abstain from voting on oil or agricultural legislation would deny representation to those who sent them to Congress. Moreover, what if the Senator or Representative, like Trump, had extensive holdings across a wide range of industries and sectors of the economy? Could they vote on anything?
The solution the House of Representatives has adopted is to distinguish between cases where a Member’s votes affect him or her as part of a class and where the votes affect the Member directly and individually. Members of Congress who are farmers are free to vote on bills aimed at agricultural in general without raising ethical concerns, but if the legislation is narrowly targeted, say it provides assistance only to farms in his or her district, then ethical antennae are raised.
Evaluating Trump’s Conflict of Interest. The House standard is helpful in judging when Trump’s conduct in office threatens to cross the line by suggesting a way to narrow the field of concern. Under it, if Trump signs or vetoes legislation affecting the hospitality industry as a whole, little ethical fuss should follow. Likewise if his tax proposals treat real estate investors generally. Opponents will be free to question the judgments behind these policy decisions, but the claim they constitute a conflict of interest or are otherwise unethical should be disregarded. Indeed, if such arguments are advanced, Trump would find an unlikely ally in California Governor Jerry Brown. When he was mayor of Oakland, the California Fair Political Practices Commission opined that his making real estate policy to boost investment in the inner-city because he owned property there was unethical. Brown successfully challenged that view, arguing he was elected in part because as an inner-city property owner he had special insight into the issues.
The difficult question arises when Trump must decide a narrow issue likely to have a “direct and substantial” effect on his business. Suppose the District of Columbia enacts legislation granting all hotel owners significant tax relief to boost the local economy and Congress passes a bill to override it. Trump’s interest as a hotel owner would dictate he veto the bill. And unlike legislators who can avoid potential conflicts by abstaining from voting, Trump either has to sign or veto the legislation. The Constitution does not contain any provision allowing him to delegate the power to another.
So how will Trump’s plan to take himself “completely” out of his businesses affect the chance that, in deciding whether to approve or reject tax relief for D.C. hotel owners, he puts his personal interest ahead of the national interest?
That is the question citizens wanting to give Trump a chance to show he takes concerns about conflict of interest seriously should ponder when, as promised, he publishes the details of his plan in December.