The mainstream press1 has finally acknowledged that members of congress from both parties have been using their position to glean information2 from congressional committee testimony unavailable to the public at large and have used this privileged information to play the stock market to their financial benefit. Other (non-congressional) citizens who have made use of such insider information have been prosecuted. Congress has specifically exempted themselves and their staff members from these laws.3 If a subpoenaed witness in these committee meetings used such information in the stock market, he would be prosecuted while a congressman or staff member who used the same information in the same time frame for the same purpose would not be so prosecuted.
Given that some supporters of laissez faire capitalism do not think that insider trading is a violation of anyone's rights and thus should not be considered a criminal act should Objectivists embrace Rick Perry's suggestion as enforcing equality under the law or should they reject it as another instance of expanding government power?
1I'm not including any links to news stories as they would likely be transient.
2This is distinct from the problem of government actors creating new law to enhance their financial positions. Historically this has been documented to have occurred, apologists for Congress argue that it no longer does. I think that they are being disingenuous.
3A subsidiary question. Does the argument from the Separation of Powers argument hold water? This was articulated by Norman Ornstein, scholar at American Enterprise Institute, to The Christian Post as follows;
“The reason for the exemption is presumably separation of powers, not wanting executive agencies that Congress oversees to have leverage over members of Congress – along with the idea that members have the check of balance of elections, have to disclose their holdings, and can recuse themselves.”
In a free economy, all information is private in varying degrees. The idea of a distinction between private and public information is largely a government created fiction. And in a free economy, there are no government restrictions on what one may do in response to information that one possesses, other than to refrain from fraud, unilateral breach of contract, theft, or other forms of direct or indirect physical force. There may still be contractual restrictions on the recipient and/or provider of information, particularly if the parties are concerned about conflicts of interest.
Legislators certainly weaken their own case against trading on private information when they engage in it themselves. Rather than pursue criminal sanctions against them, however, a far better approach would be to do away with "insider trading" laws entirely, and to put an end to the power of Congress to extort information from its victims by subpoena in the first place.
I also see little merit in the claim that Congress has to be exempt from laws against trading on private information to preserve separation of powers. There are already campaign financing laws, which ought to be repealed, to which legislators are subject, and the Congress is also already empowered to police itself through its own overseeing subcommittees if the Congress so chooses. The larger point is the need to reduce rather than expand the powers of our government. Candidates who call for expansion are missing point, as are office holders who practice different principles than they preach.
answered Nov 29 '11 at 01:38
Ideas for Life ♦