Our Laws Should Encourage Business Leaders to Become Cabinet Secretaries

One of the best disruptions of Donald Trump has been his decision to nominate many officials to the Cabinet who have been enormously successful in business. Such appointees have run major organizations and thus can use their substantial management experience to impose order on the sprawling government bureaucracy. They also bring the perspective of business into the heart of government. A commercial republic can thrive only if, from time to time, officials set about lifting off the dead weights that democratic practices tend to place on the economy.

It is thus disheartening, if not surprising, that many Democrats in the Senate now want to eliminate most of the tax law that facilitates the transition of business people to government.  This law permits appointees to an administration to defer their capital gains on the stock they must sell to avoid conflict of interest. It thus encourages wealthy individuals to take government posts, because otherwise they would face an unpalatable choice: Pay a huge capital gains bill or hold on to stock that would create conflicts of interest in their new positions. The legislation greatly aids in eliminating conflicts of interest, because in exchange for the tax deferral, appointees must put their money in treasuries or index funds.

Thus, it is not an interest in good government, but in insular government that is behind the push to change this law.One of the most striking aspects of the modern left-liberal agenda is the effort to create a politics run by and for the symbolic class—people who talk or write for a living. This impetus is most obviously demonstrated by the interest in campaign finance reform.  Such reform does not touch the very substantial influence of the media or of the academy  on the long term shape of politics, groups almost entirely on the left side of the political spectrum.  But campaign finance reform would curtail the capacity of those who create and improve our material world from using their own resources to rent the media and get their own views out the public.

The attempt to gut this sensible tax provision is yet another part of the effort to protect the power of symbolic class and make it harder for the sensibility of business to infuse government. Because academics and policy pundits generally do not face these difficult transition issues solved by this legislation. Certainly academics and policy analysts should be among those who are appointed to the executive branch. But it is a great benefit to our republic also to bring into government those who have created wealth not only for themselves but for the nation.

Reader Discussion

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on January 12, 2017 at 10:21:32 am

Perhaps the best way to discourage any such bill to eliminate tax deferments is to attach an amendment that would greatly limit the degree to which politicians leaving government may capitalize on their time in government, thereby, amassing huge personal fortunes through the speaking circuit, lobby-circuit, and book circuit.

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Paul Binotto
on January 12, 2017 at 12:36:39 pm


Very well said, except for "Certainly academics and policy analysts should be among those who are appointed to the executive branch."

Goodness Gracious, we just had an Executive Branch run by an (alleged) academic. How well did that work out?

The rest is spot-on.
What you are touching upon in this discussion of the Left's hoped for impediments to smooth transition of successful business people into government is an example of the *internalities* of an institution, its own motivations, that cause it to act in something other than the publics' best interest.

And as Paul suggests above, perhaps we can prevent our elected officials from making paid speeches, both during and after their terms, and prevent them from any commerical / financial endeavors during their terms in office.

I have often wondered how someone on a government salary for 25 years is able to leave office with wealth / assets that are orders of magnitudes greater than when they entered service. Gee, I guess they all won the *lottery*

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on January 12, 2017 at 15:32:47 pm

Guys, you'll note that McGinnis opposes limits on campaign finances because he says they only serve to limit speech. So you can't really ask him to endorse the idea of censoring former presidents.

The path of history is strewn with the bodies of people who believed they could "run government like a business." Of course, there are no shortage of bodies of people who sought to run government in some other manners, too. I don't discount anyone willing to offer up his talents in service of the public, but I'll keep my expectations modest.

That said, as far as I understand the issue, I share McGinnis's view on the tax deferment. Yeah, politicians of every stripe are prone to demagoguery. As far as I can tell, that's that Warren is engaged in when she proposes to limit the tax deferments for people joining public service. Alas, in democracy, the policy that gets implemented is not necessarily the policy that appeals to people who understand the issues, but may be the policy that feeds populist resentments. I suspect we could all cite examples--although I also suspect that we'd come up with very different examples....

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on January 12, 2017 at 16:42:08 pm



But do ya think we could claim it is just a "non-compete" clause when we ask former politicos to not make paid speeches. Ha!

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on January 18, 2017 at 16:08:34 pm

Yep, that would kill it.

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Rick Caird

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