A new UC San Diego study shows that when people learn about congressional representatives’ stock trades, it sinks their trust and diminishes their willingness to follow the law.
The January review by UCSD’s Rady School of Management used a sample of 1,000 Americans. They were shown data from the watchdog group Unusual Whales on the portfolio performance of members of Congress, which routinely outperform the market.
Among the group’s findings from 2024: GOP Congressman David Rouzer’s investment returns shot up 149%, Democratic Congresswoman Debbie Schulz 142%, Republican Senator Susan Collins 77% and Democratic Congresswoman Nancy Pelosi 71%.
UCSD’s Rady School of Management Assistant Professor Tage Rai said people who reviewed those increases, and other details, mostly saw Congress as corrupt and were less likely to abide by its laws.
“That decline in trust, that decline in legitimacy, then drives your own judgments about how you yourself should behave,” Rai said. “Citizens say, ‘Well, if I don't believe that the people who have been vested with the authority to reward good behavior and punish bad behavior are playing by the rules, then why should I play by the rules either?’”
He added that this attitude has dire implications for democracy.
“For years, political scientists have asked why some countries function well and others don’t,” Rai said. “One key difference is public trust in institutions. America used to be the poster child for that. People believed if they played by the rules, the system would work.”
UCSD doctoral student Raihan Alam, who was lead author on the study, said people even viewed lawmakers who didn’t make a profit with equal disdain.
“These effects aren't driven by people being jealous of lawmakers earning more money than them, earning millions,” Alam said. “It's the fact that they're using their insider knowledge to break the law to make money and they are our representatives.”
He argued Congress’ takeaway should be to ban stock trading.
A 2023 survey by the Program for Public Consultation at the University of Maryland found that 86% of both Republicans and Democrats believe members of Congress should be prohibited from trading stocks.
And just 29% of Americans trust Congress, according to a recent Gallup poll.
“If congressional members really care about restoring trust in the institution, this (stock trade ban) is a really easy way to do it,” Alam said.
Republican Sen. Josh Hawley last month reintroduced legislation to prohibit congressional representatives from trading or holding individual stocks.
