Burger King's announcement that it will purchase a Canadian company, and in doing so transfer its headquarters to Canada, has given President Obama an opportunity, increasingly rare these days, to score political points on a domestic issue.
Congress is unlikely to pass any legislation. But Obama got a leg up in the debate Tuesday, when Bloomberg News reported recent investment transactions by two of Capitol Hill's most important Republican tax policymakers. Both House Speaker John Boehner, R-Ohio, and Ways and Means Chairman Dave Camp, R-Mich., made money in June by selling the stock of Covidien PLC, a company that Minnesota-based Medtronic Inc. wants to buy as part of an inversion that would transfer its official nationality to Ireland.
Both Camp and Boehner say their advisers make all day-to-day decisions about stock trades. But this informal arrangement gives rise to the appearance that Obama's proposal would hurt them financially.
Ethics standards do not exist merely to prevent corruption, but also to reinforce the public's faith in their government keeping perceptions above board as well. And these particular transactions, which involve just a tiny fraction of Boehner's and Camp's wealth, have compromised two key lawmakers' ability to argue against a bad proposal from Obama.
The House should respond to this fracas not by trying to punish Burger King and Medtronic but by preventing its own members from controlling stocks in such companies in the first place.
Service in Congress is voluntary. There is nothing wrong with making elected officials choose between the powerful offices they hold and their right to engage in high-frequency stock trades (in Camp's case, he reported 370 trades this year, according to Bloomberg). Congress should adopt new rules requiring members to hold their equity investments in diversified mutual funds, as a majority of American families do. There is also an option available under current House rules that could be retained — the qualified blind trust, whose owner is kept deliberately unaware of his own holdings so as to prevent conflicts of interest. Such holdings would not be public, either.
Such restrictions may seem onerous, but fear not: America will suffer no shortage of wealthy people who are willing to run for Congress anyway.
If Obama wants to stop corporations from inverting, he should start by asking why they're so eager to get out of the United States in the first place. He and Congress can fix that problem by slashing corporate tax rates, ending taxation of foreign earnings and removing distortions from the tax code that encourage the irrational business practices, such as “stripping," related to inversions.
In the meantime, with its approval ratings plumbing new depths, Congress should jump at this opportunity to restore Americans' faith in its own dealings. A simple change in how its members can hold their wealth is far a more promising reform than the fool's errand of sniping at formerly American companies as they flee.