EP224: Why the Rich Politicians Keep Getting Richer

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Hello!!

We’re tackling a big (but important) topic today…

Why politicians are soooo rich, and just keep getting richer! 💵💵💵

When you see these giant net worths growing, even in times of extreme difficulty for the rest of the country, it’s hard not to wonder whatttt is happening.  

So, let’s talk about it! 

Secrets are nooo fun, especially when most of the country is left in the dark!

It’s time to shine a light on what’s really going on in our political system, don’t you think? 💡

Okay… in all honesty, it’s WAY past time. 

You deserve to know how the lifestyles of the rich and political are made possible – what’s legal, what’s shady, and how power and influence play a big part in all of it. 

This is pretty eye-opening stuff. 👀

It may pay to be a politician, butttt we’d rather make our money in other ways. 

Liiiike through real estate investing! 

Here’s to shining a light on the shady underbelly of political wealth. 🥂

Hi guys, welcome to another episode.

Today we are going to talk about how the political landscape is shaped by the influence of affluent elites, placing financial gains above the concerns of the people they serve.

That’s quite a statement, isn’t it?  😏😏

Have you ever stopped to think about the extreme wealth of some of our senators and other leading figures in Congress?

Well, it shouldn’t really matter, because the legislative branch of the US government is held to the highest standard of ethics possible. Or so you thought. 

But have you ever really stopped to think  about the considerable wealth of certain congressional figures?

It definitely might raise some eyebrows, to say the least.

For example, Senator Rick Scott has a net worth of approximately $300 million, while Representative Mark Warner follows suit with an impressive $215 million.

Former Speaker of the House Nancy Pelosi, not to be outdone, has also acquired a nice little fortune of around $120 million.

It’s pretty crazy, isn’t it? 🤯🤯

Yeah, it sounds like politics is a pretty lucrative career move, if you ask us.

The even crazier thing is that when you take a look at their salaries, according to Statista, the average salary of a member of Congress is currently just around $174,000. Which is definitely not a bad number, it’s just nowhere near those massive fortunes we just talked about. 

Even weirder, most of them started amassing wealth while in office, so it’s not like they all suddenly got extremely lucky. So where is all that money coming from? 

In today’s episode, we are going to explain the source of that wealth, and what it means for you.

To get things started, here’s a fun fact: most politicians actually grow their wealth by thousands of percentage points AFTER they get elected.

Seem sketch? It kind of is. As you can see from this chart by Visual Capitalist, many politicians actually have net worth in the hundreds of millions – we bet you will recognize many of these names too.

So when it comes down to it, there’s actually a couple of ways that politicians can make their money.

Let’s first take a look at Nancy Pelosi.

Back in 2018, she showed her financial savvy by pouring $46.5 million into real estate, another $15.8 million into electronics manufacturing, and another $15 million into the tech giant Apple. Talk about diversification!

Nancy Pelosi is not just a political powerhouse; she’s also a seeming real-life investment genius. According to Open Secrets, between 2020 and 2021, Pelosi orchestrated trades amounting to over $50 million in assets, boasting an impressive annualized return of 69%. That’s not just beating the stock market – it’s doing so six to seven times better than the average return. 

Move over Warren Buffett, George Soros, and Cathy Wood 🤓🤓 – Pelosi is taking the lead in the investing game! So is she just really, really lucky?

Well, it seems like she’s not the only politician who is striking it rich.

As you can see in this chart, this analysis digs into the financial disclosures of Congress members and their families whenever they make trades. Clay Higgins from Lousinian’s gains were remarkable, with an incredible 238.9% returns in 2023 – almost 10 times the S&P 500 index, which only rose by 24.8% that year.

Interestingly, the data also reveals that Democratic members of Congress secured around 31% gains in returns, surpassing their Republican counterparts who managed an 18%  gain. So what gives? Are these guys stock picking prodigies?

To illustrate this point, let’s pause for a moment of storytelling. Once upon a time in a quaint village, there lived a seasoned farmer named Elias, known all around for his hens with a golden heart. 

One day, the farmer had to journey to town to deliver some eggs.

Faced with the dilemma of leaving the hens unattended, a cunning fox named Johnny offered to keep watch over them. 

Despite Elias’s initial skepticism, he gave in to the fox’s persuasive assurances of reformation and a commitment to not harm the hens. Unsurprisingly, upon Elias’s return, both the hens and the fox were nowhere to be found.

You see, there’s this concept called privileged knowledge and insider trading. And you’d better believe these politicians are absolute pros at navigating that game. But isn’t insider trading illegal?

Backtrack a second with us to the early days of the COVID-19 🧫 pandemic, as the general public tried to source masks and toilet paper, certain politicians engaged in strategic stock trading. 

Following internal briefings by the CDC and Dr. Fauci regarding the true severity of the pandemic, not one, but FOUR senators executed significant stock market divestments. 

This timely maneuver, occurring prior to the market downturn, yielded each senator a profit of $100,000. There’s no doubt about it; they clearly took advantage of non-public information.

So when officials on Capitol Hill start trading stocks while on the job, it’s definitely a breach of trust with the public – and sometimes, even a misuse of their roles.

These legislators get the inside scoop with classified info to help make decisions for our health and well-being. But, more often than not, they end up using that behind-the-scenes knowledge to line their pockets or rake in funds for their donors.

It’s definitely seems like they’re playing the system for personal gain, which feels pretty unacceptable to us. 

So why isn’t anyone doing anything about it? Well, they are, kind of. The STOCK Act, aka Stop Trading on Congressional Knowledge Act, plays a critical role in preventing corruption and maintaining public trust. 

This legislation was put in place by Obama in 2012 with the goal of ensuring that members of Congress do not engage in insider trading or any activities that could raise suspicions of corruption. 

We love this – which must mean this problem was solved right?

Not so fast. The problem is that while the STOCK Act  is great, enforcing it is another matter entirely. 

The whole idea behind transparency is missing the mark, thanks to unclear rules, sneaky exemptions that allow them to report trades late, and a bunch of gray areas in the law’s language. All this mess is making it hard for the STOCK Act to really keep a tight rein on politicians and their financial moves. 

Let’s switch gears for a second and talk about another huge source of income for politicians: lobbying.

It turns out that lobbying also pays pretty well; in 2021 alone,  federal lobby spending was around $3.78 billion. 

Which also is totally above board, except that the people opening wallets might surprise you – they aren’t your neighbors next door, instead, they are mostly big businesses, industries, and the firms that rep them.

So how is THAT legal?

Well, it’s completely legal and to keep things on the up-and-up, it’s not like money passes straight from the hands of lobbyists over to politicians.

In fact, most of this money 💵 comes through support shown via campaign financing donations.

To keep things on the up-and-up, lobbyists don’t hand wads of cash straight to politicians. 

Nope, they slide their support under the door through campaign financing donations. 

Plus, cozying up to lobbyists brings both short-term perks and long-term gains for our politicians.

Which is all above board and lovely, until you dig a little deeper.

Let’s go back to our friend Nancy Pelosi.

We swear we aren’t picking on her – really! She’s just a really great example and happens to be super involved in a lot of these happenings. 

Back in 2008, after making a few small contributions to Pelosi’s campaign, her husband, Paul, received privileged access to a VISA IPO.

But Paul isn’t just her husband, he also happens to be the founder of a large venture capitalist firm. And after receiving this information, Paul invested large sums of money before stock prices went up.

But wait! This isn’t legal! There’s the STOCK Act! While true, the STOCK Act is just so hard to prove in court.

Which means that smart people like Paul and Nancy get to thrive off privileged information and largely have no accountability. 

The thing to remember here is that many politicians enter the political arena with pretty significant pre-existing wealth, which often increases during their time in office. And the ease with which the wealthy dominate politics stems from their interests aligning with established political parties.

Keep in mind too that the unfortunate reality is that political parties are incentivized to promote wealthier candidates as wealth tends to attract more wealth.

Think about it –  a lot of our politicians are Ivy League educated individuals, not products of the projects.

Affluent candidates bring valuable connections for fundraising, financing increasingly expensive campaigns, and garnering support from wealthy friends who benefit from their victory.

All this creates a bit of a vicious cycle with real-world 🌎 consequences.

The capitalist class significantly influences politics through various relationships, such as their disproportionate representation, powerful lobbying, and politicians with stock market interests catering to capital.

It’s not that laws protecting worker bees never pass; they just aren’t the top priority.

These laws may face delays, be streamlined to the minimum, and are carefully crafted to safeguard the long-term interests of the capitalist economy, even if it means sacrificing short-term capital interests.

So are we all just doomed?

No, of course not! But we think it’s important to be educated about this process, where politicians get and gain money, and why they seem to be thriving in a culture of struggle.

We hope you found today’s episode educational, and we encourage you to do your own research so you can be informed about what’s going on where you live. Until next time! ⭐