The Wall Street Journal - 22.02.2020 - 23.02.2020

(Axel Boer) #1

A12| Saturday/Sunday, February 22 - 23, 2020 **** THE WALL STREET JOURNAL.


Team Bloat Reduces U.S. Defense Readiness


John Lehman is correct that the
national security apparatus is mas-
sively sclerotic, inefficient, ineffective
and in many ways a real danger to the
nation’s ability to provide for the
common defense (“A Campaign
Against Bureaucratic Bloat in Foreign
Policy,” op-ed, Feb. 18). But the “9/
Commission” on which he served with
great distinction was an unintended
part of the problem as both the De-
partment of Homeland Security and
the Director of National Intelligence,
which add considerably to the bloat,
arose post 9/11.
While on the commission Mr. Leh-
man noted the obscene growth he ob-
served from his days as Navy secre-
tary of new regulations that required
tens of thousands of government em-
ployees to administer. Ask any cabi-
net- or subcabinet-level official about
how much of his or her time is spent
on regulatory and bureaucratic mat-
ters rather than leading and managing
a department.
It is understandable why the size of
the National Security Council staff
went from a few dozen under Henry
Kissinger and Zbigniew Brzezinski to
nearly 600 under President Obama.
As Mr. Lehman observes, the quality
of both the National Security advisers
and staffs simply never reached the
standards set by Henry Kissinger and
subsequent teams for many reasons,
particularly because where one stood
politically would determine where

one might sit in government.
As politics became far more polar-
ized, the list of qualified professionals
who didn’t fit either camp shrunk.
That Donald Trump has had five na-
tional security advisers is telling.
Merely trimming the NSC staff and
other bureaucracies won’t work un-
less regulations are dramatically
slashed. And the National Security Act
of 1947 also must be radically changed
if Mr. Lehman’s lament is to be ad-
dressed. As he later observed, rules
and regulations are the real Washing-
ton Monument.
HARLANK.ULLMAN,PH.D.
Washington

John Lehman’s tale of a coordinat-
ing staff evolving into cumbersome
bureaucracy speaks of the political
DNA of Washington, D.C. In 1961 Presi-
dent John F. Kennedy and Secretary of
Defense Robert McNamara established
the Defense Intelligence Agency (DIA)
to ensure one military assessment ver-
sus separate Army, Navy and Air Force
analyses. Generally, this has been the
case for the DIA, now possessing some
17,000 employees. However, as an
erstwhile intelligence officer in the
capital some 25 years after the DIA’s
birth, I occasionally noted that while
there had formerly been three com-
peting military intelligence estimates,
with the DIA there were four.
RAYMONDJ.BROWN
Londonderry, N.H.

LETTERS TO THE EDITOR


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“No one wants to be the first to say it,
but we know this whole ‘leash thing’
makes us both uncomfortable.”

THE WALL STREET JOURNAL

Bernie, 78-Year-Old Pied Piper of the Young


For those of us who are perplexed
by voter infatuation with Sen. Bernie
Sanders and his tired brand of social-
ism, Barton Swaim’s “The Bernie
Sanders Experience” (op-ed, Feb. 8) is
an eye-opener. True believers in the
social-justice, fairness and pacifist
message of Sen. Sanders relish his au-
thenticity and decadeslong commit-
ment to the cause.
The enduring appeal of Sen. Sand-
ers is, in an odd way, a testament to
America’s success. The American eco-
nomic pie is bigger than ever and big-
ger than any the world has ever seen,
so the siren song of a more just split
of the pie resonates and is feasible. If
the pie was tiny, redistribution
wouldn’t be compelling. The problem
with socialism and its collectivist and
statist offshoots is that there is a
zero-sum relationship between state
power and individual freedom.
No one knows where the precise
tipping point occurs, but for two cen-
turies the U.S. has been in a sweet
spot that fostered world-best growth
and, despite inequality, better life-
styles for most poor Americans than
they would have in any other country.
Is socialism an evolutionary step to
perfection or is incremental change

under today’s functional system a bet-
ter and safer bet? It should be obvious
that incremental change makes more
sense, but never underestimate the
power of envy and a desire of some to
get something for nothing. Feeding
that desire with state power leads to
dependence, entitlement, resentment
and an unquenchable thirst for more.
Bernie is dragging around the de-
composing body of socialism to the
delight of his acolytes.
GARYDANIELS
Sarasota, Fla.

The first sentence of the second
paragraph in William A. Galston’s
“Democrats, Don’t Hit the Panic But-
ton” (Politics & Ideas, Feb. 12) says it
all: “Democrats also began to realize
that the economy’s continuing
strength will complicate their messag-
ing.” Complicate? I think the correct
word is refute. Is Mr. Galston promot-
ing a weak economy and a massive
loss of jobs just so his preferred candi-
date can be elected? I know it pains all
Democrats, but the economy is strong.
He is still in the first stage of denial
along with the rest of his party.
RUDIBAUKNECHT
Philadelphia

Pepper ...
And Salt

Pro Budget Wrestling Has Real Consequences


Regarding your editorial “Profes-
sional Budget Wrestling” (Feb. 11):
Washington’s budget wrestling,
much like the House impeachment
proceedings and the Senate im-
peachment trial, affords both par-
ties an opportunity to posture, but
Republicans are more likely to be
bruised by a general media message
that President Trump’s plan mis-
fires on three levels: tax cuts for
the rich continue to starve Wash-
ington of revenue; lower-income
households will suffer from drastic
cuts (i.e., slower spending growth)

to the safety net; and the result of
the rich stealing from the poor is
soaring deficits. When President
Obama in 2009 set course for tril-
lion-dollar deficits, the media were
thrilled with massive spending in-
creases (starting with the roughly
$800 billion stimulus package),
planned tax increases and unprece-
dented peacetime deficits as a share
of GDP.
Some economists argued then
that GDP “growth multipliers” that
come from increases in safety-net
programs such as unemployment in-
surance and food stamps were more
powerful than multipliers from tax
cuts, but what we got was tepid
growth for eight years. Moderate
Democrats now want to raise taxes
for fiscal prudence and fairness,
while their progressive kin plan
multi-trillion-dollar spending pro-
grams for climate change, health in-
surance and college tuition. At least
with GOP imprudence, we get faster
GDP growth, more jobs and greater
increases in wages. True fiscal re-
sponsibility will have to wait for an
electorate that prioritizes smaller
deficits over more government
goodies and less burdensome taxes.
LUKEBRENNAN
Greensboro, N.C.

Eminent Domain Law and
Public Use vs. Public Good
Regarding Steven Malanga’s
“We’re From the Government and
We’re Here to Build a Bike Path”
(Cross Country, Feb. 15) on the emi-
nent domain issue, which is in the
news again lately: Mr. Malanga writes
that the Fifth Amendment allows a
taking of property for the “public
good.” In fact, the amendment says
“public use.”
There is a vast difference between
the two. Roads, public buildings, wa-
ter plants, canals and even bike paths
are tangible public facilities used by
the public. But every politician who
has ever lived thought his grand
ideas were obviously for the “public
good.” This is why the Constitution
does not allow the government to
take property from one private party
and give it to another so it can be
used for a “better” purpose as de-
fined by politicians—or, worse, an
unelected committee. Without this
protection, there would be no limit
on the power to confiscate, as long
as some plausible “public good” argu-
ment could be made.
CHARLESG.BROCKWAY
Twin Falls, Idaho

Axon Takes On the Feds


H


ow has the Federal Trade Commission
won 100% of the cases it has tried over
the last 25 years? It’s easy when you are
prosecutor, judge and jury.
That’s the claim of Axon Enter-
prise in an important legal
challenge to FTC overreach
that anyone in business should
care about.
Axon was founded in 1993
with the mission of designing less lethal weap-
ons for police departments. In 2007 a former
Axon employee launched a body camera startup,
Vievu. After winning a few large contracts, Vievu
in 2015 was acquired by body armor manufac-
turer Safariland. But Vievu was bleeding cash,
and Safariland didn’t have the engineering ex-
pertise to keep up with new body-cam competi-
tors. Safariland shopped Vievu around, and in
May 2018 Axon agreed to buy the insolvent
Vievu for $7 million.
A month later the FTC sent Axon a letter an-
nouncing an investigation, which was strange
since the agency’s threshold for reporting acqui-
sitions was $84 million. Axon also doesn’t domi-
nate the body-cam market. It has lost more than
55 large bids to 10 companies since buying
Vievu. Motorola acquired one of its strongest
competitors, WatchGuard, last July with the
FTC’s blessing for $271 million.
Two days before Christmas, Axon says the
FTC ordered it to “completely unwind” the Vievu
acquisition. It also says the commission refused
to share its competition analysis, but the FTC has
a long and regrettable record of gerrymandering
markets. Recall how the agency excluded super-
markets from its market-share review of the
Whole Foods-Wild Oats merger in 2007.
The FTC wouldn’t disclose what prompted
its investigation, though it’s not unusual for
competitors to file complaints with antitrust
authorities. An FTC spokesman told us the
agency can’t comment about the Axon case be-
cause it’s in litigation.
Since Vievu was losing money anyway—Axon
had to replace thousands of Vievu cameras for
the New York Police Department after one ex-
ploded—Axon agreed to spin off the company
with $5 million in working capital. But the FTC
demanded more.
According to the Axon lawsuit, the FTC in-
sisted on a “‘blank check’’’ letting it “unilaterally
dictate the terms of settlement” including intel-


lectual property and customer divestitures. The
suit says the FTC “described its vision of ‘re-cre-
ating’ Vievu into a virtual ‘clone’ of Axon.” When
Axon refused, the agency
threatened to file a complaint
in its administrative court,
where it has a 100% win re-
cord.
The FTC always wins be-
cause Congress has rigged the
rules for the government. FTC attorneys create
the trial record. Administrative law judges ap-
pointed by FTC commissioners adjudicate cases
with appeals decided by the same commission-
ers. Even when a company has been exonerated
by an administrative judge, the commission has
reversed the ruling. Commissioners, who are ap-
pointed by the President to seven-year terms, can
only be removed for malfeasance. Administrative
judges who are appointed by commissioners can
only be discharged in accordance with statutory
procedures for “good cause.”
As the Axon suit puts it: “In one hand, [the
FTC] wields a mighty sword—the power to not
only prosecute cases, but to judge them too; in
the other, a massive shield—near-total protec-
tion from political accountability, with the Com-
missioners who direct its actions subject to nei-
ther democratic election nor at-will removal by
the President.”
The FTC also plays by different rules than the
Justice Department, which must sue in federal
court to unwind a merger. But as Axon points
out, “merging parties have no insight or input
into which agency will investigate their merger.”
Procedures for determining this “are not man-
dated by statute, subject to Congressional scru-
tiny, or promulgated through notice-and-com-
ment rulemaking.”
This legal ambiguity may violate a defen-
dant’s due process and equal protection rights.
InHumphrey’s Executor(1935), the Supreme
Court upheld legal limitations on the President’s
authority to remove FTC commissioners by mis-
takenly concluding that the agency serves quasi-
judicial and legislative functions. Yet against
Axon and others, the FTC has aggressively
wieldedexecutivepower.
By exercising judicial, legislative and execu-
tive power, the FTC undermines the constitu-
tional separation of powers that protects Ameri-
can liberty. This abuse of government is ripe for
judicial review.

Can the FTC legally


act as prosecutor,


judge and jury?


Warren’s Super PAC Pivot


E


lizabeth Warren’s website promises she
will “disavow any Super PAC formed to
support her.” That promise has been
central to the Senator’s cam-
paign vow of non-association
with the dastardly rich.
Yet a Super PAC—an inde-
pendent political group that
can take unlimited contribu-
tions—is now running a TV
ad spot supporting Ms. Warren’s flagging
candidacy in Nevada. After Wednesday’s de-
bate, Ms. Warren broke with her pledge, pro-
testing that other candidates are backed by
Super PACs. “It can’t be the case that a bunch
of people keep them, and only one or two
don’t,” she said.
We’re delighted she is conceding that
spending money is vital to getting a message
out in a political campaign. That insight was
the basis of the Supreme Court’s 2010 decision
inCitizens United, which Ms. Warren has made
a career of excoriating.
The ad that Persist PAC is running to pro-
mote Ms. Warren’s record is core political
speech. “When you take on Wall Street, you
know how to fight,” the ad says, featuring a
montage of images of the Senator. It also shows
Barack Obama calling her one of the “fiercest
advocates for the middle class.”
The Supreme Court has said such speech can-
not be prohibited under the First Amendment.
Ms. Warren has saidCitizens Unitedillustrates


how Supreme Court Justices John Roberts and
Samuel Alito are among the most “pro-corpo-
rate” in decades. What if their real constitu-
tional thinking is that politi-
cians like Ms. Warren
shouldn’t be denied a chance
to compete against billionaires
like Mike Bloomberg?
Ms. Warren laid into Mr.
Bloomberg at the debate, and
she says billionaires shouldn’t be able to buy
elections. Yet the decades-long progressive
campaign to limit campaign funding gives bil-
lionaires a massive advantage. The law limits
contributions to candidate campaigns, and
without those limits Mr. Bloomberg might have
thrown his money behind a Democratic moder-
ate instead of running himself.
Progressives ridicule the notion that spend-
ing money has anything to do with speech.
That fiction is easier for them to believe when
the speech is supporting conservative causes.
Yet the Super PAC ads for Ms. Warren are as
much speech as a book or a protest sign. And
they don’t make themselves or pay for their
own time on the airwaves.
Ms. Warren is lucky that the Supreme Court
protected independent expenditures. Other-
wise she’d be struggling even more—precisely
when she needs a boost to remain in the race.
Now that Ms. Warren has flipped on Super
PACs, perhaps she’ll reconsider her position on
rewriting the First Amendment.

The Senator concedes
political spending is

a form of speech.


Morgan Stanley’s Middle-Class Bet


I


t’s been 11 years since the financial panic,
yet liberals are still howling about Wall
Street getting richer as folks on Main
Street scrape by. Hmmm,
then why would Morgan Stan-
ley—one of Wall Street’s lead-
ing investment banks—be
buying the online brokerage
firm E-Trade for its Main
Street customers?
Morgan Stanley has focused in recent years
on asset management for wealthy clients. Yet
on Thursday it announced a $13 billion bid for
E-Trade, which would be the biggest bank take-
over since the 2008 panic and recession. Many
Americans probably are familiar with E-Trade’s
talking baby commercials, but with 5.2 million
customer accounts and $360 billion in retail as-
sets, it ranks as a large wealth manager for
America’s non-affluent.
Discount brokerage firms have been fighting
a price war, which has made trading essentially
free but has prompted cost cutting and consoli-
dation across the industry. In November
Charles Schwab and TD Ameritrade agreed to
a $26 billion merger. Meantime, investment
banks are eyeing non-affluent customers as a
source of growth amid sluggish trading and
deal-making revenues.
J.P. Morgan customers get unlimited free
stock trades. Goldman Sachs offers no-fee sav-
ings accounts that pay 1.7% in interest on de-


posits—40 times more than other large banks.
Like its competitors, Morgan Stanley is now try-
ing to increase retail deposits that are a cheap
source of funding for lending.
They also hope to bring in
non-millionaire customers
whom they hope to someday
sell more services.
In other words, Wall Street
banks are all making long bets
on the middle-class becoming richer. Democrats
prefer to focus on inequality and wealth redis-
tribution, but middle-class wealth is increasing.
Millionaires and billionaires aren’t the only
ones benefiting from larger corporate dividends
and stock buybacks.
Corporate equities and mutual-fund shares
held by Americans in the 50% to 90% range in
the country’s wealth-distribution curve have
more than doubled since 2010, according to the
Federal Reserve. Ditto for the bottom 50%. The
top 1% have also grown richer, not least be-
cause they already have more financial assets.
But the crucial point for social cohesion and
democratic governance is whether all Ameri-
cans have the opportunity to share the benefits
of economic growth.
Morgan Stanley’s E-Trade acquisition would
also diversify its funding base and could make
its balance sheet sturdier during a downturn.
But the merger’s success will hinge on a pros-
perous American middle class.

The bank’s E-Trade bid
shows confidence in

spreading prosperity.


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