The Wall Street Journal - 22.02.2020 - 23.02.2020

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

Letters intended for publication should

be addressed to: The Editor, 1211 Avenue

of the Americas, New York, NY 10036,

or emailed to [email protected]. Please

include your city and state. All letters

are subject to editing, and unpublished

letters can be neither acknowledged nor

returned.

“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.

REVIEW & OUTLOOK

OPINION