IPFS Menckens Ghost

More About: General Opinion

Homeruns in Today's Wall Street Journal

Today's WSJ opinion pages stayed away from the Journal's war mongering and is better for it.  You will find pasted below my signature the following:

1.  Letters to the editor regarding the well-deserved bad reputation of economists.  The first letter is the best.

2.  An article about crony capitalism in my home state of Ariz., written by the chairman of the Goldwater Institute and founder of Arizona-based Insight Enterprises. 

3.  Another article about crony capitalism in the healthcare industry, written by Senator Marco Rubio, who with all of his faults, was way better intellectually and philosophically than presidential finalists Trump and Clinton, neither of whom would be capable of thinking like this and writing an article like this. 

Mencken's Ghost

Economics Claims a Precision Rarely Found

Thanks for Mr. Roberts's views on how dismal the science is in the dismal science.

Reading about Russ Roberts discussing economists shaping answers to fit politics reminds me of my days as a navigator in the Navy. The captain would ask me where we were, and I'd reply: "Where do you want us to be, skipper?"

Jim Armstrong

Glen Allen, Va.

May 24, 2016 4:27 p.m. ET

Regarding Kyle Peterson's "The Weekend Interview with Russ Roberts: When All Economics Is Political" (May 14): Thanks for bringing us Mr. Roberts's views on how dismal the science is in the dismal science. His criticism of economic models and reliance on regression analysis to find confirmation of our preconceptions is reassuring as humanism and a warning to respect humility, even if it relegates him to page nine and not page one.

A simple way to explain why we should regard economics with suspicion when applied to projected forecasts in service of political agendas is to realize that all systems, and especially economic systems, are highly nonlinear in how they respond over time to any disturbances to the system, especially human, but also natural, disturbances. It is effectively impossible to include all effects in any model of such a system, so we simplify for the sake of obtaining a computational forecast estimate in our lifetime. Unfortunately, any nonlinear system unwinds over time in ways not exactly predictable given the limits of our computational model. The devil is in the additional decimal places. It is hubris to think that more data can make predictions of large material, human, environmental and econometric ensembles more reliable. This is commonly known in chaos theory as the butterfly effect. Even meteorologists, with more data at hand, respectfully limit the accuracy of their weather forecasts.

Mr. Roberts is eminently sensible in urging us to disregard economic forecasting as a reliable tool in the hands of political economists. Too bad for page one.

Jeff Schoenwald

Newbury Park, Calif.

To be honest, let us paraphrase Carl von Clausewitz and accept that: "Economics is the continuation of politics by other means."

Peter J. Turchi

Santa Fe, N.M.

When Taxpayers Carry All the Risk

Too many insiders launch companies on the public's dime—like a $15 million subsidy for balloon rides.



May 24, 2016 7:13 p.m. ET

In 1987, after taking a $2,000 advance on my credit card, I placed a single ad offering hard drives in a magazine called Computer Shopper. I gambled that in the 20 days it took for the magazine to come out, the price for the drives from my wholesaler would drop lower than the price I advertised. Thankfully, I won that bet, which allowed my brother and me to launch Insight Enterprises, a direct-to-consumer computer sales company now with $5 billion in annual sales.

It's an inspiring story but by no means unique. American history is full of stories of entrepreneurs—from Thomas Edison to Steve Jobs to Joy Mangano—taking a risk with their last dollar and striking it big.

But recently I've watched a new class of entrepreneurs emerge who reject the idea that they must shoulder risk to earn a reward. Instead they look to lawmakers—who can dip into taxpayers' wallets—to make their bet for them.

A new example is unfolding in Tucson, Ariz. A company called World View Enterprises wants to offer tourists $75,000 rides in luxury high-altitude weather balloons. I think it's an interesting concept, and I might even buy a ticket. But even if I don't, as an Arizona taxpayer I'm already paying anyway, with more paying to come.

World View has already received $250,000 in taxpayer-funded subsidies from the state of Arizona to pay for its startup costs. But that's not enough. Now the company wants Pima County taxpayers to spend $15 million to build its headquarters and balloon launchpad. In a county with above-average unemployment, officials are desperate for anything that might lead to job growth. So they agreed to take out a second-mortgage on county buildings to raise the money to build World View's facilities.

World View's foray into tourism is a new venture and it still doesn't have Federal Aviation Administration permission to put passengers in weather balloons and launch them 32 kilometers into "near space"—which is higher than airplanes fly but below the 100 kilometer boundary of outer space. That's a big gamble to take with taxpayer money.

If World View doesn't get off the ground, taxpayers will be stuck repaying the second mortgages. And the county will have a balloon pad and another empty building.

We've seen this movie before. Taxpayers pick up the tab for a brilliant idea on paper and it turns into a bust in practice. New Mexico taxpayers have sunk more than $200 million in a "spaceport" that Popular Mechanics recently called a "ghost town." SunEdison, once the fastest-growing renewable energy company in the U.S., filed for bankruptcy last month despite receiving $650 million in federal subsidies. Rhode Island taxpayers lost $75 million when former Red Sox pitcher Curt Schilling's 38 Studios videogame company collapsed.

Even if the countless examples of taxpayer-funded businesses folding aren't enough to keep lawmakers out of citizens' pockets, the law should be. The Arizona Constitution, like that of 46 other states, makes corporate welfare illegal.

The thing about deals like this is that they always benefit insiders. When was the last time a Regular Joe got cash to pay his business startup costs and a free building from the government? Even in this age of government generosity, we only see that when someone on the receiving end is plugged in.

In the World View Enterprises case, Mark Kelly, a former astronaut and the husband of former-Tucson area congresswoman and gunshot survivor Gabby Giffords, is director of flight-crew operations for the company. I'm not suggesting that Mr. Kelly or his colleagues did anything illegal or extraordinary. On the contrary, they did what is becoming increasingly common. When you can't get enough private venture capitalists behind your project, but you know how the game is played, you go to the government.

Mr. Kelly is an American hero and World View has got a good idea. But he and his partners need to go to the bank for a loan, like all the heroes with great ideas who came before them did. If World View works out, its owners will make millions, and they should. But that's a risk that's appropriate for the market, not taxpayers.

Mr. Crown is the founder and chairman emeritus of Insight Enterprises, and the chairman of the board of the Goldwater Institute, which is challenging the subsidy to World View in court.


ObamaCare: A Crony Capitalist's Best Friend

Congress blocked the law's bailout of insurers—who are now suing to reinstate the sweetheart deal.


May 24, 2016 7:14 p.m. ET

The evidence keeps mounting: Six years after being signed into law, ObamaCare is a costly and unsustainable disaster.

Look at what has happened in the past month alone. A federal court ruled that the Obama administration violated the law by spending money on ObamaCare subsidies without an appropriation from Congress.

In Florida, 15 health insurers are seeking an average increase in premiums of 17.7% for 2017. The continued raiding of Medicare Advantage—ObamaCare was projected in 2012 to cut $156 billion from the program over a decade—hurts many seniors in my home state and nationwide.

The health law's sweeping mandates continue to target faith-based organizations like the nuns of the Little Sisters of the Poor. These nuns remain tied up in litigation because they rightfully believe that God and the Constitution's religious-freedom protections are higher authorities than President Obama and his administration's unconstitutional and liberal agenda.

ObamaCare is also bringing out corporate America's worst crony-capitalist impulses. The health-insurance lobby has teamed up with trial lawyers to sue the federal government—through individual lawsuits and a $5 billion class action—for not following through on a sweetheart bailout deal buried in the law. This provision of ObamaCare would have required taxpayers to bail out insurers for losing money on the health-care exchanges.

I was the first person in Congress to take action to stop these bailouts. In late 2013 I introduced legislation to repeal this provision entirely and later another bill to make this so-called "risk corridors" program "budget neutral." My conservative colleagues and I sounded the alarm about the likelihood of a taxpayer-funded bailout of health insurers (and were mocked as Chicken Littles for it). But we built a coalition to stop the bailouts.

When it came time to pass a spending bill at the end of 2014, we succeeded in making it the law of the land that the ObamaCare bailout program could not cost taxpayers a single cent—which ended up saving taxpayers $2.5 billion. In December of last year, we came back and repeated the feat. Now I am urging leaders in both the House and Senate to make this a priority and stop the bailout a third time.

That the health-insurance companies are suing to try to get their bailout is disgusting. The law—not to mention corresponding legal opinions issued by the federal government—makes clear that Congress must appropriate any net spending by the risk-corridor program.

In fact, one reason it was important to make clear in the law that the risk-corridor program must be budget-neutral was to protect the federal government from this exact kind of lawsuit that insurers have now filed against it. Because payments are being made only using fees paid by the insurance companies, the program is fulfilling its statutory obligation.

This assertion has been affirmed by professional attorneys from the Congressional Research Service, which has also said that the administration's practice of making other payments to insurers under the ObamaCare reinsurance program "would appear to be in conflict with the plain text" of the law. Thus, the Obama administration should stop trying to figure out a way to bail out the insurers and instead fight back against these lawsuits.

Beyond the legal battle, all this nonsense highlights a startling disconnect between corporate America, in this case the health-insurance industry, and the American people. What these shameless insurers fail to understand is that the bailout promise made to them in 2010 by President Obama, Harry Reid and Nancy Pelosi has been effectively voided by the democratic process and subsequent actions taken by Congress—and yes, signed into law by the same president.

Health insurers can hire all the high-paid trial lawyers they want, but they will run into a constitutional buzz saw: America's founding document grants Congress the power of the purse, thereby allowing the people, through their elected representatives, to put their money behind what they decide the nation's priorities should be.

Health-insurance companies need to wake up to the reality that this is not their money, and they are not entitled to it. This money they are fighting for, and that the Obama administration is trying to weasel a way to somehow give them, belongs to taxpayers. Taxpayers get to decide—through me and others in Congress—whether to bail them out. And the people have spoken: No, we will not bail out health insurance companies for ObamaCare's failures.

I look forward to the day when a conservative president and congressional majorities finally stop the bleeding from ObamaCare by repealing and replacing it with market-friendly, patient-centered reforms that ensure Americans can receive the high-quality health care they need.

Until then, the least we can do—and what we must do again this year—is to stop the bailout, in the courts and through congressional action.

Mr. Rubio, a Republican, represents Florida in the U.S. Senate.