Earlier this week, Insight Founder and successful entrepreneur Eric Crown published an op-ed on the growing use of taxpayer money to subsidize risky ventures by politically connected businessman. For years the Free Enterprise Club has fought against these types of giveaways that pick winners and losers, and we applaud Mr. Crown for shining a light on it.
Below is the op-ed in its entirety, it is well worth the read:
When Taxpayers Carry All the Risk
By ERIC CROWN
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.
Today the Arizona Free Enterprise Club released a legal analysis on the proposed ‘Clean Elections’ initiative, a ballot measure that would dramatically increase the amount of taxpayer funding politicians would receive to run their campaigns.
The analysis shows that this poorly drafted initiative contains multiple defects, most significant of which is the fact that the initiative attempts to change and amend state statutes that no longer exist. Since the proposed changes are not based on existing law, the initiative is defective and will be kept off the ballot.
“After careful review, it is clear that the proponents of taxpayer money for politicians were sloppy and failed to draft their initiative based on current law.” Club President Scot Mussi said. “The campaign finance reform amendments that rewrote state statute were passed back in March. Clean Election supporters have known this for months, yet they didn’t modify their language to take this into account.”
Even if the proponents collect enough signatures to qualify for the November ballot, there is extensive case law that initiatives cannot amend non-existent statutes and that this is grounds for kicking it off the ballot.
Mussi continued, “Even if they are successful in their signature gathering efforts, the petitions will likely be rejected, either by the state or by a challenge in court.”
The deadline to submit a new initiative application and submit signatures is July 7th. The analysis can be viewed by clicking here.
Wednesday, May 18, 2016…today The Governor signed HB 2447 which eliminates the requirement for new businesses in Maricopa and Pima Counties to purchase advertisements in newspapers to publish their articles of incorporation.
This bill has been tried for the last 15 years without success; this year the Arizona Free Enterprise Club took the lead in fighting for its passage. Despite the newspaper industry hiring an army of lobbyists to protect their corporate welfare, good public policy ultimately prevailed over entrenched special interests.
The Club’s President, Scot Mussi celebrated the victory, “HB 2447 was a win for Arizona businesses. This is one less cost and impediment to small businesses starting and growing in our state. We appreciate the members of the legislature and Governor Ducey for supporting the bill.”
Arizona joins the 21st Century and 46 other states in abolishing this archaic requirement of new businesses. Formation documents instead, will continue to be filed and published on the Arizona Corporation Commission’s website, accessible at no cost to the public and no additional cost to the businesses.