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Taking taxpayers for a ride on the Pork Railroad
Posted by: Jon Henke on Monday, November 20, 2006

You've heard of Regulatory capture; less publicized, but equally problematic is Legislative capture. Illustrating this is Porker of the Month John Thune:
Citizens Against Government Waste (CAGW) today named Sen. John Thune (R-S.D.) Porker of the Month for helping to secure a record $2.3 billion federal loan for a railroad company.
This would be..."the largest-ever government loan to a private company – dwarfing the Chrysler bailout in the 1970s."
The loan guarantee from the Federal Railroad Administration (FRA) would allow the Dakota, Minnesota, and Eastern Railroad (DM&E) to expand and improve a rail line that is used primarily to transport coal from Wyoming to Minnesota. In apparent anticipation of the loan, Sen. Thune was instrumental in increasing the FRA’s loan guarantee authority from $3.5 billion to $35 billion in the 2005 Safe, Accountable, Flexible, and Efficient Transportation Equity Act. DM&E paid Thune $220,000 in 2003 and 2004 to lobby for the loan before his election to the Senate.
Annual payment on the loan: $246 million
Current annual DM&E revenue: $200 million

This would be, according to Track the Truth, "the largest-ever government loan to a private company – dwarfing the Chrysler bailout in the 1970s." What's more, though the loan is supposed to be public, "DM&E has petitioned to seal its company financial application and list of owners".

The National Taxpayers Union is none too happy with the earmark:"floating a taxpayer-backed credit line to a private company is simply wrong."
The National Taxpayers Union, in a report this month, noted that DM&E already had the biggest federal rail rehabilitation loan guarantee ($233 million), and said the coal fields of the Powder River Basin were already served by two bigger railroads, the BNSF and the Union Pacific.

More fundamentally, it said, "floating a taxpayer-backed credit line to a private company is simply wrong."
If you want more information on this massive handout, see here. It should not fall to Walter Mondale to make the case for fiscal responsibilityIt's worth noting that limited government hero Rep. Jeff Flake opposes the project and, although it's not entirely clear that fiscal responsibility is a significant motivation, Senator Norm Coleman has come out against the plan. Locals have opposed the project, as well.

It should not fall to Walter Mondale to make the case for fiscal responsibility:
"The DM&E subsidy and its backing by a former lobbyist turned senator represents many of the things that are wrong with Washington today," said Walter Mondale, the former vice president and a former U.S. senator from Minnesota. ... Mondale sees the potential DM&E loan guarantee as a giant earmark ... "I consider the DM&E earmark to be even more egregious [that the "Bridge to Nowhere"]," Mondale said.
The argument for limited government and the primacy of the free market should be made by Republicans, not against them.



As Citizens Against Government Waste had to point out...
Sen. Thune says it will “transform South Dakota’s economy for generations.” Such pronouncements fall apart next to the simple logic that if the project’s benefits vastly exceeded its costs, a federal loan would not be necessary.

The argument for limited government and the primacy of the free market should be made by Republicans, not against them.
 
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Previous Comments to this Post 

Comments
Hate to say this but in their home states, which is all that really matters, these may not be considered negatives. Its could be seen as a plus on their resume.
 
Written By: jpm100
URL: http://
The argument for limited government and the primacy of the free market should be made by Republicans, not against them.
Well, maybe that used to be the case. I fail to see how such an assertion can be made today in the wake of bridges, and now railroads to nowhere.

The Dems and Repubs are both FUBAR. In the Dems case this is evidenced by pleas to sanity being made by aging stars long past their prime. For the benefit and well being of our country a third way has to be found and fast.
 
Written By: D
URL: http://
I guess the R’s have note quite awakened. They are still in blissful slumber, thinking the events of 11-07 were just a bad dream.
 
Written By: meagain
URL: http://
"The argument for limited government and the primacy of the free market should be made by Republicans, not against them."
And with the Dems owing so much to unions—including railway workers unions—I can’t think of why anyone with a lick of sense would think the Dems would stop this, or things like it.

Yours, TDP, ml, msl, & pfpp
 
Written By: Tom Perkins
URL: http://


Does the poster think they can repeat the same quotes three times and not get goofed on?



Does the poster think they can repeat the same quotes three times and not get goofed on?





Does the poster think they can repeat the same quotes three times and NOT get goofed on?
 
Written By: Rick Day
URL: http://goplobby.org
I thought he was posting different points in support of a theme myself.

Yours, TDP, ml, msl, & pfpp
 
Written By: Tom Perkins
URL: http://
"The primacy of the free market" can and has been supported by both democrats and republicans. Both parties have also railed against them when it has been in their local political interests. Any correlation between support for the free market and political party is invariably anecdotal and biased. Keep in mind, we are talking about politicians.

Libertarians need to give up on being republicans and concentrate on being Americans. If you select your candidates on a case by case basis without party bias you may find that you have some impact upon policy.

BTW: Anyone who thinks the dems owe much to labor is still living in the 60’s. The percent unionization in this country has tanked and the political power and money of the unions has tanked with it. Labor did not deliver in 2000,2002 or 2004. For the most part in 2006, the dems, and everybody else have stopped paying attention to them.




 
Written By: cindyb
URL: http://
Libertarians need to give up on being republicans and concentrate on being Americans.
Is that what you are, Cindy? Just an American?

If so, what does that mean?

Politically, I mean. What is ’just an American’ politically?
 
Written By: McQ
URL: http://www.qando.net/blog
Sen. Thune says it will "transform South Dakota’s economy for generations." Such pronouncements fall apart next to the simple logic that if the project’s benefits vastly exceeded its costs, a federal loan would not be necessary.
Hmm, not exactly true.

If the project’s short-term benefits vastly execeeded its costs, a federal loan would not be necessary.

Now, I really doubt that the long-term benefits for this project vastly exceed its long-term costs, either. But the quoted portion wasn’t true as given.
 
Written By: Mark A. Flacy
URL: http://
"For the most part in 2006, the dems, and everybody else have stopped paying attention to them."
You must have forgot about the NEA.
 
Written By: Unknown
URL: http://
Is that what you are, Cindy? Just an American?
Cindyb is the type of American who calls themselves Libertarians and always manages to vote for Democrats.
 
Written By: kyle N
URL: http://impudent.blognation.us/blog
"The primacy of the free market" can and has been supported by both democrats and republicans.
Andrew Jackson was the only president in history to pay off the national debt and Grover Cleveland was a veto machine! Of course in the last hundred years or so you can count the small government, free market Democrats on one hand. Of course being the original big government party Republicans have rarely been much better.
 
Written By: DS
URL: http://
Anyone who thinks the dems owe much to labor is still living in the 60’s.
BWWAAAAHAHHHAAAAHAHAHAHAHHAHAAHAH!!!

Thanks cindyb. Best laugh I’ve had all day
 
Written By: meagain
URL: http://
A few questions/points:

1. Is a loan guarantee the same as a loan?

2. Is it really so strange to see the government assisting investment in infrastructure projects?

3.The company’s revenue is currently less than the amount it has to pay back on the loan. This is not strange seeing as they have to finish the project they borrowed money for before any revenue will show up.

Now, if we can argue on the merits of the actual project, then we could definitively call "pork." What we have now seems like a whole lot of smoke.
 
Written By: Harun
URL: http://
1. Is a loan guarantee the same as a loan?
It’s a guarantee to pay if the loan goes into default. And when revenues are less than the loan payment, that’s almost guaranteed.
 
Written By: McQ
URL: http://www.qando.net/blog
Just so you know, McQ, (And leaving aside, for the moment, the the question of ’does government have a place here"...)

... the projected income will be many times the current income, which is in fact the purpose of the loan.... getting at the coal, and getting the money off of that. If forced into it, I’d bet the chances of the DM&E paying off are far higher than what we saw Chrysler doing years ago.

And, to boot, will likley create more jobs in the bargain.... coal mining, mostly, though an entire town will likely grow around the operation.

Now, as to the other question....

 
Written By: Bithead
URL: http://
Does the poster think they can repeat the same quotes three times and not get goofed on?
You lost me. Did I repeat something three times?
1. Is a loan guarantee the same as a loan?
2. Is it really so strange to see the government assisting investment in infrastructure projects?
No, and a loan guarantee is certainly less risky than a loan. However, I’m not sure that this is really an ’investment in infrastructure projects’ so much as it is a subsidy for one of the private companies already operating in the area. Perhaps investment will be economically beneficial, but it’s hard to see why the government should assume all of the loan risk. Aside from the benefit to the rail company, it essentially gives the loaner a free paycheck.
 
Written By: Jon Henke
URL: http://QandO.net
A loan guarantee is not, obviously, a loan, but there is still a limit to the risk an entity can bear in guarantees. No organization has an unlimited ability to make guarantees. Therefore that ability is a scarce resource and should be used wisely.

Leaving aside the question of why government is in the business of choosing private sector winners and losers, why is this particular project so worthy? It seems clear that no one made the effort to consider even a fraction of the possible beneficial projects that the government could guarantee before concluding that this one is the best project for the financial commitment. That - if one even accepts this is a proper role for goverment (I do not) - is hardly reasonable or responsible.



 
Written By: Unknown
URL: http://
It is my understanding that if a third party guarantees a loan, the risk to the lender is lower and the borrower can sometimes get a lower interest rate. This, it seems to me, would be a subsidy to a particular company.
 
Written By: timactual
URL: http://
midwest express airlines midwest express airlines http://filisoff.mygnome.com http://rediska.tinhyeu.net
 
Written By: express airlines
URL: http://filisoff.mygnome.com
american airlines center american airlines center http://oshibky.clickryder.com http://europx.4t.com
 
Written By: american airlines
URL: http://oshibky.clickryder.com

 
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