Conservatives take credit for DM&E loan denial
Grassroots Help Defeat Multibillion-Dollar Rail Loan Written By: Tom SchatzPublished In: Budget & Tax News Publication Date: June 1, 2007 Publisher: The Heartland Institute |
In a huge win for taxpayers, the Federal Railroad Administration (FRA) has denied a $2.3 billion federal loan to the Dakota, Minnesota, and Eastern Railroad (DM&E).
A classic case of Washington influence-peddling, the story shows how grassroots activism helped stop one backroom deal in its tracks. The denial of the loan was announced February 26.
The DM&E loan coasted under the radar until taxpayer activists caught wind of it late last year and rose up against it.
Letters Flooded Congress
Between February 7 and February 14, Council for Citizens Against Government Waste (CCAGW) members and supporters sent 10,258 letters to their representatives in Congress in opposition to the loan.
DM&E and Sen. John Thune (R-SD), a former lobbyist for the railroad who pushed the loan, became lightning rods for criticism from taxpayer watchdogs and groups that would be adversely affected by the new rail line.
The deal made no sense from a fiscal, economic, or security standpoint, according to opponents. The loan would have been used to expand and improve a rail line used primarily to transport coal from Wyoming to Minnesota--a route already served by two railroads.
(The rest is here.)
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3 Comments:
I have never found these arguments to be particularly strong against the DM&E loan. There were thousands of letters written to the FRA in support of the loan, too. The USDOT this spring has stated it expects a 35% increase in rail traffic over the next 20 years. An upgraded DM&E would have been nicely positioned to capture a good share of that percentage - making the credit risk arguement even more tenuous - not to mention hauling coal which is the largest commodity shipped via rail. Finally, the most non-sequitir argument ever given is the 'Chrysler Bailout'. DM&E is not facing bankruptcy and there are private investors who are ready to commit a lot of money to the project. In 1979 Chrysler was facing bankruptcy. The federal loan they procured was for $1.2 billion and was considerably more risky than the DM&E proposal since Chrysler was a dying company with a even worse business model. Based on inflation, the Chrysler loan would be much higher today than the DM&E loan. Chrysler was not much of a company in 1979 while DM&E is a very good company in 2007. Yes, Chrysler had some assets but no one else wanted them. DM&E's asset base is in excess of $1 billion according to their own insurers. Even after the loan, Lee Iacocca essentially went through the same actions a company entering bankruptcy would have done. It renegotiated its private debt at a loss to its lenders, restructured itself, and downsized. This was required by the special congressional legislation that gave Chrysler the loan. Chrysler paid off $600 million in debt at 30 cents on the dollar. Over 62,000 employees lost their jobs. Much of the 'profit' Chrysler showed 4 years later was a result of huge tax loss write-offs, renegotiated union contracts and cost reductions resulting from the ability to shortchange their creditors. The company was eventually sold to Daimler-Benz in the 1990's. Simply put, the Chyrsler bailout and the DM&E loan application do not resemble each other in the remotest sense. To suggest a connection between the two - as this piece does as well as Steve Forbes and David Strom of MnTPL - shows how little credibility the argument has because it's obvious those who make the connection between Chrysler and DM&E didn't take the time to look at the facts surrounding the Chrysler bailout. To make such a connection is really just political hutzpuh and a complete non-sequitir laughable by those of us who actually looked in to it.
But, government will continue to operate wasting billions of dollars without a peep from anyone. The money for the DM&E loan would have been money well-spent, it would have helped midwest shipping concerns, and it would have been transparent for all to see. I'm still rooting for DM&E. I don't think DM&E will re-apply for an FRA loan, so I hope they can find capital for their PRB project one way or another. If they do re-apply for an FRA loan, I'll be the lone conservative in favor of it.
I think it is foolish to think it was a grass roots win, no matter what side you are coming from.
I've worked hard against other issues, like the MinnCan Pipeline, Big Stone II, and Mesabi Energy, and DM&E demonstrated to me what is needed to stop something like this.
There were congressman, federal cabinet members, the governor, one of the most renowned medical institutions in the world, and grass-roots activists.
Now imagine trying to stop DM&E with nothing more than concerned citizens. Wouldn't happen.
Tom makes the homerun point - without Mayo Clinic opposition, it's a good bet the DM&E loan would have been approved. The pol$ who oppo$ed DM&E did $o in order to keep cozy tie$ with Mayo. Look what happened to Gutknecht. Even his tepid/toe-in-the-water support for the DM&E project was enough to doom him in Rochester because of Mayo's firmly ensconced political influence.
I guess my point is that the rich and powerful (Mayo) get to live by one set of rules and the rest of us live by another set of rules. And that power and influence is what sways government which I think is part of what Tom's point is regarding the other issues he has lobbied against from the grassroots.
Tom and I probably agree that we wish we had such influence, but we don't.
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