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Title: A historical look at subsidizing railroads
Source:
www.csmonitor.com
URL Source: http://www.csmonitor.com/Business/G ... -look-at-subsidizing-railroads
Published: May 17, 2015
Author: Matthew E. Kahn
Post Date: 2015-05-17 11:28:09 by CZ82
Keywords: None
Views: 1724
Comments: 12
A historical look at subsidizing railroads Obama administration will invest a large sum of cash into high speed rails. Historically, how have railroad investments impacted the US economy? By Matthew E. Kahn, April 26, 2011 Jeff Roberson / AP / File Did you short shares of airlines when you read about the Obama Administration's investment in high speed rail? I didn't and it seems clear that Richard White didn't either. In this NY Times OP-ED, he makes a number of interesting points and mentions the work of one of my heroes; Robert Fogel from the University of Chicago. To quote the article; “ "Yet here we are again. The Obama administration proposed a substantial subsidy, $53 billion over six years, to induce investors to take on risk that they are otherwise unwilling to assume. Such subsidies create what the economist Robert Fogel has called “hothouse capitalism”: government assumes much of the risk, while private contractors and financiers take the profit." In the first sentence of his piece, Richard White tells you that he is a liberal who lives in California but he goes on to say that he is happy that the deep subsidies for HSR will be cut off due to federal budget cuts. White argues that the intellectual case for using public $ to subsidize such an infrastructure project is weak; To quote his historical case study: "Proponents of the transcontinental railroads promised all kinds of benefits they did not deliver. They claimed that the railroads were needed to save the Union, but the Union was already saved before the first line was completed. The best Western farmlands would have been settled without the railroads; their impact on other lands was often environmentally disastrous. For three decades California commodities could move more cheaply, and virtually as quickly, by sea. The subsidies the railroads received enriched contractors and financiers, but nearly all the railroads went into receivership, some multiple times; the government rescued others." Environmental accountants can be brought in to quantify how much greenhouse gas emissions and local air pollution will not occur if the train substitutes for driving and plane use. This should be quantified. Such externality reductions (if large enough) would provide a justification for government subsidies. Professor White understands the importance of having budget priorities. During a time of scarcity, we can't "have it all". He writes; “ "Without bond guarantees, private investors, which so far seem more prone to due diligence than the California High-Speed Rail Authority, have yet to put up money. The most astonishing thing is that even as financial problems force California to dismantle its social safety net, eviscerate its educational system, and watch its roads crumble, it has agreed on a plan for high-speed rail that demands substantial local subsidies and certainly will involve further concessions by the state to attract private investment." So, my intuition here is that HSR advocates viewed their projects as "too big to fail" and that they assumed they could rely on the federal government for more cash injections if private financing dried up. But, the Republicans sound pretty credible these days concerning their eagerness to cut off the sugar. What did Professor Fogel write about the railroads? Here is a quick overview and some references. He studied whether railroad investments had a major impact on the development of the U.S economy and he challenged the conventional wisdom that they did. Poster Comment: There are some links in the text you might want to visit.
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#5. To: CZ82 (#0)
I rather liked the interview of the railroad historian at Stanford on his book from a few years back. It seems that CSMonitor isn't the most rail-friendly source. : ) Stanford professor Richard White, author of 'Railroaded,' voices his staunch opposition to California's high-speed train Randy Dotinga After all, it's a dusty 6.5-hour trek by car and a hassle of security lines and cramped seats by plane. But Richard White, the author of last year's well-received "Railroaded: The Transcontinentals and the Making of Modern America," is no fan of the state's mammoth high-speed rail project, which is scheduled to break ground this year. He warned in the New York Times last month that "it will become a Vietnam of transportation: easy to begin and difficult and expensive to stop." White's opposition to the bullet train is unusual since he comes from the political left rather than the right. [Editor's note: In this sentence White was originally – and incorrectly – referred to as "Wilson."] (Many of the project's political opponents are Republicans.) I called him and asked why he sees the nation's railroad history as a cautionary tale instead of an inspiration. We also talked about the railroad baron he considers to be an airhead – the one whose name graces Stanford University, where White works. Q: You write that the transcontinental railroads weren't needed but got built anyway on the public dime. What happened? A: The basic thing is that no one would invest in them to begin with. You’re building a railroad into the middle of nowhere – railroads starting nowhere and ending nowhere. There's no traffic on these things, so that's why they have to be subsidized. You need all this public money and then borrowed money to get these things up and running. They went bankrupt once, twice, three times, but the men running them got tremendously rich. Railroads become these containers for speculation, collecting subsidies and selling bonds, and financial manipulation. They’re much like the companies we're familiar with now that have gone into bankruptcy but have made people rich. Q: What was the legacy of the railroad boom? A: We're still dealing with the consequences of what the railroads set in motion. They’re a disaster politically and environmentally. They begin modern American corruption, when corporations infiltrate the political system and make politics an instrument of corporate policy. My argument in the book is that this is not a happy story. Q: What do you say to skeptics who will say you're just another left-leaning academic bashing capitalism? A: This is a book that proceeds mostly by quoting the people who did it. They make a far better case for what happened then I did. It's full of quotes, oftentimes very funny, about how they invent this kind of corporate capitalism. If you don't believe me, the book is full of footnotes. For me footnotes are what give me protection. It's like smell to a skunk. What’s interesting is that I'm attacked sometimes as being a leftist, which I am, and I am often attacked as being too conservative by people who want subsidies for these large infrastructure projects. Q: You're not flattering about the brainpower of Leland Stanford, the railroad baron whose name graces your own university. What did you find out about him? A: Stanford was not the sharpest tool in the shed. A lot of this stuff has to be explained to him. His wife Jane realized exactly what was in his papers and she destroyed them all, but the story is in the papers of other people. Q: What have your overlords at Stanford thought of all this? A: I don’t think they really suspected that he was much more than how he's portrayed in the book. Stanford University has been very nice to me, but I will never speak at Founders Day. Q: How have your findings affected your perspective on the California bullet train project, which is estimated to cost almost $100 billion? The writing of the book led me to question it in the ways I wouldn’t have before. This looks like pretty much like transcontinental railroads: people demanding a huge public subsidy for a railroad that will be extraordinarily expensive. The public seems to be taking all the risk, and the gain will go to the contractors and people who build it. What they’re trying to do is make hard questions go away through all this gauzy public relations about how this is the future. Q: How should the public look at projects like this? A: You should be very leery of giving public money to large corporations on the promise that everything will be fine. The legislation has to be carefully written, and you should never have it that all the risk is public and all the gain is private. Often the private sector pretty much protects itself and is confident that the public will come in and bail them out if things goes wrong. These public-private kinds of endeavors very often will lead to an exploitation of the public.
Honest Abe championed railroad legislation to open vistas for the young and aspiring, and to build national markets. In §2 of the Railroad Act of July 1, 1862 Act (12 Stat. 489, 491) [scribd link], the railroad corporation was established and, In §3 of the Act (12 Stat. 489, 492), we find, But see the Act of 1864 (13 Stat. 356, 358) [scribd link] (amending the above Act of July 1, 1862), §4 which provides, http://en.wikipedia.org/wiki/Pacific_Railroad_Acts President Abe championed railroad legislation to open new vistas for the Railroad companies. CW 7:16 (Collected Works of Abraham Lincoln, Vol. 7) In pursuance of the fourteenth Section of the act of congress, entitled “An act to aid in the construction of a Railroad and Telegraph Line from the Missouri river to the Pacific ocean, and to secure to the Government the use of the same for postal, military, and other purposes” Approved July 1, 1862, I, Abraham Lincoln, President of the United States, do hereby fix so much of the Western boundary of the State of Iowa as lies between the North and South boundaries of the United States Township, within which the City of Omaha is situated, as the point from which the line of railroad and telegraph in that section mentioned, shall be constructed. ABRAHAM LINCOLN. CW 7:228 In pursuance of the provisions of Section 14, of the Act of Congress entitled “An Act to aid in the construction of a Rail Road and Telegraph Line from the Missouri River to the Pacific Ocean, and to secure to the Government the use of the same for Postal,—Military, and other purposes,” Approved July 1st. 1862, authorizing and directing the President of the United States, to fix the point on the Western boundary of the State of Iowa, from which the Union Pacific Rail Road Company is by said section authorized and required to construct a single line of Rail Road, and Telegraph, upon the most direct and practicable route, subject to the approval of the President of the United States, so as to form a connection with the lines of said Company, at some point on the one hundre[d]th meridian of longitude in said section named: I, Abraham Lincoln President of the United States do, upon the application of the said Company, designate and establish such first above named point, on the Western boundary of the State of Iowa, east of, and opposite to the East line of Section 10, in Township 15, North, of Range 13, East of the sixth principle meridian, in the Territory of Nebraska Done at the City of Washington this, seventh, day of March, in the year of our Lord, one thousand eight hundred and sixty four ABRAHAM LINCOLN CW 7:233-34 To the Senate of the United States: In compliance with a resolution of the Senate, of the 1st. instant, respecting the points of commencement of the Union Pacific Railroad, on the 100th. degree of West Longitude, and of the branch road, from the Western boundary of Iowa, to the said 100th. degree of Longitude, I transmit the accompanying report from the Secretary of the Interior, containing the information called for. I deem it proper to add that, on the 17th day of November last, an executive order was made upon this subject, and delivered to the Vice President of the Union Pacific Rail Road Company, which fixed the point, on the western boundary of the State of Iowa from which the Company should construct their Branch-Road to the 100th. degree of West Longitude, and declared it to be within the limits of the township, in Iowa, opposite the town of Omaha in Nebraska. Since then the Company has represented to me, that, upon actual surveys made, it has determined upon the precise point of departure of their said Branch-R road from the Missouri river, and located the same as described in the accompanying report of the Secretary of the Interior, which point is within the limits designated in the order of November last; and inasmuch as that order is not of record in any of the Executive Departments, and the Company having desired a more definite one, I have made the order, of which a copy is herewith, and caused the same to be filed in the Department of the Interior. ABRAHAM LINCOLN President Abe championed railroad legislation to open new vistas for the Union Pacific. What is that mysterious unnamed town “opposite the town of Omaha in Nebraska?” http://en.wikipedia.org/wiki/Council_Bluffs,_Iowa And what is special about Council Bluffs, Iowa? Mr. Lincoln had been an attorney for the Rock Island Railroad. Mr. Lincoln gave a speech at Council Bluffs, Iowa on August 13, 1859 (CW 3:396-97). Mr. Lincoln was there to look at land. Indeed, he invested in land in Council Bluffs and obtained the deed on November 11, 1859. A fuller accounting of Lincoln’s visit to Council Bluffs, his purchase of land, and later selection of Council Bluffs as the starting point for the Transcontinental Railroad is given in What I Saw of Lincoln, [scribd link] by Major-General Grenville M. Dodge, in Appleton’s Magazine, Volume XIII, January-June (1909), February, pp. 134-140. The owner of the land next to Lincoln’s was Clement L. Vallandigham, the Ohio anti-war Democratic congressman Lincoln expelled behind Confederate lines during the Civil War.
#11. To: nolu chan (#10)
We can make similar flowery summaries of any prez, even the most corrupt and loathsome. I would say he was fundamentally a Clay Whig throughout his life.
Top • Page Up • Full Thread • Page Down • Bottom/LatestRailroad historian says California is on wrong track
February 13, 2012
Considering that he spent 12 years studying the history of American railroads, you might assume Stanford University professor Richard White would be delighted to take a bullet train from nearby San Francisco to Los Angeles in the time it takes to watch a Harry Potter movie.
#10. To: TooConservative (#5)
[Quoted] Q: You write that the transcontinental railroads weren't needed but got built anyway on the public dime. What happened?
authority is hereby given to said company to take from the public lands adjacent to the line of said road, earth, stone, timber, and other materials for the construction thereof; said right of way is granted to said railroad to the extent of two hundred feet in width on each side of said railroad, where it may pass over the public lands…
"That there be, and is hereby, granted to the said company, for the purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon, every alternate section of public land, designated by odd numbers, to the amount of five alternate sections per mile on each side of said railroad, on the line thereof, and within the limits of ten miles on each side of said road, not sold, reserved, or otherwise disposed of by the United States, and to which a preemption or homestead claim may not have attached, at the time the line of said road is definitely fixed…"
That section three of said act be hereby amended by striking out the word "five," where the same occurs in said section and by inserting in lieu thereof the word "ten;" and by striking out the word "ten," where the same occurs in said section, and inserting in lieu thereof the word "twenty."
From 1850 to 1871, the railroads received more than 175 million acres (71 million ha) of public land – an area more than one tenth of the whole United States and larger in area than Texas.
Executive Mansion, Washington, November 17. 1863.
March 7, 1864
Executive Mansion
March 9th. 1864. Council Bluffs is more than a decade older than Omaha. The latter, founded in 1854 by Council Bluffs businessmen and speculators following the Kansas-Nebraska Act, has grown to be the significantly larger city.
Replies to Comment # 10. Honest Abe championed railroad legislation to open vistas for the young and aspiring, and to build national markets.
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