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Quick Lesson from the Railroad
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<blockquote data-quote="SeniorGeek" data-source="post: 187215" data-attributes="member: 4823"><p>I like Shilling's method (as explained in the linked CSM article) of counting private-sector jobs that are created by government spending the same way that government employees are counted. A lot of the moves to "privatize" government functions have resulted in little or no savings to taxpayers, but have filled the pockets of the privateers.</p><p> </p><p>The hypocrisy I saw was particularly the part I quoted: ...which appears to say that subsidies are without economic virtue. If you interpret this differently, I can see that you might miss the intent of the rest of what I wrote.</p><p> </p><p>Pribonic has used the railroad anecdote to attempt to prove that subsidies never work. An alternate message could have been that, given a chance, businesses (and individuals) will fleece the taxpayers to the maximum extent the law allows. </p><p> </p><p>Maybe I was offended because here it is, 138 years later, and I still think that our government promoting a transcontinental railway was a good idea...that was really done the wrong way. Oversight was lacking, but that was probably due to the cronyism that was involved. (I think the land grants were excessive, too, but Pribonic does not address that issue. He does mention other subsidies that were added later, after the project was already in progress, but does not point out that <u>those</u> were truly direct subsidies, and porky.)</p><p> </p><p>Getting back to the facts of the essay: What Pribonic calls per-mile "subsidies" for the railroad were loans - <strong>not grants</strong> - of $16,000 or $48,000 per mile at 6% interest. The loans were repaid, as a mortgage against the railroad, over the course of 40 years:</p><p><a href="http://cprr.org/CPRR_Discussion_Group/2006/06/dollars-per-mile-of-track.html" target="_blank">CPRR Discussion Group - Central Pacific Railroad Photographic History Museum</a></p><p>(The interest-rate guarantee was still quite significant, since banks at the time had rates of 30% and higher for projects in the frontier.)</p><p> </p><p>...implies that Union Pacific failed once government support was withdrawn, or failed due to the cost of doing the work over again. Bankruptcy can be a financial tactic. (I UP was bankrupt in 1872, but <u>this year's</u> shareholder's meeting is in Salt Lake City.</p><p> </p><p>Pribonic seems to ignore the Credit Mobilier (sp?) scandal. I wanted to compare Credit Mobilier to Enron, but I find it has already been done for me:</p><p><a href="http://www.pbs.org/wgbh/amex/tcrr/sfeature/sf_scandals.html" target="_blank">American Experience | Transcontinental Railroad | Special Features</a></p><p> </p><p>Much of what we get in return for our taxes is in the form of <u>infrastructure</u>. Yes, UPS and other businesses and individuals benefit from our tax-supported roads, airports, courts, law enforcement, regulatory agencies, schools, et cetera. - but those are things that government does for our collective benefit. These <u>might</u> also be called subsidies, but all of us derive some benefits from them.</p><p> </p><p>Nowadays, when our government pays for roads to be built those roads belong to the public. Don't they?</p></blockquote><p></p>
[QUOTE="SeniorGeek, post: 187215, member: 4823"] I like Shilling's method (as explained in the linked CSM article) of counting private-sector jobs that are created by government spending the same way that government employees are counted. A lot of the moves to "privatize" government functions have resulted in little or no savings to taxpayers, but have filled the pockets of the privateers. The hypocrisy I saw was particularly the part I quoted: ...which appears to say that subsidies are without economic virtue. If you interpret this differently, I can see that you might miss the intent of the rest of what I wrote. Pribonic has used the railroad anecdote to attempt to prove that subsidies never work. An alternate message could have been that, given a chance, businesses (and individuals) will fleece the taxpayers to the maximum extent the law allows. Maybe I was offended because here it is, 138 years later, and I still think that our government promoting a transcontinental railway was a good idea...that was really done the wrong way. Oversight was lacking, but that was probably due to the cronyism that was involved. (I think the land grants were excessive, too, but Pribonic does not address that issue. He does mention other subsidies that were added later, after the project was already in progress, but does not point out that [U]those[/U] were truly direct subsidies, and porky.) Getting back to the facts of the essay: What Pribonic calls per-mile "subsidies" for the railroad were loans - [B]not grants[/B] - of $16,000 or $48,000 per mile at 6% interest. The loans were repaid, as a mortgage against the railroad, over the course of 40 years: [URL="http://cprr.org/CPRR_Discussion_Group/2006/06/dollars-per-mile-of-track.html"]CPRR Discussion Group - Central Pacific Railroad Photographic History Museum[/URL] (The interest-rate guarantee was still quite significant, since banks at the time had rates of 30% and higher for projects in the frontier.) ...implies that Union Pacific failed once government support was withdrawn, or failed due to the cost of doing the work over again. Bankruptcy can be a financial tactic. (I UP was bankrupt in 1872, but [U]this year's[/U] shareholder's meeting is in Salt Lake City. Pribonic seems to ignore the Credit Mobilier (sp?) scandal. I wanted to compare Credit Mobilier to Enron, but I find it has already been done for me: [URL="http://www.pbs.org/wgbh/amex/tcrr/sfeature/sf_scandals.html"]American Experience | Transcontinental Railroad | Special Features[/URL] Much of what we get in return for our taxes is in the form of [U]infrastructure[/U]. Yes, UPS and other businesses and individuals benefit from our tax-supported roads, airports, courts, law enforcement, regulatory agencies, schools, et cetera. - but those are things that government does for our collective benefit. These [U]might[/U] also be called subsidies, but all of us derive some benefits from them. Nowadays, when our government pays for roads to be built those roads belong to the public. Don't they? [/QUOTE]
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