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Don Phillips' writing in the November 2008 Trains issue

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Posted by garr on Wednesday, October 1, 2008 2:48 PM
 carnej1 wrote:

 Just to weigh in on this, I own copies (but no means complete volumes) of Trains going back as far as the 1950's and the magazine has always had editorial content which included political issues of significance to the railroad industry. Going back much of this was written by David P. Morgan. Over the years there have been a number of columnists with pronounced political perspectives such as John Kneiling (who was definitely to the "right of center").

 The fact of the matter is that columnists are contributing editorial content and I have always read the columns as just that, the opinion of the author. TRAINS magazine is primarily an enthusiast's publication (O.C also including heavy RR industry news content). I do not think in any way the magazine has any obligation to offer "equal time"(I'd use the term "fair and balanced" but I don't wan't to infringe on anyones trademark) as far as the columnists go. They have and do, frequently publish readers letters offering critique of the columnists writings, and IMO have been pretty balanced about that...  

carnej1,

A paragraph or two from some unknown reader does not carry the weight of a columnist. The Trains Turntable columns usually had an author's bio which was longer than today's reader letters.

A modern version of John Kneiling's Professional Iconoclast column would not be bad idea either. A lot of what we see in railroading today was first exposed to the railfan community decades ago in his column.

 

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Posted by garr on Wednesday, October 1, 2008 2:55 PM
 henry6 wrote:
 tstage wrote:

Crandell,

It sounds to me that what happened with the CPR is similar to what happened with the US Transcontinental Railroad back in the 1860s.  Corruption and greed were at the real heart of the operation.

And, after the railroad was completed, they had to go back and rebuild it again because of shoddy workmanship.

Tom

 

HMMMMMMM....And that was private enterprise.  With the help of government initiatives, of course.  To read some of the above posts 1). government didn't really get involved until much later in our history, and 2). private enterprise will always do it better and do it right!  And if I remember my history correctly there was a lot of boondogling and other financial shenagans going on in the venture, too. But I am being told today that government was the boondoggler and big business was Mr. Clean.  HMMMMMM...something just isn't adding up!

 

henry6,

There is one big difference. If private enterprise creates a boondoggle, it is ultimately the investors' money at risk. If the US government creates a boondoggle, it is my money along with millions of other tax payers' money. 

If my money is going to be wasted, I want to be the one blowing it--not some politician buying votes or greasing the palms of his/her cronies.

 

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Posted by blue streak 1 on Wednesday, October 1, 2008 3:03 PM

Not all government RR building turned out bad. Three quick examples: State of Ga's the Atlanta - Chatanooga Western and Atlantic RR of civil war fame Operated by NC&STL - L&N - Family lines - now operated by CSX. The CNO&TP built by the city of Cincinnati operated in later years by Southern RR and now NS. The North Carolina RR from Charlotte - Morehead City operated by Southern and now the new NS.  All these propertys pay good although not what they are really worth to their owners.

I'm sure there are others that you posters will list and I"ll add them here.

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Posted by henry6 on Wednesday, October 1, 2008 3:16 PM

 garr wrote:
 

henry6,

There is one big difference. If private enterprise creates a boondoggle, it is ultimately the investors' money at risk. If the US government creates a boondoggle, it is my money along with millions of other tax payers' money. If my money is going to be wasted, I want to be the one blowing it--not some politician buying votes or greasing the palms of his/her cronies.

Jay 

 

Understood.  But the post was made to answer the accsations or insinuations above which indicated that all government work was boondogle and if private big business had done it there would be no problem.  Neither point is 100 per cent true.  And also the point is about the discussion that there was no government support, intervention, or oversight to anything in transportation until the 20th Century, which is false as seen the the examples I produced.    What has happend this discussion now is that it is in so many pieces in so many places, that the total statements and counterstatements are scattered and piecemeal.  I wonder how much further it can go before it is totally incomprehensible by being scattered so much.

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Posted by selector on Wednesday, October 1, 2008 8:28 PM
 henry6 wrote:
 tstage wrote:

Crandell,

It sounds to me that what happened with the CPR is similar to what happened with the US Transcontinental Railroad back in the 1860s.  Corruption and greed were at the real heart of the operation.

And, after the railroad was completed, they had to go back and rebuild it again because of shoddy workmanship.

Tom

 

HMMMMMMM....And that was private enterprise.  With the help of government initiatives, of course.  To read some of the above posts 1). government didn't really get involved until much later in our history, and 2). private enterprise will always do it better and do it right!  And if I remember my history correctly there was a lot of boondogling and other financial shenagans going on in the venture, too. But I am being told today that government was the boondoggler and big business was Mr. Clean.  HMMMMMM...something just isn't adding up!

It was all done before the CPR existed or drove a single spike.  It was under the auspices of Sir Sanford Flemming, hired by Sir John A., and later Alexander MacKenzie, and was all government patronage.  One thing that did go very wrong with the whole affair, was Hugh's bribing George Ettiene Cartier and others with money provided by Jay Cook, the Chicago Financier, who wanted to annex the Canadian NW for the use of the Northern Pacific.  So, yes, private capital was at work, but only in the way of bribes.  The money went, ostensibly, to campaign funding for relection.   I don't know all the facts or details, but that is my recollection.

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Posted by Anonymous on Wednesday, October 1, 2008 9:07 PM
 henry6 wrote:
 tstage wrote:

Crandell,

It sounds to me that what happened with the CPR is similar to what happened with the US Transcontinental Railroad back in the 1860s.  Corruption and greed were at the real heart of the operation.

And, after the railroad was completed, they had to go back and rebuild it again because of shoddy workmanship.

Tom

 

HMMMMMMM....And that was private enterprise.  With the help of government initiatives, of course.  To read some of the above posts 1). government didn't really get involved until much later in our history, and 2). private enterprise will always do it better and do it right!  And if I remember my history correctly there was a lot of boondogling and other financial shenagans going on in the venture, too. But I am being told today that government was the boondoggler and big business was Mr. Clean.  HMMMMMM...something just isn't adding up!

I would not say that everything done by government is a boondoggle and everything done by the private sector is successful.  But there is a fundamental difference between the business economics of the two sectors.  Garr makes the point that when private business fails it loses its money and when the government fails, it loses the public's money.  That is an important part of the fundamental difference, and I would add that another part of the difference between government and the private sector is that the government operates without financial risk precisely because it does use someone else's money.  Whereas the financial risk that is inherent in the private sector using its own money makes it more careful to avoid risk.  The private sector has an incentive to work harder and be more prudent because it is risking its own money.

And beyond that, a major difference between the economics of the two sectors is that government always wants to get bigger, and it does so simply by spending money.  So when the government builds a bridge, even if the bridge falls down, or is not needed, or costs ten times more than it should have, the government will still have succeeded in expanding its power and scope simply by spending the money.  So in regard to this primary motive of enlarging government, and feathering its own nest, the bridge is really beside the point. 

Also beside the point is whatever this trillion-dollar bailout is supposed to fix.  First and foremost, the money will grow the government, and a bigger government is liable to come back and tell us that a trillion was not enough.

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Posted by oltmannd on Thursday, October 2, 2008 8:49 AM
 henry6 wrote:
 tstage wrote:

Crandell,

It sounds to me that what happened with the CPR is similar to what happened with the US Transcontinental Railroad back in the 1860s.  Corruption and greed were at the real heart of the operation.

And, after the railroad was completed, they had to go back and rebuild it again because of shoddy workmanship.

Tom

 

HMMMMMMM....And that was private enterprise.  With the help of government initiatives, of course.  To read some of the above posts 1). government didn't really get involved until much later in our history, and 2). private enterprise will always do it better and do it right!  And if I remember my history correctly there was a lot of boondogling and other financial shenagans going on in the venture, too. But I am being told today that government was the boondoggler and big business was Mr. Clean.  HMMMMMM...something just isn't adding up!

The construction of the UP was full of financial shenanigans, but not much boondoggling.The subsequent operation of the UP after construction was complete was totally on the up and up.  The construction and operation of the CP was pretty much clean all around.

The biggest boondoggle in the whole deal was that they got paid a gov't bonus for miles completed, and because the gov't couldn't decide the meeting point between the two road, they graded past each other on parallel paths for over 200 miles!

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Posted by selector on Thursday, October 2, 2008 10:59 AM
Imagine Walmart building two of its Super Stores across a highway from each other.  Doesn't seem at all likely with private money.
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Posted by garr on Thursday, October 2, 2008 2:57 PM

 selector wrote:
Imagine Walmart building two of its Super Stores across a highway from each other.  Doesn't seem at all likely with private money.

Selector,

Not right across the street from each other, but here in Acworth, GA Walmart has two Super Stores just over a mile from each-I believe the closest in the US. Both are on the same highway, US 41, not even 5 minutes from each other during the worst of rush hour traffic.

Closeness resulted when Cobb County would not approve zoning for the second store. So Walmart went to the city of Acworth which approved the zoning on different land which is closer to the older store. Both have remained open for over 2 years which surprised me.

 

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Posted by selector on Thursday, October 2, 2008 6:47 PM

That is a surprise, Jay.  I was wondering if someone would reply and prove me wrong.  Close, anyway.

-Crandell

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Posted by oltmannd on Thursday, October 2, 2008 9:19 PM

 selector wrote:
Imagine Walmart building two of its Super Stores across a highway from each other.  Doesn't seem at all likely with private money.

More like a Lowes and a Home Depot across the street from each other....

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Posted by alphas on Thursday, October 2, 2008 11:50 PM

A good rule to follow is if a private company won't do it, the government should only do it if its  necessary for the safety, security, health or similar of the public.  

The classic example of governmental transportation bungling was the building of the Pennsylvania "Canal System" which became the one single transportation project that I'm aware of to almost financially sink an entire state.  The amazing thing was that the railroad already existed for the first part of the trip [Philly to Columbia with a branch to Harrisburg], and it was incorporated into the canal system.   You'd think anyone would have realized that the extension of the railroad to Pittsburgh was the next logical step, not the canal that couldn't operate over the winter and needed the incline plane series to get the boats over the mountains.      

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Posted by oltmannd on Friday, October 3, 2008 7:14 AM
 alphas wrote:

A good rule to follow is if a private company won't do it, the government should only do it if its  necessary for the safety, security, health or similar of the public.  

The classic example of governmental transportation bungling was the building of the Pennsylvania "Canal System" which became the one single transportation project that I'm aware of to almost financially sink an entire state.  The amazing thing was that the railroad already existed for the first part of the trip [Philly to Columbia with a branch to Harrisburg], and it was incorporated into the canal system.   You'd think anyone would have realized that the extension of the railroad to Pittsburgh was the next logical step, not the canal that couldn't operate over the winter and needed the incline plane series to get the boats over the mountains.      

Sometimes private industry won't do it if the project is too large and/or risky for private capital. Hoover Dam is an example of this.

Pennsylvania had a bad case of "canal fever" and built canals all over the state, but the main line canal was interesting in that it was a technological masterpiece but a financial disater.   

The Erie Canal was such a success that NY eclipsed Philly as the main port city in the US.  Philly has been second fiddle to NY ever since. (Except the last two years in baseball!  Mets collapse two years in a row.  Couldn't happen to a nicer bunch of guys...)

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Posted by greyhounds on Friday, October 3, 2008 10:38 AM
 henry6 wrote:

 The point is that govenrments at any and all levels have participated in the building, maintenance, operation and advancement of all transportation at all times in our history.  Yes, the State of New York (governemtent) did bond, build, and operate (still does) the Erie Canal. Bonds and tolls all were handled through the State government agency, yes, so it still was (and is) a state and its agency as the catylist and the owner/operator. 

As for the Coast Guard, they police all coasts, harbors and waterways and were a function of the Department of Commerce until very recently, and not a seperate military service nder the Department of Defense.  This was a set up based on the Congress's duty to regulate interstate commerce and not on the part of the Department of Defense or indiviual military organizations.

Argueing with you is easy. Making a point and trying to figure out what your point is and means is difficult and frustrating.  You appear to not accept anything but what you believe.  Your point about the Erie Canal being paid off by private enterprise is fine, but you ignore that it was, and is, a state government that planned, built, maintains, operates, and administers the whole thing.  Private enterprise needed it but the state had to provde it. And did successfully. Granted, today, it is a canal for the liesure class with user monies nowhere paying for it and little if any commercial traffic on any but a small part of it in the Hudson Valley.

Well, then yours is a point without a point.

Nobody ever said the State of New York didn't build the Erie Canal.  Basically, it was the equivalent of a toll road and I don't think anyone here has any objections to state governments building toll roads that are fully paid for through the tolls.

As to the US Coast Guard, I still don't see its relavence.  (It's less than 100 years old having been created in 1915).  It's basically a law enforcement/defense organization and, as such, is a proper function of the Federal Government.  It has been kept out of the Department of Defense because its best for our individual liberty if the DOD doesn't do domestic law enforcement.

If you want to use the military as an "Involvement" by the Feds in transportation a better example might be the 3rd Calvary Regiment.  (Still on active duty today.)  It was formed as a regiment of mounted riflemen in the 1840's to guard the Oregon Trail.  This "Guarding" of transportion preceedes the Coast Guard by many decades.  The push to seperate the military from civilian law enforcement came after the Civil War when great resentment was created in the South by Federal military occupation forces.

I have never expressed objections to government involvements such as "Guarding".  I don't object to state toll roads or state government facilities paid for entirely by user fees, as was the case with the Erie Canal.

What I have repeatedly expressed in this thread are my objections to:

1) Any Federal transportation plan - economic planning by central governments does not work.

2) The diversion of general revenue funds to government planned projects.  This is what was done with the river transportation system and it proved to be the ususal boondogle.  There is no way the politicians can redistribute the money in an effective, efficient manner.

I think you would do well to look at the history of Federal involvement in transportation.  Start with the Transportation Act of 1920.  We lived with that thing for 60 years.  It took a stab at central planning through the regulatory process.  The result was a disaster.  The Act was obsolete from the beginning but some people did benifit from the restrictions it put on the rail network.  This made it difficult to change through the political process, which is why the political process shouldn't be involved in such things.  By preventing the development of an integrated transportation network it did, and continues to do, great harm to the US Economy by making the US less competitive in the world market.

Then go on and take a look at the establishment of Parcel Post transportation.  Learn how it destroyed the private express companies and degraded the passenger train network.

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by wjstix on Friday, October 3, 2008 11:17 AM

The development of the American West is a great example of how government involvement in private enterprise works out well. It's true Americans are married to this myth of the "rugged individualist" doing everything on their own. Unfortunately, it's just that - a myth. Except for a small handful of say fur trappers, generally pioneer settlers didn't come to an area until the government had established a military fort in the area, and generally worked out a means of transportation - rivers and / or roads (often rather primitive but useable). Only then did people come and establish farms (often on free land given to them by the government as homesteaders) and businesses.

The government (both federal and states/territories) set up land grants for railroads, giving them reimbursement (and then some) for building rail lines. In return the government got a reduced rate of moving military equipment and personnel which was usefull during the World Wars. Building the railroads increased populations in the areas they served, allowed businesses to be established in shipping out raw materials and receiving finished goods from the east.

Without government paving the way for the pioneers, the West as we know it would not exist, it would still very sparsely populated and have much less industry and commerce.

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Posted by henry6 on Friday, October 3, 2008 11:17 AM
 greyhounds wrote:
 

Well, then yours is a point without a point.

Nobody ever said the State of New York didn't build the Erie Canal.  Basically, it was the equivalent of a toll road and I don't think anyone here has any objections to state governments building toll roads that are fully paid for through the tolls.

As to the US Coast Guard, I still don't see its relavence.  (It's less than 100 years old having been created in 1915).  It's basically a law enforcement/defense organization and, as such, is a proper function of the Federal Government.  It has been kept out of the Department of Defense because its best for our individual liberty if the DOD doesn't do domestic law enforcement.

If you want to use the military as an "Involvement" by the Feds in transportation a better example might be the 3rd Calvary Regiment.  (Still on active duty today.)  It was formed as a regiment of mounted riflemen in the 1840's to guard the Oregon Trail.  This "Guarding" of transportion preceedes the Coast Guard by many decades.  The push to seperate the military from civilian law enforcement came after the Civil War when great resentment was created in the South by Federal military occupation forces.

I have never expressed objections to government involvements such as "Guarding".  I don't object to state toll roads or state government facilities paid for entirely by user fees, as was the case with the Erie Canal.

What I have repeatedly expressed in this thread are my objections to:

1) Any Federal transportation plan - economic planning by central governments does not work.

2) The diversion of general revenue funds to government planned projects.  This is what was done with the river transportation system and it proved to be the ususal boondogle.  There is no way the politicians can redistribute the money in an effective, efficient manner.

I think you would do well to look at the history of Federal involvement in transportation.  Start with the Transportation Act of 1920.  We lived with that thing for 60 years.  It took a stab at central planning through the regulatory process.  The result was a disaster.  The Act was obsolete from the beginning but some people did benifit from the restrictions it put on the rail network.  This made it difficult to change through the political process, which is why the political process shouldn't be involved in such things.  By preventing the development of an integrated transportation network it did, and continues to do, great harm to the US Economy by making the US less competitive in the world market.

Then go on and take a look at the establishment of Parcel Post transportation.  Learn how it destroyed the private express companies and degraded the passenger train network.

 

I don't agree that my point is a point without a point.  One of the problems here is that the conversation has become unwieldly with you, me, oltmann, and a few others, each with opinions concerning varying degrees of government(s) invlovement in transportation so that a statement made to one does not fit an answer to another.  There is one opinon which has been posted that says transporation should only be part of the private sector on one hand while the other side one says  that it is the reponsibilities of government; and there are those who are in between.   There have been comments that government(s) participation is new.

The only real points I have wanted to make are that governemts have always been involved in transportation in many different ways and degrees and for many different reasons and not to endorse any one system; sort of trying to find a definition of where government involvement begins and ends.  Some of the facts of government involvement stem from Congressional power to oversee intersate commerce (which lead them to form the Coast Guard, channel rivers and harbors, build and operate canals and waterways; and to oversee railraods and air traffic) to the Executive Branch power to wage war (thus the Interstate Highway System).  My posts have been to show examples of the different levels and different projects and different ways governments have affected transportation projects. I have not tried to defend any one invlovement but to defend the fact that there has been involvement.  The only real opinion I have on all this is that what has emerged is a most likely irreversable situation whereby transportation is a joint function of government and private capital and on a case by case basis. 

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Posted by greyhounds on Friday, October 3, 2008 11:26 AM

 henry6 wrote:
  The only real opinion I have on all this is that what has emerged is a most likely irreversable situation whereby transportation is a joint function of government and private capital and on a case by case basis. 

Well, it it's irreversable then we've lost control of our government and it now controls us.

What "government capital" (and I'll argue that, like the Social Security Trust Fund, there is no such thing) has been involved in the most recent, largest railroad expansion projects?

1) Transcon double tracking

2) Sunset double tracking

3) Overland triple tracking

4) Powder River capacity expansion

BTW, the UP just told the State of California to take their money and stuff it when the state offered to help fund clearance improvements over Donner Pass.

It's only omnipresent and "irreversable" if we allow it - politicians crave power, that's why they're politicians.  They'll take all they can get.

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by greyhounds on Friday, October 3, 2008 11:42 AM
 wjstix wrote:

The development of the American West is a great example of how government involvement in private enterprise works out well. It's true Americans are married to this myth of the "rugged individualist" doing everything on their own. Unfortunately, it's just that - a myth. Except for a small handful of say fur trappers, generally pioneer settlers didn't come to an area until the government had established a military fort in the area, and generally worked out a means of transportation - rivers and / or roads (often rather primitive but useable). Only then did people come and establish farms (often on free land given to them by the government as homesteaders) and businesses.

The government (both federal and states/territories) set up land grants for railroads, giving them reimbursement (and then some) for building rail lines. In return the government got a reduced rate of moving military equipment and personnel which was usefull during the World Wars. Building the railroads increased populations in the areas they served, allowed businesses to be established in shipping out raw materials and receiving finished goods from the east.

Without government paving the way for the pioneers, the West as we know it would not exist, it would still very sparsely populated and have much less industry and commerce.

Yes.  Establishing security and rule of law are necessary functiions of government - and commerce can not function at all without the government providing such functions.

Allocation of economic resources to specific political "winners" is not a necessary function of government.  And when the government tries to do it it fails miserably.

You're talkiing two different things.  National security, courts, law enforcement, etc. are what the government is for.  Allocation of economic resources is not what the government is for and it is not something they can do well.

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by CSSHEGEWISCH on Friday, October 3, 2008 12:06 PM
Judging by the state of the economy, I'm not sure that the private sector is very good at allocating economic resources, either.
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Posted by oltmannd on Friday, October 3, 2008 1:19 PM
 henry6 wrote:
 greyhounds wrote:
 

Well, then yours is a point without a point.

Nobody ever said the State of New York didn't build the Erie Canal.  Basically, it was the equivalent of a toll road and I don't think anyone here has any objections to state governments building toll roads that are fully paid for through the tolls.

As to the US Coast Guard, I still don't see its relavence.  (It's less than 100 years old having been created in 1915).  It's basically a law enforcement/defense organization and, as such, is a proper function of the Federal Government.  It has been kept out of the Department of Defense because its best for our individual liberty if the DOD doesn't do domestic law enforcement.

If you want to use the military as an "Involvement" by the Feds in transportation a better example might be the 3rd Calvary Regiment.  (Still on active duty today.)  It was formed as a regiment of mounted riflemen in the 1840's to guard the Oregon Trail.  This "Guarding" of transportion preceedes the Coast Guard by many decades.  The push to seperate the military from civilian law enforcement came after the Civil War when great resentment was created in the South by Federal military occupation forces.

I have never expressed objections to government involvements such as "Guarding".  I don't object to state toll roads or state government facilities paid for entirely by user fees, as was the case with the Erie Canal.

What I have repeatedly expressed in this thread are my objections to:

1) Any Federal transportation plan - economic planning by central governments does not work.

2) The diversion of general revenue funds to government planned projects.  This is what was done with the river transportation system and it proved to be the ususal boondogle.  There is no way the politicians can redistribute the money in an effective, efficient manner.

I think you would do well to look at the history of Federal involvement in transportation.  Start with the Transportation Act of 1920.  We lived with that thing for 60 years.  It took a stab at central planning through the regulatory process.  The result was a disaster.  The Act was obsolete from the beginning but some people did benifit from the restrictions it put on the rail network.  This made it difficult to change through the political process, which is why the political process shouldn't be involved in such things.  By preventing the development of an integrated transportation network it did, and continues to do, great harm to the US Economy by making the US less competitive in the world market.

Then go on and take a look at the establishment of Parcel Post transportation.  Learn how it destroyed the private express companies and degraded the passenger train network.

 

I don't agree that my point is a point without a point.  One of the problems here is that the conversation has become unwieldly with you, me, oltmann, and a few others, each with opinions concerning varying degrees of government(s) invlovement in transportation so that a statement made to one does not fit an answer to another.  There is one opinon which has been posted that says transporation should only be part of the private sector on one hand while the other side one says  that it is the reponsibilities of government; and there are those who are in between.   There have been comments that government(s) participation is new.

The only real points I have wanted to make are that governemts have always been involved in transportation in many different ways and degrees and for many different reasons and not to endorse any one system; sort of trying to find a definition of where government involvement begins and ends.  Some of the facts of government involvement stem from Congressional power to oversee intersate commerce (which lead them to form the Coast Guard, channel rivers and harbors, build and operate canals and waterways; and to oversee railraods and air traffic) to the Executive Branch power to wage war (thus the Interstate Highway System).  My posts have been to show examples of the different levels and different projects and different ways governments have affected transportation projects. I have not tried to defend any one invlovement but to defend the fact that there has been involvement.  The only real opinion I have on all this is that what has emerged is a most likely irreversable situation whereby transportation is a joint function of government and private capital and on a case by case basis. 

No, gov't involvement isn't new. That's been a contant.   That so much is gov't owned and operated is (relatively) new.

And, I don't think there is anything intrinsic about what's been done to put us in an "irreversible" state. Do you have an example?

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by greyhounds on Friday, October 3, 2008 1:24 PM

 CSSHEGEWISCH wrote:
Judging by the state of the economy, I'm not sure that the private sector is very good at allocating economic resources, either.

Now we're risking getting off a railroad topic while discussing railroads, but...The private sector does very well allocating economic resources when the government doesn't interfere.  The present state of the economy is primarily due to a housing market problem.  This housing market problem can be directly traced to "Government Sponsored Enterprises" such as Fannie Mae which directed housing loans to people who couldn't afford housing loans.  The New York Times, of all institutions, had it pegged in 1999:

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&partner=permalink&exprod=permalink

What the government did was decouple the decision process for making a loan from the ability of the borrower to repay the loan. The concern of the lending bank became not wether the loan would be repaid, but wether the loan could be sold to the "Government Sponsored Enterprise."  Since the GSE would buy really questionable loans this lead to a lot of really questionable loans. 

And, if the bank didn't go along and approve the high risk loans it got in hot water with the government. 

Q.E.D. Government interferance in the allocation of economic resources in housing, railroading, whatever, is a path to disaster.

BTW, this Raines Guy mentioned in the article just was hit with a $27 million fine for cooking the books while he was in charge of the GSE.  It's another Enron, but since it was a "Government Sponsored Enterprise" this time the Drive By Media is giving it a pass.

 

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by NKP guy on Friday, October 3, 2008 3:33 PM

I've been fascinated by these comments and have not only learned a lot, I've been ruminating on ideas I'm not comfortable with.

For decades now I've read similar comments from railfans about the railroad industry and capitalism vs socialism.  I think the past few weeks have been a fulcrum point, a watershed.  All of our theories about the relationship of gov't and the economy are now outdated.  With the intervention today of the federal gov't in the economy we are on new ground.  Just as liberals hate to admit that socialism doesn't work, I think recent events have proved that capitalism (in this case, worship of the "free market") doesn't, either. 

Don Phillips is consistently the best writer at Trains magazine.  I abhored John Knieling's views on economics and railroads, but I read his thought-provoking essays.  Phillips disturbs a number of people here, but I agree with his views.  Win a few, lose a few.

Politics, economic theory, and railroads are all tied together.  Never in American history were they not related.  We are living through a time when the very nature of Wall Street and the American economy are changing forever.  In the words of an old favorite hymn, "New ocassions teach new duties; time makes ancient good uncouth."  Get ready to see some of your pet economic theories abandonned or junked. 

 

 

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Posted by henry6 on Friday, October 3, 2008 3:39 PM
 oltmannd wrote:

No, gov't involvement isn't new. That's been a contant.   That so much is gov't owned and operated is (relatively) new.

And, I don't think there is anything intrinsic about what's been done to put us in an "irreversible" state. Do you have an example?

Railroads are chartered and under the thumb of the FRA an STB; air traiffic is controlled by the FAA; waterways have been built and are operated by the Army Corps of Engineers and patrolled by the Coast Guard; highways, city streets, and country roads are built and maintained by their respective governments' agencies.  Anybody who wants to untangle any or all of that raise your hand.

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Posted by SFbrkmn on Friday, October 3, 2008 5:26 PM
I read the article today, thought it was good and did not come away with the thought it was expressing political views. It basically touched on a few topics that perhaps some out there may not know in the fact that Biden has been a strong supporter of Amtrk. However, if he does become our next VP, it really doesn't matter on how he stands on the issue as he is going to be loaded with much more important issues that should be dealt with ahead of any Amtrk issue......No one yet has expressed a thought on Phillips othr article on the severe weather warnings for railroads. For someone who grew up watching Mike Smith do the weather on Wichita tv in the 1980's and I live only 110 miles from Greensburgh, I found it to be the better of the two articles.
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Posted by greyhounds on Saturday, October 4, 2008 12:03 AM
 henry6 wrote:

Railroads are chartered and under the thumb of the FRA an STB; air traiffic is controlled by the FAA; waterways have been built and are operated by the Army Corps of Engineers and patrolled by the Coast Guard; highways, city streets, and country roads are built and maintained by their respective governments' agencies.  Anybody who wants to untangle any or all of that raise your hand.

First it was the Coast Guard, now it's "raise your hand".  I don't understand the relavence of either.  I have raised my hand and not one of you saw it. 

Seriously, Trains used to have a very good contributor named George W. Hilton.  Hilton was a PhD Economist on the UCLA faculty.  I believe he's retired now, but I haven't heard of his passing.  Hilton was also a railfan who wrote books such as "The Electric Interurban Railways in America", "American Narrow Gauge Railroads", "The Monon Route", and a book about the Great Lakes train ferries.  I've got the first three of those books and they are three of my favoite books - and not just railroad books, I do read about other things.  These are three of my favoirite books on any subject.

I like Hilton because, as an economist, he could explain "why".  He'd not only tell the story of the interurbans and the narrow gauges, he could, and would, tell you why it happened.  Why did the interurbans and narrow gauges get built, why did they operate as they did, why did they use the equipment they did, and why did they fail.  Same with the Monon (Hilton was of the opinion it should have been ripped up.  It was his "hometown" railroad and he was fascinated with it enough to write a book about it, but, as an economist, he saw it for what it was.  It was a redundant facility with meager growth prospects.)  Same with the lake ferries but I don't have that book.

Hilton understood the economics of transportation. 

The STB is a successor to the old Interstate Commerce Commission which spent many decades harming the US economy.  Hilton said the ICC was very effective.  It could cause a lot of economic harm with some pieces of paper.    Any government agency that could do that was certainly "effective".  "Effective" in a very bad way, but "Effective" none the less.

Hilton was once asked what should be retained of the ICC.  His reply was that "The 'Blind Man's' lunch counter in the basement" should stay.  Aparently, disabled folks were given priority in the operation of concession facilities in Federal buildings.  A "blind man" had the lunch counter concession in the ICC building and Hilton thought he did a good job with lunch.  All else should go away in the interest of the economic well being of the USA.

The STB unfortunately retained more of the iCC than the lunch counter.  If reasoned economic thought and analysis got rid of the ICC, it can get rid of the STB.  I don't have a PhD, but I'd sure like to try to junk that useless agency of intrusive, oppresive, harmful government. 

 

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by Anonymous on Saturday, October 4, 2008 5:25 PM
 NKP guy wrote:

I've been fascinated by these comments and have not only learned a lot, I've been ruminating on ideas I'm not comfortable with.

For decades now I've read similar comments from railfans about the railroad industry and capitalism vs socialism.  I think the past few weeks have been a fulcrum point, a watershed.  All of our theories about the relationship of gov't and the economy are now outdated.  With the intervention today of the federal gov't in the economy we are on new ground.  Just as liberals hate to admit that socialism doesn't work, I think recent events have proved that capitalism (in this case, worship of the "free market") doesn't, either. 

Don Phillips is consistently the best writer at Trains magazine.  I abhored John Knieling's views on economics and railroads, but I read his thought-provoking essays.  Phillips disturbs a number of people here, but I agree with his views.  Win a few, lose a few.

Politics, economic theory, and railroads are all tied together.  Never in American history were they not related.  We are living through a time when the very nature of Wall Street and the American economy are changing forever.  In the words of an old favorite hymn, "New ocassions teach new duties; time makes ancient good uncouth."  Get ready to see some of your pet economic theories abandonned or junked. 

I strongly agree with nearly everything you say, especially your point about the last few weeks being a watershed for a big change in the government / economic system.  I would say the earth moved yesterday in regard to our political system.  You said, "Just as liberals hate to admit that socialism doesn't work, I think recent events have proved that capitalism (in this case, worship of the "free market") doesn't, either."  I disagree with the second part of your point.  Much of what follows is covering the same ground that Greyhounds covered five posts back, but it bears revisiting especially because the wool is being so profoundly pulled over the public's eyes on this matter.  

Assuming that you are referring to the current credit crisis, it quite dramatically proves that socialism does not work.  It proves nothing about capitalism, however, unless you believe the ones who caused the crisis and their allies in the media when they try to shift the blame onto the lenders who created the bad loans and onto Wall Street who ultimately purchased those loans.  During the V.P. debate, when Gwen Ifill asked Sarah Palin whether the current housing crisis was caused by the lenders or the borrowers.  The correct answer is, "neither." 

Here is my simplified explanation of what caused the housing crisis, which is a big driver of the current financial crisis:  The government pressured lenders to make risky loans and then assumed that risk on behalf of the taxpayers.

The reason the loans were bad is because the government, through Freddie and Fannie, guaranteed them.  The guarantee meant that the loans did not need to be made to credit-worthy borrowers.  Not only did the government guarantee the loans, but it also pressured lenders to make the loans to people who could not afford them-the so-called sub prime loans.  It may appear as though the lenders are to blame because they made the bad loans, but the creation of bad loans is just the normal business consequence when the government removes financial risk from the lenders, in effect, acting as a co-signer on the loans.

Yet many are blaming the crisis on insufficient government regulation of the financial business. On the contrary, the government pressure on lenders to make loans to un-credit-worthy borrowers amounted to excessive government regulation, not insufficient government regulation.  And additionally, the government guarantee amounts to socialism if it needs to be executed and honored, as has proven to be the case. 

Basically the government guarantee on all loans opened to door to create bad loans.  The bad loans created a lot of new housing that drove down house values.  So we have an oversupply of housing that has driven its value below the price of its creation.  Yesterday the government bought all that excess housing with taxpayer money in order to take it off the backs of the private financial sector, which was being dragged down by carrying it. 

We are being told that when the housing market recovers, those excess houses that the government bought will be put back on the market and sold.  We are told that some houses might even sell at a profit, enabling the government to pay back the taxpayers for the bailout.

However, the government's motive that led to the creation of the bad loans was to provide affordable housing, which amounts to housing for those who can't afford it.  To make it affordable, the government takes money from those who have excess and gives it to people who don't have enough to buy a house.  So, as the government holds all the houses it bought yesterday, I don't see a motive for them to hold out for a good price once the market recovers. 

On the contrary, the motive will be the same motive that created the crisis in the first place.  That is to sell the houses below market value for the benefit of those who cannot afford to pay market value.  Indeed, there is no motive for the government to make a profit on the houses because, fundamentally, the public sector has no profit motive.  If anything, the motive will be to come back to the taxpayers and ask for more money.  We will be lucky if half the money we gave them yesterday even goes for the intended purpose of buying up the so-called toxic mortgages. 

The likely scenario is that the government will hold their houses off the market for a while, not only to allow the market to recover, but to allow time for them to make decisions about the process.  Then the government will burst the dam and allow all their houses to suddenly flood the market at discounted prices.  They will probably even engage in social engineering, setting the house prices according to the ability of buyers to pay or giving similar advantages to the financially disadvantaged, since that was their plan from the very start of this mess.  The sudden influx of discounted housing will drive down the value of everybody's house like nothing we have ever seen in the normal course of free market forces.  Nothing can distort a market like the government can.  I would say that, despite the current housing crisis, this would be the best possible time to sell your house if you consider it to be an investment to any extent.         

Here is a chronological outline:

1)        The government uses its power to make a guarantee that causes the creation of houses, which their buyers cannot afford.

2)        The process creates a bubble of excess housing.

3)        The bubble of excess housing drives down all home values.

4)        The government uses taxpayer money to purchase the excess housing.

5)        With the excess housing taken off the market, all home values rise to previous levels.

6)        The government redistributes the excess housing at below market prices.

7)        The excess discounted housing drives down all home values a second time.

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Posted by henry6 on Saturday, October 4, 2008 6:06 PM
 Bucyrus wrote:
 NKP guy wrote:

I've been fascinated by these comments and have not only learned a lot, I've been ruminating on ideas I'm not comfortable with.

For decades now I've read similar comments from railfans about the railroad industry and capitalism vs socialism.  I think the past few weeks have been a fulcrum point, a watershed.  All of our theories about the relationship of gov't and the economy are now outdated.  With the intervention today of the federal gov't in the economy we are on new ground.  Just as liberals hate to admit that socialism doesn't work, I think recent events have proved that capitalism (in this case, worship of the "free market") doesn't, either. 

Don Phillips is consistently the best writer at Trains magazine.  I abhored John Knieling's views on economics and railroads, but I read his thought-provoking essays.  Phillips disturbs a number of people here, but I agree with his views.  Win a few, lose a few.

Politics, economic theory, and railroads are all tied together.  Never in American history were they not related.  We are living through a time when the very nature of Wall Street and the American economy are changing forever.  In the words of an old favorite hymn, "New ocassions teach new duties; time makes ancient good uncouth."  Get ready to see some of your pet economic theories abandonned or junked. 

I strongly agree with nearly everything you say, especially your point about the last few weeks being a watershed for a big change in the government / economic system.  I would say the earth moved yesterday in regard to our political system.  You said, "Just as liberals hate to admit that socialism doesn't work, I think recent events have proved that capitalism (in this case, worship of the "free market") doesn't, either."  I disagree with the second part of your point.  Much of what follows is covering the same ground that Greyhounds covered five posts back, but it bears revisiting especially because the wool is being so profoundly pulled over the public's eyes on this matter.  

Assuming that you are referring to the current credit crisis, it quite dramatically proves that socialism does not work.  It proves nothing about capitalism, however, unless you believe the ones who caused the crisis and their allies in the media when they try to shift the blame onto the lenders who created the bad loans and onto Wall Street who ultimately purchased those loans.  During the V.P. debate, when Gwen Ifill asked Sarah Palin whether the current housing crisis was caused by the lenders or the borrowers.  The correct answer is, "neither." 

Here is my simplified explanation of what caused the housing crisis, which is a big driver of the current financial crisis:  The government pressured lenders to make risky loans and then assumed that risk on behalf of the taxpayers.

The reason the loans were bad is because the government, through Freddie and Fannie, guaranteed them.  The guarantee meant that the loans did not need to be made to credit-worthy borrowers.  Not only did the government guarantee the loans, but it also pressured lenders to make the loans to people who could not afford them-the so-called sub prime loans.  It may appear as though the lenders are to blame because they made the bad loans, but the creation of bad loans is just the normal business consequence when the government removes financial risk from the lenders, in effect, acting as a co-signer on the loans.

Yet many are blaming the crisis on insufficient government regulation of the financial business. On the contrary, the government pressure on lenders to make loans to un-credit-worthy borrowers amounted to excessive government regulation, not insufficient government regulation.  And additionally, the government guarantee amounts to socialism if it needs to be executed and honored, as has proven to be the case. 

Basically the government guarantee on all loans opened to door to create bad loans.  The bad loans created a lot of new housing that drove down house values.  So we have an oversupply of housing that has driven its value below the price of its creation.  Yesterday the government bought all that excess housing with taxpayer money in order to take it off the backs of the private financial sector, which was being dragged down by carrying it. 

We are being told that when the housing market recovers, those excess houses that the government bought will be put back on the market and sold.  We are told that some houses might even sell at a profit, enabling the government to pay back the taxpayers for the bailout.

However, the government's motive that led to the creation of the bad loans was to provide affordable housing, which amounts to housing for those who can't afford it.  To make it affordable, the government takes money from those who have excess and gives it to people who don't have enough to buy a house.  So, as the government holds all the houses it bought yesterday, I don't see a motive for them to hold out for a good price once the market recovers. 

On the contrary, the motive will be the same motive that created the crisis in the first place.  That is to sell the houses below market value for the benefit of those who cannot afford to pay market value.  Indeed, there is no motive for the government to make a profit on the houses because, fundamentally, the public sector has no profit motive.  If anything, the motive will be to come back to the taxpayers and ask for more money.  We will be lucky if half the money we gave them yesterday even goes for the intended purpose of buying up the so-called toxic mortgages. 

The likely scenario is that the government will hold their houses off the market for a while, not only to allow the market to recover, but to allow time for them to make decisions about the process.  Then the government will burst the dam and allow all their houses to suddenly flood the market at discounted prices.  They will probably even engage in social engineering, setting the house prices according to the ability of buyers to pay or giving similar advantages to the financially disadvantaged, since that was their plan from the very start of this mess.  The sudden influx of discounted housing will drive down the value of everybody's house like nothing we have ever seen in the normal course of free market forces.  Nothing can distort a market like the government can.  I would say that, despite the current housing crisis, this would be the best possible time to sell your house if you consider it to be an investment to any extent.         

Here is a chronological outline:

1)        The government uses its power to make a guarantee that causes the creation of houses, which their buyers cannot afford.

2)        The process creates a bubble of excess housing.

3)        The bubble of excess housing drives down all home values.

4)        The government uses taxpayer money to purchase the excess housing.

5)        With the excess housing taken off the market, all home values rise to previous levels.

6)        The government redistributes the excess housing at below market prices.

7)        The excess discounted housing drives down all home values a second time.

 

I can't agree with most of what you said, Buycrus.  But worse, I fear you have crossed the line which is going to get this otherwise envigorating, civil, and intellegent conversation locked! 

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Posted by Anonymous on Saturday, October 4, 2008 6:52 PM

henry6,

For what reason can you not agree with most of what I said?  What is the part you can agree with?

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Posted by greyhounds on Saturday, October 4, 2008 7:14 PM
 henry6 wrote:

 

I can't agree with most of what you said, Buycrus.  But worse, I fear you have crossed the line which is going to get this otherwise envigorating, civil, and intellegent conversation locked! 

OK, two questions. 

Why did Buycrus cross a line when NKP Guy didn't cross a line?  Was it because you disagree with one and agree with the other?

What specifically did Buycrus say that you disagree with?  Those are the facts.  That's what happened.

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.
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Posted by zardoz on Saturday, October 4, 2008 8:38 PM
 greyhounds wrote:

......then we've lost control of our government and it now controls us.

Now THAT sums up the current political/social/economic situation in a well-written, concise  proverbial nutshell.

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