Corporate Welfare Scandals Escalate
|December 31, 2003||Posted by Staff under The Progress Report|
Corporate Welfare Scandals Escalate
Here is a news update from Taxpayers for Common Sense. TCS is the best organization that monitors excessive government spending, corruption and corporate welfare.
THAT SINKING FEELING Not even a war plus record-breaking budget deficits could keep the Senate from an opportunity to add a few pork projects to a must-pass bill. A wasteful ship subsidy program that even the President has been trying to kill for years, and which serves no defense or security purpose, received a handout of $50 million of taxpayer money in this week’s wartime emergency spending bill. The Maritime Guaranteed Loan Program (Title XI) has powerful supporters in the Senate from states with connections to the shipbuilding and cruise industries.
Particularly shocking is the fact that this handout was given just three days after the Inspector General of the Department of Transportation released a scathing report citing the program for mismanagement, fiscal irresponsibility, and lack of oversight. Title XI has lost $490 million in defaulted loans since 1998, and according to the program’s own rules, most of those loans should never have been awarded in the first place.
The most egregious example of the loan program’s wastefulness is easily Project America, the billion-dollar plan to revive domestic cruise-ship building. Project America’s set goal was to build the first two American cruise ships in 50 years, in order to run an inter-island Hawaiian line. The government backed 87.5% of the ships’ cost with Title XI loans and gave the cruise company, American Classic Voyages Co., monopoly rights to inter-island cruises.
But Project America was headed for Titanic troubles. In December of 2000, American Classic simply used new government loans to repay old ones. In August 2001, American Classic admitted that operating losses had quadrupled from the previous year. Nevertheless, the Maritime Administration continued to float them loans without batting an eye. In October, American Classic embraced a new 11 — Chapter 11 — when they filed for bankruptcy. They defaulted on more than half a billion dollars in loans, $330 million of which were backed with taxpayer dollars.
Every step of the way, the Maritime Administration missed the warning signs of disaster and kept handing money out. Yet Congress, instead of demanding accountability, just keeps giving them money to spend. Attaching the funding to the war bill is just a shameless attempt to slip these handouts under the public radar.
The sad truth is that this program could be easily fixed by asking the parent companies to co-sign on the loans that their subsidiaries receive. Making the loan recipients have a bigger initial investment when they first receive the loan will create a strong incentive not to jump ship when the financial going gets rough. Lastly, the Maritime administration could follow other government agencies by getting outside appraisals, a literal fiscal second opinion on the more expensive and controversial projects.
Generally, lawmakers like loan guarantees because they don’t appear to cost taxpayers. Yet, after hundreds of millions in loan defaults have occurred in this shipbuilding program, if Congress won’t cut this flawed program, then somebody needs to fix it. It’s time for the Maritime Administration to shape up or ship out. Otherwise taxpayers will keep watching our money going down the drain.
For more information, contact Keith Ashdown at (202)-546-8500 ext. 110 or by email at firstname.lastname@example.org
TCS is at www.taxpayer.net
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