Stossel: Stupid on Steroids

John Stossel writes that “Our Government Doesn’t Create Jobs, It Kills Them.” In this column he objects to something the President said recently:

“We’re the country that built the intercontinental railroad,” Obama says. “So how can we now sit back and let China build the best railroads?”

The President meant the transcontinental railroad, but he’s not the first person to call it the “intercontinental railroad.”

Stossel then launches into a history of the transcontinental railroad that makes it into the biggest money-wasting boondoggle in history — “a Solyndra-like Big Government scandal,” he says. And he brings up all the corruption and bribery that went along with the project, and tosses in the fact that the two railroad companies that built the transcontinental railroad both went bankrupt a few years later. The project inflicted terrible cruelty on the workers, particularly the Chinese hired by the Central Pacific. It also was another blow to the cultures of the plains Indians.

On the other hand, any history book will tell you that the transcontinental railroad had a huge impact on the nation’s culture and economy. Goods could be shipped across the country at a fraction of the time and cost as before. Towns, and new businesses, sprang up all along the route. Interstate trade boomed. For all the graft and waste and cruelty that went with it, it created real wealth for the entire country.

There was only one 19th-century railroad company, Great Northern, that didn’t receive government subsidies, and which didn’t go bankrupt in the Panic of 1893, as many other railroads did (for reasons not entirely of their making). But Great Northern wasn’t operational until 1890, and it didn’t build the transcontinental railroad.

Then Stossel says,

We need infrastructure, but the beauty of leaving most of these things to the private sector — without subsidies, bailouts and other privileges — is that they would have to be justified by the profit-and-loss test. In a truly free market, when private companies make bad choices, investors lose their own money. This tends to make them careful.

But the only way private companies build infrastructure is infrastructure for their own personal use. Why would any company build a road or a bridge if anyone’s trucks can use them? There’s no profit in it, unless the company can charge for using it somehow.

No private company ever would have built the interstate highway system, or the Golden Gate Bridge, or the Hoover Dam. Or the transcontinental railroad, for that matter. Would not have happened. Yet building those things eventually made a whole lot of business enterprise possible that would not have been possible otherwise.

Stossel’s complaint about the railroad could be said about the voyages of Columbus, you know. I’m pretty sure those voyages were a financial loss to Ferdinand and Isabella, and Columbus turned out to be, um, a problematic individual.

And has the space program made a profit yet? I doubt it.

Righties are sooooo stupid.

18 thoughts on “Stossel: Stupid on Steroids

  1. I remember reading that as a financial incentive to sweeten the pie the builders of the Trancontinental Railroad were deeded by the government all the land for 1 mile on both sides of the track that they managed to complete. That’s a 2 mile swath of land for the lenght of the track, with the track being a center line. Of course most of that land was out in the middle of nowhere and didn’t have much value, but as towns sprung up along the tracks that land became a valuable incentive and paid a handsome dividend.

  2. “John Stossel doesn’t create brain cells, he kills them.”

    Or maybe it would be better to write “Fox News doesn’t create knowledge, it kills it.”

    I was about to begin a rant about how stupid his premise is, but it’s John Stossel. It couldn’t be otherwise.

    Though this one is particularly dumb.

  3. Stossel hates the idea of public infrastructure on which no private firm is making a profit. It threatens the libertard ideological fantasy that they succeed all by themselves without any government involvement, and hence morally don’t owe a cent in taxes.

  4. The classic example of government infrastructure which no on WANTS to turn a profit is close by. The Internet. If the Internet was to charge all the market would bear righties would be the first to scream.

  5. As I’ve posted before, railroads are something near and dear to my heart, and I lament the dilapidated condition of the USA’s railroads and subways. Meanwhile, Europe and much of Asia keep building excellent trains.

    There are several reasons why the USA’s trains are in horrible shape, but most of them relate to the fact that it’s privately owned. In most nations, railroads are operated by the government. One of the stupidest things America has done is to let local governments apply property taxes to railways. As a result, railroad companies that had double-tracking ripped it up and went to single tracks to reduce their tax bill. They also shut down and tore down train stations located in downtown areas, turning them into vacant lots with shipping containers stacked up.

    This is SO different than in, to use an example, Seoul, South Korea, where train stations are always lively places filled with shops open late at night. The Seoul subway system has around 800 stations, one of the world’s largest, with trains arriving and departing every five minutes, connecting to the airport and the long-distance train system. It’s 100% government-run, except of course the shops which lease space in the train stations.

    Stoessel doesn’t seem to have any objection the Interstate highway system, which directly subsidizes the trucking industry, making it hard for railroads to compete. Unlike train tracks, the Interstate highways don’t pay property tax.

    The history of America’s railroads is one of chaos and greed. Swami is correct that the government handed over public land to the railroad companies, which was insane. As a result, the railroads winded up owning all the most valuable land. They rewarded the communities which literally paid for the railroad to come through their towns by immediately jacking up freight rates to the Moon shortly after they started operation. Thus, they managed to break the backs of farmers, coal mining companies, etc, who couldn’t pay the ruinous rates. This led other companies to come in and build parallel train tracks, sometimes with no intention to actually complete them but rather to force the endangered monopoly railroad to buy them out for millions. Frequently the issue was settled with some well-placed dynamite.

  6. OT – but not entirely – the conservative argument for the bad economy denies that the root problem is a lack if aggregate demand. Companies aren’t hiring because they don’t need to hire people to make stuff they can’t sell because sales (consumption) is down. And low demand is the result of high unemployment. Which is the argument for government stimulus and help for the unemployed – greater consumption creates demand. That’s Kesian economics.

    The conservative denies that a decline in aggregate demand is the root cause. Since Wall street is drowning in excess cash, capital is not the problem, so the excuse is government regulation. That’s why there’s no hiring. If we just lifted banking and environmental regulation (and penalties) the economy would take off. Why? There’s still no change in aggregate demand.

    But lets look for supporting evidence of the rightie claim that government regulation is killing the economy. The document which validates proceeding with a business or demonstrates that an idea is unwise is a business plan. Thousands of these are produced every year. If government regulation is the problem, there should be stacks and stacks of them which show that business decided NOT to start or expand because of the cost of regulation. Banks – the SBA – can any authority point to the dead business plans which identify regulation as the killer of a business idea?

  7. Who cares what Herr Johann Stossel thinks?
    As an intellectual, he’s a bad joke, poorly told.
    But he might had made a half-ass decent porn star.
    Unfortunately, much to his chagrin, he discovered that his brain was not his only shortcoming.

  8. Ooops, I know what I did to make my comment disappear!
    I spelled out ‘ornpay arstay.’
    Let me see if asterisks will work. (Not to worry, maha, I don’t plan on using the words p*rn st*rs often on your site – if ever).

  9. Candide: Amtrak, the passenger operator, though is a governmental corporation and it is starved for funding by the Congress. Since its creation in 1971, it has consistently been denied sufficient resources to operate. The freight train companies do make money — that’s why they are still in existence. They did not want to continue running passenger trains and that’s why Amtrak was created after they dropped passenger routes between the 1920s and 1970.

  10. Purplegirl,

    All true, but also worth mentioning that freight companies own the tracks (which are almost entirely single-tracked) and Amtrak has to lease from them. Freight trains get the right of way. This forces Amtrak trains to often sit and wait on a side-track for the freight to pass. On my last trip to America (3 years ago), I saw some of those mile-long freight trains chugging along at a big 30 mph on a single track. It must be maddening for Amtrak passengers to wait for that, and I can see why they’d prefer to drive or fly.

    Not that I have a lot of experience with Amtrak, having ridden it just once. An American friend who recently visited me said he took Amtrak from Reno to Oakland and it was 3-1/2 hours late, for the above reason. I’ve read about delays of 10 hours on some routes. Obviously, that makes Amtrak a guaranteed loser for people who need to get somewhere on time.

    I don’t doubt that America had better passenger train service in the 19th century than the 20th.

    • Candide: Thanks for your comments on trains. Yes, there was much better train service in the U.s. in the 19th century than there is now. All those years of cheap (subsidized) gasoline conditioned Americans to just drive their own cars wherever they wanted to go, and now that’s coming back to bite us.

      Here on the eastern corridor, my experiences with Amtrack have been very good. It is the most efficient, least stressful way to travel around the eastern megalopolis — Washington DC – New York – Boston – Philadelphia, etc. There are a bunch of ultra-cheap commercial bus companies taking some Amtrack customers away, but if I’ve got the money for a train I’ll take the train, thank you. This is quadrupally true if you are traveling with small children.

      And I love the fact that I can take trains from here to Brooklyn to see my kids. It’s a pain in the bleep to drive from Westchester to Brooklyn.

      In the rest of the country, the extremely limited train service just makes what train service there is so much worse. People who try it once probably don’t try it again. And then the low ridership gives politicians an excuse to not subsidize it. But speaking as a native midwesterner, I’d say it doesn’t even occur to people that maybe they could take a train.

  11. Candide – the US had a better passenger train service in the 20th century than the 19th. Right up through the 1950’s, it was a competitive and popular form of transport – both short and long haul.

  12. And has the space program made a profit yet? I doubt it.

    Heh. As a government program, it has. The research and spin-off technology has more-than paid for the costs of the space program (or so I’ve heard). It’s all-but impossible to envision private industry doing such a thing, though. Without someone at least providing proof of concept, it’s a much too risky venture to put significant money into.

  13. The ingratitude is what gets me. The government makes these vast investments in order to build the economy, most of the profits wind up in private hands, and then the business lobby starts bitching about how the government is oppressing them.

  14. It’s all-but impossible to envision private industry doing such a thing, though. Without someone at least providing proof of concept, it’s a much too risky venture to put significant money into.

    That’s a good point. Stossel overlooks the most basic principle in investing: low risk, low reward; high risk, high reward.

    In a truly free market, when private companies make bad choices, investors lose their own money. This tends to make them careful.

    Investors don’t “tend to be careful,” they have different levels of risk tolerance. But as you point out, there are certain levels of risk that few if any private investors will be willing to take on, meaning they have to forego the potential rewards.

  15. Candide – as someone who once worked at a locomotive factory, and who studied the effects of transportation on the growth of our nation, I especially appreciate your remarks on the rail systems in other countries.

    I suspect the generous giveaway of a mile of land around the tracks was the incentive given to the railroads to build out into the hinterland. If someone upstream made this point, I apologize for missing it/repeating it.

    There is such a basic point that Stossel and the free marketeers omit in their simple minded zeal. Nothing of high risk would ever be done by private enterprise, unless government was willing to do the initial work and pave the way. The railroads (with the generous land giveaway), the internet, the space program, you name it – would never be undertaken by private industry without government help.

    Perhaps the way Stossel et al. get around this glaring point, is that they want certain individuals in private industry to become so wealthy that they are indeed willing to undertake a risky project, without the accursed government’s help. They’re stupid enough to think this is a good thing.

    Righties have internalized this myth that they are entirely self-made, which is utter rubbish. I loved the way Elizabeth Warren demolished it.

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