The Federal Railroad Administration handed a rare victory to the American taxpayer last week by denying a questionable $2.33 billion loan application by the Dakota, Minnesota and Eastern (DM&E) Railroad. What makes this news of special interest is the paramount role Republican Sen. John Thune of South Dakota played in boosting the loan. Here is a cautionary tale of political life in Washington and how it corrupts.
Legislative changes that made the loan possible were guided through Congress behind closed doors by Thune. But the assessment that DM&E is a poor credit risk was shared by Thune’s fellow conservative senators — Tom Coburn of Oklahoma and Jim DeMint of South Carolina — who took the extraordinary step of advocating rejection of a colleague’s pet project. Making matters worse, Thune is a former paid lobbyist for the South Dakota-based railroad and has received political contributions from the company’s executives.
Thune entered the Senate in 2005 as one of the GOP’s rising stars with a limitless future after defeating Senate Democratic Leader Tom Daschle for re-election. He declared himself eager to fight against spending under a Republican-controlled government. But instead of aligning himself with his party’s reformers, Thune has been energized in promoting pork for South Dakota. After the embarrassment of the DM&E loan rejection, a Senate Republican source (who declined to be identified) said: "One can hope this episode helps Thune recover his revolutionary zeal."
DM&E applied for the loan guarantee, under the Railroad Rehabilitation and Improvement Financing (RRIF) program, to build a railway to haul coal, ethanol and other agricultural products in the Powder River Basin stretching across South Dakota, Minnesota and Wyoming. This area is already served by two railway giants, Union Pacific and Burlington Northern Santa Fe.
The fact that RRIF still exists is testimony to Thune’s energy and skill. The program was zeroed out of President Bush’s 2005 and 2006 budgets, but was saved and revised behind closed doors under Thune’s leadership as part of the 2005 transportation appropriations bill (that contained the infamous "bridge to nowhere"). Indeed, Thune took credit for it, traveling the state of South Dakota in November of 2005 to spread the good news. Whether this qualifies as an earmark is a matter of opinion.
Earmark or not, Coburn and DeMint contend the loan is about policy. Normally, when a senator dislikes a colleague’s protected project, he follows the chamber’s politesse and swallows his objections. Not Coburn and DeMint, who since their election in 2004 have waged war on pork.
On Jan. 23, without telling Thune, they wrote Secretary of Transportation Mary Peters: "Because the applicant could not secure private funding, we are concerned that a loan of this size unnecessarily puts taxpayers at risk." Republican Rep. Jeff Flake of Arizona, the leading House opponent of earmarks, has opposed the loan for the same reasons, as have the conservative National Taxpayers Union and Citizens Against Government Waste.
On Feb. 26, Federal Railroad Administrator Joseph H. Boardman indicated he agreed. He denied the loan application because there was "too high a risk concerning the railroad’s ability to repay the loan."
None of these critics mentions Thune’s connections with DM&E. Since 2001, the railroad’s executives have contributed $21,750 to Thune (all but $2,000 prior to his election in 2004). In 2003 and 2004, when Thune was a private citizen between service in the House and Senate, he received $220,000 as lobbyist for DM&E. (Thune says he never worked on the loan application as a lobbyist.)
If he had it to do over again, I asked the senator last week, would he still advocate the loan project? He replied: "I don’t know what else I could do. I was strong for my state. It was a no-brainer."
The DM&E loan cannot prove a cautionary tale for John Thune unless he knows he went in the wrong direction and admits it, at least to himself. If he has not personally come to terms with this, he is not alone. Well-meaning conservatives like Thune get caught up in procuring the benefits of the federal leviathan for their state and their constituents. It is much of what ails the Republicans today.
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