Pork-Barreling Is Charged in War Funds Bill

The Senate, brushing back charges of pork-barreling, on Thursday slipped $50 million for a controversial and allegedly wasteful home-state shipbuilding program into emergency legislation to finance homeland security and the war on Iraq.

The vote to pay for a program guaranteeing bank loans for commercial shipbuilders came only days after the Transportation Department reported that the program has squandered nearly $500 million through poor management. Sen. John McCain (R-Ariz.), a longtime critic of the program, attempted to delete the $50 million and a variety of other miscellaneous provisions from an emergency spending bill raising about $80 billion, mostly to cover war costs.

His amendment was defeated, 60 to 39, with California’s two Democratic senators, Barbara Boxer and Dianne Feinstein, voting against it.

“To continue funding this program until it is fundamentally reformed ... is a criminal waste of American tax dollars,” McCain said Wednesday night as he introduced the amendment to strip the program from the bill. It “does not serve any defense or homeland security purpose, and it should not receive funding under the guise of a wartime need.”

Authorship of the provision was not clear. The Bush administration did not request the money for the war effort. But the funds were included in the version of the bill that the Appropriations Committee presented to the Senate.

After beating back McCain’s effort to delete the provision, the Senate went on to pass the overall bill, 93 to 0. The House’s version of the war-spending bill, approved Thursday night 414 to 12, provides no funds for shipbuilding. So before the Senate provision can become law, it must survive a committee of House and Senate members appointed to write a compromise version of the bill.

Sen. Thad Cochran (R-Miss.), whose state includes one of America’s biggest shipyards, sits on the Appropriations Committee. He and fellow Mississippi Republican Trent Lott argued passionately against McCain’s amendment.

‘Critical Need’ Cited

“There is a critical need for auxiliary maritime sealift capacity during time of war,” Cochran said.

Lott argued that the program was needed “to meet our national objectives, our energy self-sufficiency, increase domestic commerce, strengthen shipbuilding, our industrial base, and a large commercial fleet of militarily useful ships ... in our war on terrorism.”

In fact, just one of the 51 commercial ships the Defense Department is using to support the war in Iraq was built under the loan-guarantee program -- a fact Lott used to underline the need for the $50 million.

“More and more and more we are dependent on foreign ships,” he said. “How many countries in the history of the world have survived very long without their own merchant fleet?”

Just days before the Senate authorized the $50 million, the Transportation Department’s inspector general sharply criticized the shipbuilding program. In a published report following a yearlong investigation of the loan-guarantee program, the inspector general called it poorly managed and wasteful -- to the tune of $490 million since 1998.

The program, known as Title XI, allows the Maritime Administration to guarantee bank loans for private companies that build commercial ships at American shipyards, an industry that has been declining rapidly since the end of the Cold War. It costs taxpayers money only when companies default on the loans, as has happened more frequently in recent years.

Cost to Taxpayers

Among the program’s most costly disasters was a $1.1-billion project to build two cruise ships in Mississippi that were to serve the Hawaiian vacation market. This project cost taxpayers $330 million last year. It was pushed through by Lott, the Mississippi Republican, and Sen. Daniel K. Inouye (D-Hawaii), who sits on the Appropriations Committee.

American Classic Voyages won the loan guarantees to build what would have been the largest cruise ships assembled in the U.S. The company went bankrupt in October 2001, leaving hundreds of millions of dollars in debts.

Taxpayers picked up almost all of them. Before its bankruptcy, American Classic received $185 million and produced one half-built ship and material for a second. These were sold for $2 million last summer to Norwegian Cruise Line, which plans to complete their construction on foreign shores.

Dubbed Project America, the cruise ship project was the biggest -- and most controversial -- ever attempted under the program. When American Classic went bust, the Maritime Administration had to borrow money to pay back the loans from the U.S. Treasury.

Three other big loans had been handed out to subsidiaries of Enron Corp. Those defaulted loans cost taxpayers more than $120 million when the Houston energy giant went bankrupt.

In its investigation, the Transportation Department’s inspector general found that the Maritime Administration failed to get sufficient collateral for its loans and failed to adequately track the finances of the borrowers after they had been lent the money. It also said the agency routinely modified its own rules to qualify companies for the loans -- a finding that the Maritime Administration admitted.

“In a number of instances where defaults have occurred, it has been due to political pressure brought upon [the Maritime Administration] to overlook underwriting requirements,” Maritime Administrator Capt. William G. Schubert stated in a formal response to the investigation.

Keith Ashdown, vice president of the Washington-based Taxpayers for Common Sense, was outraged that the Senate had tucked “goodies for the special interests” into a bill to pay for the war on Iraq and homeland security. “Lawmakers who turn this must-pass bill into a gravy train should be ashamed of themselves,” he said.