Rick Santorum says, “I didn’t vote for a steel bailout.” But in fact, the former Pennsylvania senator voted in 1999 for the Emergency Steel Loan Guarantee Program, which was dubbed a “bailout” by multiple news organizations at the time.
The loan guarantee program Santorum supported was much smaller than the auto bailouts he has regularly criticized on the campaign trail. Only three steelmakers ever tapped the program, and all money has been repaid. But it did underwrite more than $400 million in loans, and put taxpayers at risk.
Whoa, Says Santorum
Mitt Romney first raised the claim that “you also voted for a bailout of the steel industry” during the Feb. 22 Republican debate in Arizona. Santorum did not directly respond at the time. But on Feb. 26, the issue was raised again on “Meet the Press.” NBC’s David Gregory said Santorum voted “for a steel bailout even though you say you’re principally opposed to voting for bailouts.” And this time Santorum denied it.
Santorum, Feb. 26: Whoa, whoa, I didn’t vote for a steel bailout.
Gregory: You didn’t support that?
Santorum: What I voted for was to enforce the law, to enforce the tariffs when China was illegally dumping steel in this country. That’s not a steel bailout. There are laws in place in this country that protect domestic manufacturers from illegal dumping into this country. They went through the process, they did the evaluation. The evaluation was that China was breaking the law and I supported imposing tariffs. There was a process here. That wasn’t a bailout.
Santorum was referring to his support for tariffs of up to 30 percent, which President George W. Bush placed on steel imports in March 2002. According to a New York Times report at the time, Bush said the tariffs were aimed at buying time for American steel producers to consolidate operations and stem layoffs.
Santorum was a strong supporter. In 1999, he voted in support of a bill to impose quotas and tariff surcharges on steel imports, but the bill failed on a cloture vote. And he continued to push for them publicly. In a story about the issue on Dec. 11, 2001, the New York Times included this, from Santorum:
New York Times, Dec. 11, 2001: “This is an industry that has significant national security implications,” said Senator Rick Santorum, Republican of Pennsylvania. “It’s important from the whole basic concept of maintaining manufacturing in this country. It’s important to have a vibrant domestic source of steel.”
Allowing the industry to be liquidated, Mr. Santorum said, “would put this country on a path to overdependence, similar to oil, on foreign sources.”
Whether it’s fair to characterize those quotas and tariffs as bailouts is a matter of opinion. Many economists argued they were not justified, University of Pittsburgh Economics Professor Frank Giarratani told us.
While the steel industry argued it was being unfairly hurt by a wave of steel imports, the New York Times story cited above notes that some industry analysts and competitors of the big steel companies “said the industry was simply looking for corporate welfare.”
Emergency Loan Guarantees
Three years before the import tariffs, though, Santorum cast a Senate vote in favor of H.R. 1664, the Emergency Steel Loan Guarantee and Emergency Oil and Gas Guaranteed Loan Act of 1999. That bill — as the name implies — sought “to provide loan guarantees to qualified steel companies.” The legislation gave a Loan Guarantee Board the authority to guarantee up to $1 billion in loans. The bill passed the Senate by a 63-34 vote. All but one of the votes against the bill were from Republicans, though 20 other Republicans joined Santorum in voting for it.
According to the Romney campaign website, that’s the vote that prompted Romney’s comment about Santorum supporting a steel bailout.
At the time of the 1999 vote, the steel industry was in a “deep financial crisis,” said Giarratani, a nationally renowned expert on the economics of the steel industry. Sixty percent of the steel industry was in bankruptcy. Due to a financial crash in Asia, Asian companies were encouraging the export of products to keep people working. That was the practice Santorum and others referred to as “dumping.”
“At that time, not a lot of banks were willing to loan [American steel companies] money,” Giarratani said.
To be sure, the auto bailout that Santorum opposed was, at $80 billion, many times larger than the steel bailout Santorum supported. It also involved outright government ownership of stock in two auto companies.
According to the Commerce Department, the total of the loans funded under the Emergency Steel Loan Guarantee program was $402 million, to three companies.
Congressional Quarterly reported in November 2009 that no steelmaker had tapped the program since 2003. According to CQ, the program received 13 applications in 2000, and the board approved seven guarantees. But in a report to Congress, the loan board stated that “due to continued worsening of the domestic steel market in 2000, all except one of the approved loan guarantee applications were abandoned by the proposed lenders.” As for the three loans it did guarantee, one of the recipients went bankrupt and left taxpayers on the hook for $92 million, for a time. But the federal government was repaid in full, with interest, in bankruptcy liquidation. The other two loan guarantees ended either with repayment of the debt or refinancing of the debt without further federal involvement. So taxpayers are not out any money. As of Dec. 31, 2011, the board no longer has the authority to guarantee any further loans.
— Robert Farley