Monday, January 31, 2011

From Wendell Cox: High-Speed Rail; Budget Buster

High-speed rail promoters hate him.  For good reason.  Wendell Cox brings clarity and rationality to a situation about which most of us learn only from the press release rhetoric of the HSR advocates.  What Cox does, in a rigorous and almost academic way, is to say that the emperor isn't wearing any clothes.  

What emperor wants to hear that?  And, you'll have to admit there's something very imperial about the imposition of the high-speed rail on the backs of all Californians, even those who thought they wanted it in 2008.

Cox's point is that if HSR funding is not included in Washington's deficit reduction plans, we can be assured that there really are no genuine intentions to reduce the deficit.  Please note, in the budget cutting furor in Sacramento at the hand of the new Governor, Jerry Brown, what is being slashed and what appears to be immune to budget cutting? Higher Education, for example, is getting a huge hit.  Is that a problem?

Higher education produces the seed corn for the State's economy; that is, educated individuals who will contribute the advanced skills necessary to restore the innovation and manufacturing productivity of the next generation of everything, sort of like the computer revolution.

Which do you think will contribute more to California's economic future, a high-speed luxury train, or a highly educated work-force?  You know, of course, that unemployment impacts the least educated the hardest.  Those with four years or more of college experience only a 5% unemployment rate rather than the 15% unemployment of those with only a high-school degree.  So, you might ask, do we have to make a choice here?  The answer is, a choice is being made, whether we like it or not, and it's the wrong choice.

Jerry Brown is also cutting support for all those social benefits that define this state as a civilized, caring society.  He's belt tightening.  But, you should ask whose belt is being tightened, and whose isn't?  Who in the government's agencies is going to be laid off, and who isn't?  Is the rail authority being asked to downsize, as so many other state government agencies are?

In short, Brown is not -- not yet at least -- touching the high costs to the state that is the high-speed rail project.  As I've explained many times, it's not the bonds that pay for the work on the train, it's the California taxpayers who have to cover the interest and principal of those bonds.  He had said several times, everything is on the table.  He obviously doesn't mean it, since HSR has been one of his pet projects for decades.

Although the rail authority in California has already spent an amount approaching one billion dollars, the real cash flow hasn't started yet.  But, unless it's stopped, it will.    

Reminds me of an old joke.  Man comes home and says to his wife, "I saved $500. today." "How did you do that?" she asks.  He says, "You know the sign on the subway that says '$500. fine for spitting?'. . . . Well, I didn't spit."   My point?  We can save billions in this state and nation if we don't spit; that is, build this wasteful, unnecessary train.  


JANUARY 31, 2011 4:00 A.M.
High-Speed Rail, Budget Buster 

Virtually everywhere it has been constructed, taxpayers have lost out.

If the nation is going to reduce its out-of-control spending, the first step is to stop spending money on things we do not need. Despite President Obama’s call in his State of the Union speech for linking 80 percent of the nation by high-speed rail, it is hard to imagine a more unnecessary program.

For example, people who travel between Los Angeles and San Francisco — along the route planned for one of the nation’s first high-speed-rail projects — already have choices. They can fly, drive, take the bus, or travel by train. True, some would prefer to tax their fellow citizens so that they can have another choice, high-speed rail. But indulging this desire would be as legitimate as funding government grocery stores for people who prefer not to shop at their local grocery chains.

Among intercity transport modes, only Amtrak is materially subsidized. User fees pay virtually all the costs of airlines and airports, which (together with connecting ground transportation) link any two points in the nation within a day. The intercity highway system goes everywhere, and nearly all of it was built with user fees paid by drivers, truckers, and bus companies.

High-speed rail is a budget buster. Japan, with the world’s leading system, illustrates the financial devastation that high-speed rail can produce. For 25 years, Japan borrowed to build a system serving the ideal rail corridor, nestled along a single coast with a population of more than 75 million people. Ridership was artificially increased by high gasoline prices and one of the highest highway tolls in the world. Yet this modest system, only twice as long as proposed California system, played a major role in driving up a gargantuan rail debt that was transferred to Japanese taxpayers. The rail debt added more than 10 percent to the national debt. This is akin to adding $1.4 trillion to the U.S. national debt.

Virtually everywhere high-speed rail has been constructed, financial liability has fallen to the taxpayers. In Taiwan and the United Kingdom, taxpayers assumed billions of dollars in private debts for much more modest high-speed-rail systems than Japan’s.

All of this could have been avoided. Through the years, high-speed-rail cost overruns have been well documented. Most recently, research by Bent Flyvbjerg of Oxford University, Nils Bruzelius of Stockholm University, and Werner Rothengatter of the University of Karlsruhe (a former president of the influential World Conference on Transportation Research) found that passenger-rail cost overruns above 40 percent were common and that overruns above 80 percent were not uncommon. Overruns can go even higher: On Korea’s high-speed-rail project, they were between 200 and 300 percent, the president of the country’s rail system said.

High-speed-rail cost escalation has reached these shores. Even before the first shovel has been turned, California’s high-speed-rail costs have risen at least 50 percent, inflation adjusted. The cost estimates for the first approved section of the Los Angeles–to–San Francisco line, a “train to nowhere” from Corcoran to Borden, indicate escalation beyond $45 billion.

In Florida, boosters tell taxpayers that their liability for the Tampa to Orlando high-speed-rail line would be only $280 million, and that, somehow, a private bidder will shower additional billions upon them to pay any cost overruns.

Boosters also claim that high-speed rail will provide substantial environmental benefits, reduce highway-traffic congestion, and ease air-traffic congestion. Yet, as Joseph Vranich and I showed in the Reason Foundation’s “Due Diligence” report on California’s high-speed-rail proposal, the cost per ton of greenhouse gas removed would be from $1,900 to $10,000. This is 40 to 250 times what the International Panel on Climate Change research indicates greenhouse-gas removal should cost ($50 per ton). Our estimate does not account for the revised (much lower) ridership projection. Even the rosy reports produced by boosters show that high-speed rail would remove only a small percentage of cars from the roads. The hope of reducing air congestion is just as elusive because travel origins and destinations are so dispersed in the United States and because the number of people forsaking air travel for high-speed rail will be small.

Voters gave the new Republican House of Representatives a mandate to cut spending. Zeroing high-speed rail out of the federal budget may be the litmus test. If Congress fails to stop this costly and unnecessary program, it would call into question the commitment to spending reduction.
— Wendell Cox is principal of Demographia, an international public-policy consultancy in St. Louis.