Monday, April 23, 2012

High-Speed Rail: The fault lies not in our stars, but in ourselves

This is going to be a very political discussion about high-speed rail -- why we have it, and why we shouldn't.  It was triggered by an article by Ryan Lizza, "The Obama Memos" in the January 30, 2012 edition of The New Yorker. 

To begin with, a full disclosure:  I'm a lifelong Democrat and I'm going to vote for Obama this November.  Having said that, I want to explain as best I can how the federal high-speed rail program became a reality and what's wrong with it.  

And if what I say here provides ammunition for the Republican opposition to this Administration, and therefore to this project and its Democratic supporters, so be it.

To begin with, the Obama Administration inherited a national economic crisis with which the Bush Administration had started to wrestle. Even in November of 2008, prior to the upcoming election, Obama attended economic meetings (as did Candidate John McCain) held by President Bush for extensive briefings on the emerging economic crisis. Sect. of the Treasury Paulson wrote a two page memo asking for $700 billion in stimulus funds to bail out the banks and Wall Street. 

After winning the Presidency, President-elect Obama attended a meeting in Chicago to discuss plans offered by Larry Summers, who was appointed head of Obama's National Economic Council.  Obama accepted Summers' recommendation of a middle ground stimulus package ranging between $550 billion to $890 billion. 

Here's the first quotation from the article whereby I received this painful lesson in politics:

"At a meeting in Chicago on December 16th to discuss the memo, Obama did not push for a stimulus larger than what Summers recommended. Instead, he pressed his advisers to include an inspiring "moon shot" initiative, such as building a national "smart grid"  -- a high-voltage transmission system sometimes known as the "electric superhighway," which would make America's power supply much more efficient and reliable.  

Obama, still thinking that he could be a director of change [rather than the manager of change that he became], was looking for something bold and iconic -- his version of the Hoover Dam -- but Romer and others finally had a "frank" conversation with him, explaining that big initiatives for the stimulus were not feasible.  They would cost too much, and not do enough good in the short term.  The most effective ideas were less sexy, such as sending hundreds of millions of dollars to the dozens of states that were struggling with budget crises of their own."

In short, Obama aspired to constrain his bailout amount request, keeping moderation between both Parties in mind.  But he also persistently sought a highly visible "moon-shot" project, an iconic thrust creating the symbolic appearance of moving the country forward, and pointing toward economic recovery and national optimism about the future.  At first, his idea was the "Smart Grid," unifying all of American power distribution within a single, computer-efficient management system that optimized the distribution of electricity.

The advice he received indicated that such bold initiatives would not perform as expected, being both hugely expensive and taking at least a decade to obtain any results. He was told it would make him look like a "liberal wastrel" to the Republicans. 

"At the same time, Obama hadn't abandoned his dream of a moon-shot project. He had replaced the smart grid with a request for $20 billion in funding for high-speed trains." 

 Obama's financial advisors indicated that this too was highly risky. About this HSR idea, their memo to the President stated: "Critics may argue that such a proposal is not appropriate for a recovery bill because the funding we are proposing is likely to be spent over 10+ years."

As we now know, Obama ignored this warning and a lot of other advice.  He failed to pay attention to the infeasibility of specific huge stimulus projects. He was told, and paid no attention to the fact that, "They would cost too much, and not do enough good in the short term.  The most effective ideas were less sexy, such as sending hundreds of millions of dollars to the dozens of states that were struggling with budget crises of their own." 

If the President had only listened, there would be no need for this blog. And there would be no need for what is becoming the biggest albatross ever to hang around this President's neck.

As I recall, the way this process unfolded was that although the ARRA legislation did not contain any reference to HSR funding, it was the White House Chief of Staff, Rahm Emanuel, at the last minute managed to inject an additional $8 billion into the ARRA legislation dedicated to high-speed rail, probably at the President's behest. This was a 'quick and dirty' action without lengthy analysis or debate.

I have often wondered why Emanuel would do this. One plausible explanation is that he already had political ambitions beyond the White House and intended to run for mayor of Chicago, which he did, successfully.  These funds would become political pork for Illinois, the home state of the President and Mr. Emanuel, as well as Secretary Ray LaHood, Joseph Szabo and the highly influential other Senator from Illinois, Dick Durbin. Except for Mr. LaHood, all these electeds are Democrats. 

And, outside of California, as we know, Illinois has been the fortunate recipient of many billions of those high-speed rail stimulus dollars, being earmarked to upgrade existing Amtrak passenger service throughout the Midwest, with Chicago as the hub of this vast spoke-like network. It's not actually high-speed rail, but they are calling it that to qualify for those dollars. 

Reminder: except for the Acela in the Northeast corridor, Amtrak is a major money loser and subsidized cost burden on all Americans, train riders or not.  And, as has been repeatedly pointed out, the transit demands and problems are not between cities, but within major population centers and urban regions with high-density populations. 

A train ticket on Amtrak from New Orleans to Los Angeles costs taxpayers over $400. in subsidies for each seat.  Riding the trains is an expensive proposition;  somebody has to pay not only for development, but operations. Ticket prices pay only a small fraction of those costs. High-Speed Rail is, by far, the most expensive train ticket on the planet (except for the five star privately owned Orient Express, a luxury vacation trip for the 'rich and famous.')

What's the bottom line here? The $3.5 billion ARRA stimulus funds which were awarded to California have yet to be spent to start stimulating. It's now been over three years. 

Furthermore, digging into the facts and analysis demonstrates that all those jobs that were promised for the construction and operation of this train will not materialize when construction actually takes place. The rail authority, in its desperation for those dollars, seeks to dazzle us with man-years rather than real job numbers, intentionally confusing one with the other. The "jobs" story is as big a lie as all the others.

In short, this HSR "moon-shot" project was a major strategic and political mistake of the Obama Administration, and they are now stuck with it.  Therefore, Secretary LaHood has the unenviable obligation to promote this iconic project as the salvation of America and its future, regardless of now nonsensical that may be.  Obviously, admitting to mistakes on this order of magnitude is almost impossible for this Administration and its supporting Party.

And, given that cash-strapped California is in as deep a financial hole as it has ever been, there is no way in hell that this state Democratic Administration and Democrat-dominated Legislature will relinquish those those billions of 'free' dollars, regardless of the horrific consequences downstream.  We, the taxpayers of California, are to become the victims of a domino-effect of decisions, each one making things worse. 

So, even as I reluctantIy cast my vote for Obama this fall, I will certainly not vote for any Democrats on the state ballot. None.

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