Finally: The Truth About High-Speed Rail

“OF ALL the high-speed train services around the world, only one really makes economic sense,” The Economist observed last week, that one being the Tokyo-to-Osaka route. “All the other Shinkansen routes in Japan lose cart-loads of cash, as high-speed trains do elsewhere in the world. Only indirect subsidies, creative accounting, political patronage and national chest-thumping keep them rolling.”

What a difference a year makes. In February 2010, an Economist columnist pen-named Gulliver was gushing over “China’s dashing new trains.” “Scarcely a week goes by without another glowing report about racy Chinese trains,” the columnist reported in March.

In April, Gulliver praised Obama’s high-speed rail plan. “America’s failures in the HSR department are so glaring that they’re impossible to ignore,” the article noted, not considering that those “failures” might be because America was slightly less interested in “political patronage and national chest-thumping” than other nations. (Gulliver also often confused the “top speed” with the “average speed” of trains.)

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In Memory of Freedom

Today we are supposed to remember the people who sacrificed themselves for our freedom. We also need to remember freedom itself, including freedom of mobility, freedom to use your own property as you like so long as you don’t harm your neighbors, and freedom to dance in a memorial to Thomas Jefferson, himself a support of freedom of expression.

Unfortunately, our noble Park Service police have forgotten that last one. Many people love the Park Service because they love the lands and resources it manages. But sometimes it seems that the Park Service itself is run by a bunch of thugs who have nothing better to do than ruin other people’s reputations, attempt to steal other people’s land, or put them out of business.

This isn’t a specific problem with the Park Service; it is a general problem of giving government too much power. And that is what we should remember this Memorial Day.

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Senate Reauthorization Proposal

Bipartisan leaders of the Senate Environment and Public Works Committee have reached an agreement on a broad outline for surface transportation reauthorization. This agreement includes:

  • Fund programs at current levels to maintain and modernize our critical transportation infrastructure;
  • Eliminate earmarks;
  • Consolidate numerous programs to focus resources on key national goals and reduce duplicative and wasteful programs;
  • Consolidate numerous programs into a more focused freight program that will improve the movement of goods;
  • Create a new section called America Fast Forward, which strengthens the TIFIA program to stretch federal dollars further than they have been stretched before; and
  • Expedite project delivery without sacrificing the environment or the rights of people to be heard.

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Two Ways of Preventing the Crisis

One of the more common notions about the housing bubble is that it was caused by political pressures to increase homeownership. The Antiplanner’s view is that it would be more accurate to say that the bubble was caused by the conflict between policies aimed at increasing homeownership and policies aimed at reducing homeownership (or, at least, single-family home construction). It would be even more accurate to say that the policies aimed at reducing single-family home construction started the bubble, while some of the policies aimed at increasing homeownership made it worse.

As the Antiplanner noted in recent posts, a lot of factors contributed to the recent housing bubble and subsequent financial crisis. But only two factors were so crucial that, without them, the crisis would not have happened.

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California HSR Fading Fast

You know you are in trouble when a liberal bastion such as the Washington Post questions your big-government program. So last week’s editorial questioning the California High-Speed Rail Authority for being “bound and determined to start building the railroad before its long-term funding is clear” should be one more sign that the rail project is doomed.

The editorial cites a recent report from the California Legislative Analyst’s Office recommending that the state stop funding high-speed rail other than $7 million for “needed administrative tasks.” The report also urges the state to negotiate with the feds for more flexibility on where to spend the rail grants it has received. One of the federal grants required that funds be spent in the congressional districts of some Democrats who were fighting close re-election campaigns. As the Post says, this is likely to result in California spending “a fortune to plan and build a stretch of high-speed track that would end up as a railroad to nowhere.”

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Top Down or Bottom Up?

America’s transportation system needs more centralized, top-down planning. At least, that’s what the Brookings Institution’s Robert Puentes advocates in a 2,350-word article in yesterday’s Wall Street Journal.

If that seems like an unlikely message from America’s leading business daily, perhaps it is because Puentes couched it in terms such as “spending money wisely,” solving congestion, and “adhering to market forces.” But not-so-hidden behind these soothing phrases is Puentes’ real argument: “America needs to start directing traffic” by developing “a clear-cut vision for transportation.” Such a vision “must coordinate the efforts of the public and private sectors.”

“The big question,” Puentes says, “is how much it will all cost.” But this is a diversion from the real big question, which is: who will do this coordination? In Puentes view, the answer is smart people in Washington DC who can best determine where to make “critical new investments on a merit basis” using such tools as an infrastructure bank.

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Halting TIF’s Rapid Growth

Tax-increment financing (TIF) costs taxpayers around $10 billion per year and is growing as fast as 10 percent per year, according to a new report, “Crony Capitalism and Social Engineering,” published by the Cato Institute. Though originally created to help renew “blighted” neighborhoods, TIF today is used primarily as an economic development tool for areas that are often far from blighted.

The report argues that TIF does not actually generate economic development. At best, it moves development that would have taken place somewhere else in a community to the TIF district. That means it generates no net tax revenues, so the TIF district effectively takes taxes from schools and other tax entities. At worst, TIF actually slows economic development, both by putting a larger burden on taxpayers and by discouraging other developers from making investments unless they are also supported by TIF.

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When Is a Fee a Tax?

Years ago, Oregon voters approved a ballot measure that required a vote of the people before any local increase in taxes or user fees. As the Antiplanner supports user fees as a way of improving government efficiency, I asked one of the measure’s authors why he included user fees in the measure. “You know if they were exempted that local governments would just claim every tax increase was a user fee.”

It seems to me that user fees can clearly be distinguished from taxes: fees go to the use for which they are paid while taxes go for other uses. That question might be settled by a recent lawsuit filed against the Metropolitan Washington Airport Authority, which is Dulles Toll Road in order to raise money to build the Silver Line extension of the Washington Metrorail system.

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Are Auto Accidents a Disease?

Somebody thinks they are. The Centers for Disease Control just released a study saying that crash-related deaths cost $41 billion a year.

This smells to me like a government agency seeking more funding by jumping into an area outside of its core mission. The first thing to note about this study is that it is out of date. It is based on data from 2005, when 43,510 people were killed in motor vehicle accidents. By 2010, this had dropped 25 percent to just 32,788. That suggests that CDC’s estimate of the cost of crash-related deaths is also about 25 percent too high.

Make no mistake: every accident-related fatality is a tragedy. But motor-vehicle accidents appear to be a problem that is being solved, whether it is through safer highways, safer automobiles, reduced congestion, or some combination of the three. Can CDC name any diseases that is a part of its core mission that has seen a 25 percent drop in fatalities in the last five years? If not, it had better get to work on those diseases and leave motor vehicle accidents to the real experts.

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Market Asymmetry

Along with Michael Lewis’ The Big Short, Gregory Zuckerman’s The Greatest Trade Ever shows that at least some investors were aware that the housing bubble of the mid-2000s was likely to collapse, with severe repercussions on the economy. The book (whose alternate subtitle is “How One Man Bet Against the Markets and Made $20 Billion”) focuses on John Paulson, whose Paulson & Company was considered a minor player until he shorted so many mortgage bonds that he made the company $14 billion (plus $4 billion for himself).

Believers in the “efficient market hypothesis” argue that there will always be investors willing to bet on both sides of any market. The resulting prices, they say, represent the most accurate possible evaluations of the true value of any investment. One problem with this hypothesis, Zuckerman shows, is that some investments are asymmetrical, which leads to a bias in the markets.

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