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.)

“Would you ride a bullet train from San Francisco to Los Angeles?” asked Gulliver. “I would.” Though a Washington DC byline suggests that Gulliver would rarely have the opportunity to ride the train, he or she seemed to feel that American taxpayers should spend the $45 to $65 billion needed to build the line just in case that opportunity should arise.

Some doubts crept in last July. “America’s system of rail freight is the world’s best,” the magazine that calls itself a newspaper observed. “High-speed passenger trains could ruin it.” In December, Gulliver admitted that one of his or her “hang ups” was “America’s failure to build any meaningful high-speed rail,” and fretted that it now appeared that “not many” miles would be built in the coming decade. But the columnist blamed it on the “culture wars” rather than the sheer economic idiocy of spending hundreds of billions on a project guaranteed to lose money.

The story is different this year. China is “off the rails,” and its high-speed rail plans are “on the wrong track,” according to recent articles. (The most recent news from China, not yet reported by the Economist, is that the country may be scaling back its high-speed rail plans.)

While Gulliver may still want American taxpayers to pay billions for a few joy rides, the columnist who is taking a more realistic look at high-speed rail is called Babbage. Where Gulliver specializes in “business travel,” Babbage focuses on “science and technology” and actually lives in California. Given the name of the publication they work for, however, you would think both would be equally versed on the political economics of benefits, costs, pork barrel, and chest thumping.

Finally, you know your traindoggle is truly doomed when a normally apolitical comic strip like Shoe makes fun of it.

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19 thoughts on “Finally: The Truth About High-Speed Rail

  1. metrosucks

    It’s about time. Though I bet some of the usual suspects around here will be crying in their cornflakes Tuesday morning, before they head to their planning jobs.

  2. JJM PE

    Highwayman has a good point. Local roads and streets are financed almost entirely with property and sales taxes. State roads use a mix of user fees and general funds (sales and income taxes). Even the national highway trust fund has needed infusions of cash from the general fund in recent years.

    I think you’d be hard-pressed to find a mode of transportation that isn’t subsidized in some way.

  3. Andrew

    JimKarlock:

    Roads are not paid for by user fees unless you are paying a toll.

    I just drove to Pittsburgh and back on the PA Turnpike, blowing through 30 gallons of gas in the process. I paid about $12 or $13 in gas taxes, but no roads paid for by the gas tax were harmed by the passage of my vehicle. So that money went to subsidize someone else’s travels.

    Lucky them. Many, many other people drive on non-gas tax receiving roads every day, accounting for about 75% of total vehicle miles. Those gas taxes go to subsidize the heavy users of the Interstate and US highway systems, like drivers in LA and Texas and their magnificent “free”ways. They certainly are relatively free for them, if not quite so free for the rest of us.

  4. The Antiplanner Post author

    JJM PE,

    Actually, the construction of local roads and streets is usually paid for by developers, who turn them over to cities or counties who then pay for maintenance out of property or sales taxes. While some point out that we have always had streets and they benefit property owners so it is appropriate to pay for maintenance out of property taxes, I think a well-designed vehicle-mile fee should cover those costs.

    Gas taxes are an imperfect way of paying for roads, which is why we want to go to vehicle mile fees. But gas taxes did build and maintain the vast majority of our state highway systems, and subsidies until recently have been small. On a per passenger mile basis, subsidies to rail are many times greater than subsidies to highways. I don’t say this to defend the highway subsidies, only to point out that, if we get rid of all subsidies (as I think we should) it will have a bigger impact on Amtrak and urban rail transit plans than on highways.

  5. metrosucks

    Unfortunately, rail advocates use the small road subsidies as an excuse for the huge rail subsidies. Getting roads off subsidies completely would be a good way to protect gas tax monies from the thieving rail lobby.

  6. Andrew

    Randall:

    The Economist article is

    1) written by an anonymous “journalist” – leaving us at a loss to know the person’s motivations, ties, education, background, etc.

    2) Contains numerous factual errors (“the first section of California’s high-speed railway, estimated to cost $5.5 billion, will run 65 miles between the tiny towns of Bordon and Corcoran in the midst of the Central Valley’s farmland” – actually, its to run 150 miles and will cost less than that number; “Amtrak, the government-owned passenger railway” – actually, its owned by three freight railroads and Carl Lindner)

    3) Is filled with outright distortions (“there are simply not enough people packed into the 50-mile wide coastal strip that wends its way 350 miles from Los Angeles to San Francisco” – the line is running through the Central Valley past several cities, not up the sparsely populated Pacific Coast; “All the other Shinkansen routes in Japan lose cart-loads of cash, as high-speed trains do elsewhere in the world.” – why the fear of quantifying these losses with a number?)

    4) And of course the usual unintended irony (“The irony is that California has the highest rate of car-ownership in the country, if not the world.” – how else is one to get around in California? Its nearly impossible to live there without a car outside a couple of small areas in LA and San Francisco due to the near total lack of travel options.; “The biggest such change is to transfer day-to-day operations from the High-Speed Rail Authority (HSRA), set up to oversee the project, to the California Department of Transportation. Caltrans, which designs and manages the state’s major roadworks, is widely respected around the world for its engineering prowess and professionalism.” – Caltrans only bids out 10% of design work, so the pressure to transfer the project to Caltrans is a blatant attempt at shoving work towards government union employees that would be done privately by CHRSA – Caltrans has no history at all of HSR work, while many of the private firms involved have been involved in the design and construction of systems around the world.)

  7. Sandy Teal

    There is so much debate on this website about the gas tax not being a perfect user fee. I think it is a very good user fee because of the very low transaction costs, and the incentives are pretty good, even if the incentives are far from perfect.

    Those vaunted user fees for parks and natural areas do target the users, but the transaction fees are atrocious. Agencies will freely acknowledge the transaction fees are 25% of the revenue, but you can easily argue they are often closer to 50% of the revenue. Interestingly, the excise taxes on hunting and fishing items to support conservation are also weakly targeted, but not controversial for many decades.

    It is academically interesting to see the reaction to hybrid and electric cars, and their relative advantages under the gas user fee tax. How much will people be willing to pay in loss of privacy in order to charge cars by the mile instead of by the gallon?

  8. metrosucks

    Andrew, I can’t possibly imagine why you would believe that a Central Valley line would be heavily used. Have you ever driven through the Central Valley? I have, several times. Except for maybe two major population centers, it consists of small towns and a large number of industrial food operations. No one who lives in the Valley is going to be using high speed rail, and I fail to see the utility of spending many billions so a select few can ride from Sacramento to Fresno or Bay Area to LA.

  9. Sandy Teal

    As I understand the issue, there is a debate about whether or not it is valuable to build an expensive high speed rail system in California. Some say it is, some say it is not, depending on lots of variables.

    So should the first step be to build the cheapest and least valuable stretch of the system, or should it be to build a high cost and high value stretch of the system?

    Obviously the low value stretch will not pay for itself, nor will its ridership be any indication of the value of the whole system. So the resulting data will mean nothing. It might help politically as having sunk costs, but it doesn’t provide any useful data.

    On the other hand, one stretch of a valuable transportation system isn’t immediately profitable either. A bridge to undeveloped land is not valuable until the land is developed, then it is a bargain that makes huge wealth gain possible.

    I think that is the real debate. Is this a first step in a SF to LA high speed rail a transportation option that creates huge new value, or is it just the cheapest step in a system that adds very little value? If planners can’t find data to decide, then why not fund an experiment that gives evidence of the answer?

  10. Craigh

    So should the first step be to build the cheapest and least valuable stretch of the system, or should it be to build a high cost and high value stretch of the system?

    You’ve posed the question inaccurately. It should read, “Where is the easiest place to start building this loser? Where will the environmentalists be least concentrated; where are the landowners most desperate to sell; and where are there the fewest number of local TV stations to rake muck?”

    See! It all comes clear when you can formulate the question properly.

  11. Dan

    Actually, the construction of local roads and streets is usually paid for by developers

    Yes, this is exactly how we did it here.

    The “paid for” being a bond securitized by public debt and paid for by property assessment. Very common. Getting a loan for $30M for infra on top of the loans for land and improvements is a big deal. The bonded roads’ maintenance is out of public General Funds by the city.

    Several Special Districts in the vicinity have the little issue of not being able to make their bond payments so the City(ies) will be required to step in and take over roads and infra if this happens. This has happened several times in a city not too far to the south, sadly this wasn’t in the finance forecasts and has impacted Capital Funds and debt issuance ever since. I (and the US Olympic Team) used to enjoy riding the mountain bike on some old roads crumbling away because the land can’t be developed and the infra just sits there as a sunk cost. That’s how we do it around here. Not surprisingly, not everyone likes this model so it is nowhere near a universal practice.

    But I agree that auto-dependence requires roads. And I don’t have a problem that maintenance comes out of property taxes into the general fund, even if I never drive/ride on most local access roads – since we are cutting bus service to schools, we need even more auto-dependence to get the little ones to school.

    DS

  12. Andrew

    Sandy Teal and Metrosucks:

    The Central Valley portion of the line is not a low-value section. It is actually a very high value section, as it is the only part that can be built immediately, used immediately for long distance intercity rail service in lieu of the construction of the entire system at once, be easily engineered to the highest standards without expensive major heavy civil work like bridges and earthwork and tunnels, and it serves the fastest growing portion of the state. The suggestion of blowing it on the San Francisco to San Jose portion or the LA to Anaheim portions is silly. If needed, those parts of the line can be built much later and the existing tracks simply upgraded and electrified as is. The really key portion to providing high speed rail right now is San Jose to Santa Clarita – the Central Valley and the two mountain passes. In fact, it would probably be preferrable to build that part of the line, plus the lines to San Diego and Sacramento to attacking either of the urban segments in LA or San Francisco.

    The “nobody” living in the Central Valley who will “never” use the train is 2.6 million people between Madera and Bakersfield who generate 1.1 million annual boardings and alightings on 12 Amtrak trains a day that do not even go to Los Angeles or San Francisco or San Jose, and only get to Oakland in a very round about way. That is already a better ridership:population ratio than the Northeast Corridor, and it is before high speed rail and before the line actually gets anywhere.

  13. metrosucks

    Andrew, stop trying to make excuses for this boondoggle! No matter how anyone paints it, building this would be a major mistake that the entire country would subsequently subsidize.

  14. the highwayman

    The Autoplanner; JJM PE,

    Actually, the construction of local roads and streets is usually paid for by developers, who turn them over to cities or counties who then pay for maintenance out of property taxes. While some point out that we have always had streets and they benefit property owners so it is appropriate to pay for maintenance out of property taxes.

    THWM: Then you’re using a false premise, roads are there by default.

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