The CEO and board chair of the California High Speed Rail Authority have resigned in disgrace over erroneous cost projections. A peer-review commission created by the California legislature says the authority’s high-speed rail plan is “not financially feasible.” Surveys show a majority of Democrats, Independents, and Republicans in the state all oppose construction.

Yet the authority’s scheme to build a new rail line capable of moving trains from Los Angeles to San Francisco in two hours and 40 minutes won’t die unless the state legislature kills it. Officially, the authority plans to begin construction by September 2012, despite the fact that it has less than 10 percent of the money it needs to complete the project.

The tide definitely turned against the plan when the authority published a new business plan admitting that estimated inflation-adjusted construction costs had more than doubled from $43 billion to $98.5 billion. Moreover, under the new plan the promised 220-mph trains would not roll until 2033, more than a decade later than voters were promised in 2008.

The authority’s credibility was further reduced when it admitted that the million jobs it promised were really job-years, and that no more than 60,000 jobs would be created at any given time (and even that was probably an exaggeration). These revelations cost the project the editorial support of a number of major papers that had previously endorsed the project.

The 2008 ballot measure that voters narrowly approved authorized the sale of $9 billion in bonds that would eventually have to be repaid by state taxpayers. But those bonds could only be sold if they were matched by funds from federal or other sources. The Obama administration has given the state about $3.5 billion (giving the authority a total of $7 billion) on the condition that construction begin by September 30 and that the first segment constructed be in the Central Valley. The latter condition was made just before the 2010 election in a blatant effort to assist the election campaign of Representative Jim Costa (D-CA) of Fresno (who subsequently won re-election by a mere 3,000 votes).

Journalists are now questioning every aspect of the project. The latest story is that “doubts [are being] cast on cost estimates” for the alternative to high-speed rail, which is better highways and airports. I pointed this out back in 2008 in a Cato report showing that the highway-airport alternative did far more to reduce congestion than the high-speed rail line, suggesting that a highway-airport alternative that accomplished the same congestion reduction as the rail line would have cost much less.

What raises doubts now is the way the cost of the alternative has crept up. When the authority was insisting that the rail line could be built for $43 billion, its highway-airport alternative was estimated to cost $100 billion. When the rail cost jumped to nearly $100 billion, the highway-airport cost mysteriously increased to $171 billion. “There is some dishonesty in the methodology,” says a University of California, Berkeley transportation engineer. “I don’t trust an estimate like this.”

California Republicans have introduced a bill in the state legislature to prevent any bond sales that would fund the initial construction out of Fresno. Some Democratic legislators question the project, but it retains the endorsement of Governor Jerry Brown, and since Democrats have majorities of both houses of the legislature, anything could happen.

If the legislature doesn’t kill the project, the authority will spend the money it has available to build track capable of moving trains at 220 mph from somewhere south of Fresno to somewhere north of Fresno (though probably not all the way from Bakersfield to Merced). A handful of daily Amtrak trains might use those tracks, probably at no more than 110 mph, to save their passengers a few minutes on their trips from Bakersfield to Sacramento. The authority will be betting that someone will come up with the other $92 billion, but at the present time neither the federal government nor the state government has the cash.

All this has made rail advocates increasingly desperate. While supporters hysterically talk about California’s population growing to 50 million people, the truth is that, by the time the state could ever finish a high-speed rail line, the technology will have been completely superseded by such things as driverless cars and improved air service. Although the failure of the California scheme will end Obama’s dream of a national high-speed rail system, California needs high-speed rail like it needs a $100 billion hole in its budget.

Is California High-Speed Rail Dead? is a post from Cato @ Liberty - Cato Institute Blog

Half truths, innuendo, and pseudo-science form the basis of a response to my recent Cato paper, Intercity Buses: The Forgotten Mode. The response is produced by America 2050, a project of the Regional Plan Association, a New York City–area regional planning organization. The response’s basic thesis of the response is that intercity buses have a role to play in a “balanced transportation system,” but they are “no replacement for high-speed rail.”

Of course, my report never argued that buses were a replacement for true high-speed rail. But it did show that existing bus schedules in many corridors are faster, more frequent, and charge far lower fares than Amtrak in the same corridors. Of course, there is a “replacement” for high-speed rail: it is called “air travel” and it is far faster and costs about a fifth as much per passenger mile as Amtrak’s Acela.

In any case, America 2050 says my report ignored “one of the most powerful arguments for rail: providing an alternative to highway congestion.” I didn’t address that argument in the paper on buses because, as I’ve shown in other papers, it’s a bad argument. Highways move about 85 percent of all passenger travel and more than a quarter of all ton-miles of freight in this country. If they are congested, maybe we should relieve that congestion rather than spending hundreds of billions of dollars on an elitist rail network that won’t relieve congestion and won’t carry more than a tiny fraction of the number of people (and none of the freight) moved on the highways.

But we can’t fix highway congestion, says America 2050: “providing additional road space does not solve congestion; in fact it creates additional demand for driving.” That’s another bad argument, for four reasons. First, my bus paper never advocated building new roads, and if asked, I would have suggested relieving congestion using congestion pricing of roads before building new capacity.

Second, the idea that building roads creates demand is totally absurd. As my friend, Wendell Cox, says, it is akin to saying that building maternity wards leads people to have more babies.

Third, those who argue that we shouldn’t build roads because people will drive on them are effectively arguing that government shouldn’t provide anything that people will use; only what they won’t use (such as high-speed trains). If that’s the case, government should just get out of the transportation business entirely and leave it to the private sector.

Finally, most congestion is in cities, not between them, so building rail lines between cities isn’t going to help much. Of course, planners don’t want to relieve congestion anywhere because they hope congestion will persuade a few people to stop driving.

America 2050 goes on to say that “one railway with a single track in each direction has the capacity to transport as many people per hour as sixteen lanes of highway.” While I could dispute that number, even if true, capacity doesn’t matter unless people actually use that capacity. Amtrak has 6 percent of the passenger market between Boston and Washington; highways, mainly Interstate 95, have 80 percent. Interstate 95 and parallel roads probably have less than 16 lanes, yet they carry 13 times as many passenger miles.

“High-speed trains allow passengers to bypass this congestion,” America 2050 goes on to say, “bringing passengers directly into center cities.” Yes, but who wants to go directly into center cities? Less than 8 percent of American jobs and less than 1 percent of America’s population lives in city centers (which is why I call high-speed rail “elitist”). In many, if not most, urban areas, more people and more jobs are located near airports than near train stations, and virtually everyone is near a highway.

America 2050 then challenges some of my numbers that it says are “flatly incorrect.” “To count passenger miles,” says the article, “O’Toole uses the American Bus Association’s 2005 Motorcoach Census, which counts passenger-miles logged by intracity airport shuttles, sightseeing tours, and private commuter buses, amongst other categories that are not making cross country or intercity trips.” America 2050 clearly did not read my paper carefully: first, I used the 2007 Motorcoach Census, but, more important, I counted only those passenger miles (about a quarter of the total) attributable to scheduled intercity buses.

When comparing bus to rail safey, “O’Toole counts passenger miles only for Amtrak trains, while counting fatalities for all passenger trains, including commuter rail,” says America 2050. Again, America 2050 did not read carefully. National Transportation Statistics reports that commuter trains suffered about 20 to 60 fatalities per year over the past two decades; the fatalities I reported ranged from 3 to 24 per year (except in 1993 when there were 58), which obviously does not include the commuter rail fatalities. That 1993 number may have skewed my data upwards; but rail fatalities are nevertheless higher than bus fatalities per billion passenger miles.

America 2050 then goes into the topic of subsidies, noting there are large subsidies to highways. “Recently, the Highway Trust Fund has received bailouts of $8 billion in 2008, $7 billion in 2009, and $20 billion in 2010.” As I’ve noted elsewhere, those bailouts were not subsidies to highways; they were subsidies to pork barrel. If Congress had not diverted a third of gas tax revenues to non-highway projects, and then mandated spending on those projects even if gas tax revenues fell short, the bailouts would not have been necessary.

Admittedly, there are highway subsidies, mainly at the local level. But when compared with highway usage, which is on the order of 4 trillion passenger miles and 1 trillion ton miles of freight per year, the subsidies are trivial: about a penny per passenger mile at most. Since intercity buses operate with about twice the occupancy rates of other vehicles, subsidies to them are probably much lower (and were taken into account in the numbers my paper cited). By comparison, subsidies to Amtrak are close to 30 cents a passenger mile and subsidies to most high-speed rail lines will be much more.

America 2050 concludes by saying, “Intercity buses provide a valuable service and are an important part of a complete and balanced transportation system.” Who can argue with “balanced”? With respect to buses, America 2050 would give the high-use transport corridors—the cream of any transport service—to subsidized rail, leaving the dregs to buses (which would then require subsidies to serve those dregs).

The question is: How do you measure “balanced”? Apparently, America 2050′s answer is “balanced means taking the fees you pay to drive and spending them on my favored mode of transport while you sit stuck in traffic.” By contrast, my answer is: if it can be done without subsidies, it is balanced. Let’s just end the subsidies to all modes of transportation and see what happens.

America 2050: Forget the Forgotten Mode is a post from Cato @ Liberty - Cato Institute Blog

Last week I discussed the Obama administration’s decision to redistribute federal high-speed rail money rejected by Florida Gov. Rick Scott. I noted that “Florida taxpayers were spared their state’s share of maintaining the line, but they’re still going to be forced to help foot the bill for passenger-rail projects in other states.” My underlying point was that the states should be allowed to make their own transportation decisions with their own money.

Two Michigan state policymakers — both Republican — want to send the same message to Washington. State representatives Paul Opsommer and Tom McMillin have introduced resolutions that call on the federal government to allow the states to keep the federal gasoline taxes that they send to Washington. (Opsommer’s resolution would have to pass both state chambers, whereas McMillin’s resolution would only need to pass in the Michigan House.)

Michigan would no longer send its money to Washington so that it can be washed through Congress and the federal bureaucracy and sent back to Michigan (and the other states) with costly federal strings attached. Instead, highway financing and control would be left to the states. As a Cato essay on federal highway funding argues, re-empowering the states is clearly preferable to the current top-down approach:

With the devolution of highway financing and control to the states, successful innovations in one state would be copied in other states. And without federal subsidies, state governments would have stronger incentives to ensure that funds were spent efficiently. An additional advantage is that highway financing would be more transparent without the complex federal trust fund. Citizens could better understand how their transportation dollars were being spent.

The time is ripe for repeal of the current central planning approach to highway financing. Given more autonomy, state governments and the private sector would have the power and flexibility to meet the huge challenges ahead that America faces in highway infrastructure.

Some people, particularly those with an interest in the current convoluted arrangement, argue that it’s necessary for the enlightened beings in Washington to provide us with a national “vision” or “plan.” But the redirection of Florida’s high-speed rail allotment to other states shows that decision-making in Washington usually has more to do with politics than economics.

Conspicuously left out of the Obama administration’s re-spreading of high-speed cheese was Wisconsin, which tried to grab some of the Florida money for an intercity rail line that connects the state to Chicago. Reason’s Sam Staley points out that Wisconsin Gov. Scott Walker also said “no thanks” to the administration’s high-speed rail money. Staley says “the snubbing of the State of Wisconsin smells a lot like political payback,” and links to a piece from a Milwaukee Journal-Sentinel columnist who doesn’t have any doubts.

If either or both of the Michigan resolutions pass, Congress can simply choose to ignore the message. Hopefully, more states will take a cue from Michigan, which could make it harder for the folks in Washington to simply look the other way. Regardless, Opsommer and McMillan deserve a round of applause for trying to score one for fiscal federalism.

Michigan State Policymakers Push to Keep Federal Gas Taxes is a post from Cato @ Liberty - Cato Institute Blog

Florida Governor Rick Scott deserves a big round of applause for dealing a major setback to the Obama administration’s costly plan for a national system of high-speed rail. As Randal O’Toole explains, the administration needed Florida to keep the $2.4 billion it was awarded to build a high-speed Orlando-to-Tampa line in order to build “momentum” for its plan. Instead, Scott put the interests of his taxpayers first and told the administration “no thanks.”

That’s the good news.

The bad news is that the administration is going to dole the money back out to 22 passenger-rail projects in other states. Florida taxpayers were spared their state’s share of maintaining the line, but they’re still going to be forced to help foot the bill for passenger-rail projects in other states.

Here’s Randal’s summary:

Instead, the Department of Transportation gave nearly $1 billion of the $2.4 billion to Amtrak and states in the Northeast Corridor to replace worn out infrastructure and slightly speed up trains in that corridor, as well as connecting routes such as New Haven to Hartford and New York to Albany. Most of the rest of the money went to Midwestern states—Illinois, Iowa, Minnesota, Michigan, and Missouri—to buy new trains, improve stations, and do engineering studies of a few corridors such as the vital Minneapolis-to-Duluth corridor. Trains going an average of 57 mph instead of 52 mph are not going to inspire the public to spend $53 billion more on high-speed rail.

The administration did give California $300 million for its high-speed rail program. But, with that grant, the state still has only about 10 percent of the $65 billion estimated cost of a San Francisco-to-Los Angeles line, and there is no more money in the till. If the $300 million is ever spent, it will be for a 220-mph train to nowhere in California’s Central Valley.

Why should Floridians be taxed by the federal government to pay for passenger-rail in the northeast? If the states in the Northeast Corridor want to pick up the subsidy tab from the federal government, go for it. (I argue in a Cato essay on Amtrak that if the Northeast Corridor possesses the population density to support passenger-rail then it should just be privatized.)

I don’t know if taxpayers in Northeast Corridor would want to pick up the federal government’s share of the subsidies, but I’m pretty sure California taxpayers wouldn’t be interested in footing the entire $65 billion for their state’s high-speed boondoggle-in-the-works. As I’ve discussed before, the agitators for a national system of high-speed rail know this:

If California’s beleaguered taxpayers were asked to bear the full cost of financing HSR in their state, they would likely reject it. High-speed rail proponents know this, which is why they agitate to foist a big chunk of the burden onto federal taxpayers. The proponents pretend that HSR rail is in “the national interest,” but as a Cato essay on high-speed rail explains, “high-speed rail would not likely capture more than about 1 percent of the nation’s market for passenger travel.”

According to the Wall Street Journal, congressional Republicans aren’t happy that the administration is taking Florida’s money and spreading it around the country:

Monday’s announcement drew criticism from House Republican leaders, who questioned both the decision to divide the money into nearly two-dozen grants around the country—instead of concentrating it into fewer major projects—and the fact that many of the projects will benefit Amtrak, the federally subsidized passenger-rail operator.

I heartily agree with the Amtrak complaint, but I’m not sure why as a federal taxpayer I should feel better about instead “concentrating [the money] into fewer major projects.” Subsidizing passenger-rail is no more a proper role of the federal government than education or housing. Unfortunately, for all the criticisms of the Obama administrations and the constant talk about spending cuts, Republicans don’t appear to possess much more desire to limit the scope of the federal government’s activities than the Democrats.

See this Cato essay for more on fiscal federalism.

High-Speed Rail and Federalism is a post from Cato @ Liberty - Cato Institute Blog

To sell his high-speed rail program, President Obama desperately needed a success story—a high-speed train operating during his administration that would awe the public and lead to a national demand for more such lines. That success story was going to be Florida’s Orlando-to-Tampa line, the only true high-speed route (as opposed to speeding up existing trains by 3 to 5 mph) that could have been completed during Obama’s term in office (assuming he is re-elected).

Anticipating that success, the administration drafted a proposal to use federal gasoline taxes and a “new energy tax” to fund $53 billion for more high-speed rail lines over the next six years. (The proposal also included $250 billion for highways, $120 billion for urban transit, $27 billion for “livability,” and $25 billion for an infrastructure bank.)

The chances of that happening died when Florida Governor Rick Scott decided to turn back the $2.4 billion in federal dollars dedicated to the Orlando-Tampa line. To maintain momentum behind high-speed rail, the administration could have given all of that money to California, the only other state proposing to build true high-speed rail.

Instead, the Department of Transportation gave nearly $1 billion of the $2.4 billion to Amtrak and states in the Northeast Corridor to replace worn out infrastructure and slightly speed up trains in that corridor, as well as connecting routes such as New Haven to Hartford and New York to Albany. Most of the rest of the money went to Midwestern states—Illinois, Iowa, Minnesota, Michigan, and Missouri—to buy new trains, improve stations, and do engineering studies of a few corridors such as the vital Minneapolis-to-Duluth corridor. Trains going an average of 57 mph instead of 52 mph are not going to inspire the public to spend $53 billion more on high-speed rail.

The administration did give California $300 million for its high-speed rail program. But, with that grant, the state still has only about 10 percent of the $65 billion estimated cost of a San Francisco-to-Los Angeles line, and there is no more money in the till. If the $300 million is ever spent, it will be for a 220-mph train to nowhere in California’s Central Valley.

In essence, the administration has given up on high-speed rail. New York Times editorial writers haven’t figured that out yet, opining that Florida Governor Scott made a dreadful mistake when he rejected the rail money. In fact, as tax activist Doug Guetzloe told a Tampa newspaper, “Federally funded rail is like being given a brand new Maserati and then you have to pick up the gas and the insurance — forever. The car looks great, but the costs will kill you.”

The Times suggested that Florida taxpayers will resent Scott’s decision whenever they are stuck in traffic. But no one seriously believes that intercity rail will ever relieve traffic congestion, most of which is in cities, not between them. In its original application for high-speed rail funds, Florida’s DOT admitted that Orlando-to-Tampa traffic grows more every five years than all the cars the trains were expected to take off the road, so at best high-speed rail was a very expensive and temporary solution to congestion.

Outside of the Times editorial offices, most transportation experts agree that the President’s high-speed rail program is over and his draft transportation bill is dead on arrival. Taxpayers throughout the country should thank Scott (as well as Ohio Governor John Kasich and Wisconsin Governor Scott Walker) for saving them the hundreds of billions of dollars that Obama’s program would have eventually cost.

The Administration Concedes Defeat is a post from Cato @ Liberty - Cato Institute Blog

President Obama’s dream of connecting 80 percent of Americans to a high-speed rail line appears to be dead. Congress appropriated $8 billion for high-speed rail in the 2009 stimulus bill and $2 billion more in the 2010 appropriations bill. But, after newly elected governors of Florida, Ohio, and Wisconsin rejected high-speed rail projects in those states, Congress declined to include any more funds in 2011 and it is unlikely to spend any more on this boondoggle as long as Republicans have a hold on the House.

What will Americans get for the $10 billion or so already committed?

• California appears ready to spend $5.5 billion building a 220-mph rail line from Corcoran–a town south of Fresno mainly known for the prison housing Charles Manson–to Borden–a ghost town north of Fresno. Considering that trains were not scheduled to stop in either Corcoran or Borden, this will truly be a train to nowhere.
• Illinois is spending more than $3 billion adding three trains per day (to the current five) between Chicago and St. Louis and increasing average train speeds from 51.6 to 56.8 mph, saving train travelers a half hour on the current 5.5-hour trip. Illinois hopes to eventually boost average speeds to 72.6 mph, but that will require more money.
• Washington state is spending $700 million adding two trains per day (to the current three) between Seattle and Portland and increasing average train speeds from 53.4 to 56.1 mph, thus saving rail travelers 10 minutes on the current 3.5-hour journey.
• North Carolina is spending $545 million adding two trains a day (to the current three) between Charlotte and Raleigh and increasing speeds from 54.1 to 57.7 mph, thus saving travelers 12 minutes on the current 3.2-hour trip.

There are a few other even less-inspiring projects, and the administration has yet to decide what to do with the $2.5 billion that Florida turned back to the feds. But it is clear that the administration’s plan to dazzle Americans with an exciting new infrastructure project comparable to the Interstate Highway System has failed.

When first announced, Obama’s plan was well received by people who had taken high-speed trains in Europe and Japan. Obama’s strategy was to quickly build an 85-mile high-speed line connecting Tampa to Disneyworld in Orlando, which would open before the end of Obama’s presumed second term. This, he hoped, would inspire politicians elsewhere to demand similar lines in their states. He also hoped the fact that China was building a $400-billion high-speed rail network would be a “sputnik moment” forcing Americans to support our own rail system. Rarely mentioned was the total cost of Obama’s plan, though Transportation Secretary Ray LaHood finally offered an estimate of $500 billion.

Reports from Cato, Reason, and others attempted to dampen people’s enthusiasm for this expensive program. The real turning point, however, was the November, 2010 election. Republican gubernatorial candidates in Ohio and Wisconsin promised to kill the trains if elected. However, Rick Scott–the Republican candidate for governor in Florida–the linchpin of Obama’s plan–was on the fence.

The incumbent governor, Charles Crist, wanted to anchor the Tampa-to-Orlando train with light rail in Tampa and commuter rail in Orlando, and to do so light rail was on the ballot in Tampa. A few weeks before the election, Wendell Cox, who had written on high-speed rail for Reason, and I spoke to Tampa Tea Party members and inspired them to fight both the light rail and high-speed rail. Despite being outspent by 50-to-1, light rail opponents prevailed at the polls in November, winning by 58 to 42. The momentum from this victory helped them persuade Scott, who narrowly won the governorship, to kill high-speed rail in February.

In April, National Review Online credited Cato, Reason, Heritage, and the Florida Tea Party with killing high-speed rail. The day after the article appeared, Congressional leaders agreed to zero-out funding for high-speed rail in the 2011 budget. It appears likely that, other than minor improvements to Amtrak’s Boston-to-Washington corridor, high-speed rail is dead, at least for now.

Once the darling of the media, high-speed trains are now closely scrutinized. The New York Times published an op ed calling Obama’s plan “a fast train to nowhere.” Instead of praising China’s high-speed trains, the Washington Post has declared them a “train wreck.”

The big question is California. The state currently has only about 10 percent of the funds it needs to build a line from Los Angeles to San Francisco. Scrambling to close a $28 billion deficit in its 2012 budget, the legislature is not likely to find any more state funds for this megaproject. Unless a miracle occurs, it appears the only added impact of Obama’s dream will be the cost to state taxpayers of running a few extra trains per day in Illinois, North Carolina, and Washington.

Dodging the High-Speed Bullet Train is a post from Cato @ Liberty - Cato Institute Blog

When Barack Obama emerged as a serious contender for the presidency, he offered a core menu of curing everything by increased federal intervention in health care, education, and energy. Whenever new problems arose that lessened the urgency of earlier concerns, Obama has crafted assertions that his original prescriptions will also resolve the new difficulties. In energy, this has involved extending his program to new, even more dubious projects. He also has a habit of incessantly repeating the same tired arguments in the vain hope that his skill at persuasion will win the day.

His March 30, 2011 energy speech and accompanying Blueprint are typical. About the only differences between these and his June 15, 2010 speech on energy were more bad ideas. He added to the panic-driven slowdown in offshore oil and gas drilling permits, now rationalized as a prudent response; a post-Japan crisis review of nuclear power; and another for new methods of producing natural gas. For no good reason, he argued that Brazilian oil development needed U.S. government support despite the long history that successful oil development in some of the most backward countries in the world has occurred without major U.S. government aid. (In fact, the aid offered was an Export-Import Bank loan and thus more an exercise in crony capitalism than a useful move.)

Otherwise Obama continued to display the central characteristic of his philosophy — that he and his advisers possess such superior insight that they can guide the average American to better decisions. This is precisely the Progressive error that has led to the present political mess and the cause of the dramatic 2010 shift in the composition of the U.S. House of Representatives. Whenever concerns arise that he has overreached, he claims that he was doing the sensible thing.

His Blueprint constitutes Exhibit A in the case against this interventionism. It is essentially a list of the many mandates that Obama has achieved or desires, ranging from high-speed rail to micromanaging the design of every new building in the United States. This list is dominated by the many provisions of the infamous stimulus bill that indiscriminately threw money at every favored area including energy. Obama seems to believe that seeing where the money went will counteract the outrage at ill-conceived, unnecessary, and counterproductive spending. At least to energy specialists, what actually appears is resounding proof that the voters were right — every idea is bad.

The speech also showcased Obama’s talent at making dubious assertions. Many have commented that he does not deserve the credit that he seems to claim for the rise in U.S. oil output. The very long lead times, which Democrats traditionally use to oppose expanded oil-and-gas leasing, imply that the rise was facilitated by actions in prior administrations. An even greater whopper was his intimation that the existence of many undeveloped leases suggests that no rush exists to lease and license more. The more obvious criticism is that his cumbersome licensing policy contributes to the inability to develop. Less apparent is the likelihood that many of those leases proved, after further examination, to be unattractive while more promising areas are being withheld from leasing.

He similarly selected the most misleading possible way to understate U.S. oil-production potential. He indicated correctly that the United States has only 2 percent of world “proved” reserves of oil. What he ignored is that proved reserves cover only already-known sources and wild methodological differences among countries in how this is calculated make cross-country comparisons dubious. (This situation was worsened by 1970s hysteria. The highly efficient existing U.S. system was replaced because it was run by the supposedly untrustworthy industry. The government created its own far more expensive and far less satisfactory system.) The more reliable measure of actual production shows an 8.5 percent U.S. share in 2009. Neither measure satisfactorily indicates what really matters — the potential efficiently to add production. Obama thus adds to his prior unjustifiable aim to reduce petroleum use by also misstating the petroleum potential. Substantial oil imports remain desirable for the U.S. because of the underlying economics. Nevertheless, the federal government has imposed undesirable restrictions on oil and gas production.

Energy Error Continued is a post from Cato @ Liberty - Cato Institute Blog

In his customary salesman style, Vice President Joe Biden recently made a pitch to a Philadelphia crowd for a plan to spend $53 billion over the next six years on a national system of high-speed rail.

Biden’s performance brings to mind the classic Simpsons episode “Marge vs. the Monorail” in which con-man Lyle Lanley convinces the town’s residents to waste money on an exciting-sounding high-speed train that turns out to be a boondoggle.

The full episode can be viewed here, but here’s the scene in which Lanley whips the crowd into frenzied support of his plan:

There are some uncanny parallels between the two pitches.

Biden says that “If we don’t get a grip, folks, they’ll not only be teaching us, they’re gonna own our kids.” The VP is referring to other countries that have built or are building high-speed rail systems, such as China.

Lanley gains his audience’s attention by threatening to take his “greatest idea” to the next town over. Lanley then proceeds to point out other towns across the country that he has allegedly “put on the map” with a high-speed train. (Biden cites the city of Meridian, MS, which is a stop on Amtrak’s money-losing Crescent Line, as an example of the magic of federal rail subsidies.)

Biden promises what every politician promises when talking about the latest, greatest way to spend other people’s money: jobs! The VP says “We’re going to insist … that there be a strong ‘Buy America’ requirement which can help us create tens of thousands of middle-class jobs… These are real live jobs that pay real good money.”

Lanley makes the same promise. Barney, the town drunk, asks him, “What about us brain-dead slobs?” Lanley responds, “You’ll be given cushy jobs!”

Lanley’s promises never pan out, as he’s really a con-artist who suckered the town into buying a faulty train that doesn’t work. Joe Biden means well, but his train isn’t going to work either — not without wasting hundreds of billions, and perhaps a trillion, taxpayer dollars.

A Cato essay on high-speed rail explains why the Obama administration’s high-speed rail dreams make little practical and economic sense, especially when the government’s finances are already like a train headed off a cliff.

Fortunately, new House Transportation Committee Chairman John Mica (R-FL) dismissed Biden’s announcement as being akin to “giving Bernie Madoff another chance at handling your investment portfolio.” Rep. Bill Shuster (R-PA), chairman of the House Railroads Subcommittee, labeled it “insanity.”

However, Shuster recently penned an op-ed in a Connecticut newspaper in which he supports the idea of a federally-funded high-speed New Haven-Hartford-Springfield line. That’s right, Springfield — the name of the fictional town in The Simpsons. Like Biden, Shuster expresses the same overblown concern that the United States is “behind the international curve” when it comes to government subsidy-dependent high-speed rail.

D’oh!

HSR: Joe Biden Channels The Simpsons is a post from Cato @ Liberty - Cato Institute Blog

Today POLITICO Arena asks:

Although President Obama proposed a five-year, $40 billion per year freeze in non-security, discretionary spending, and Republicans want to cut spending by at least $100 billion a year, is either side serious about real spending cuts?

My response:

With uncontrolled deficits well into the future and a debt exceeding $14 trillion, for Obama to propose saving only $40 billion per year in discretionary spending over the next five years, while “investing” in pie-in-the-sky things like high-speed rail, wind farms, environmentally destructive ethanol, and the like, is worse than unserious — it’s an insult to our intelligence. Like Obama, many Republicans too treat military spending, among other things, as sacrosanct, but at least they’re proposing more serious budget cuts.

The deeper problem, of course, is systemic. Socialism, a large dose of which we have in America today, brings out the very worst in people. In the name of collective responsibility, it saps and then destroys individual responsibility, leading to a war of all against all. No one wants “his” entitlement cut for fear that his neighbor might profit at his expense — because, after all, “we’re all in this together.” Suspicion and envy are the order of the day. Meanwhile, dreamers like Obama (at least that’s his pose), who promote our collective drift, either can’t or won’t grasp the hard reality until it crashes down upon them, and us, as it is doing now in several of our states and in Europe. For the “hard-hearted” realists among us, November 2012 can’t come soon enough.

Is Obama Serious? is a post from Cato @ Liberty - Cato Institute Blog

Tea party victories in November likely signal the beginning of the end for President Obama’s ambitious and expensive high-speed rail plans. Republican governors-elect of both Ohio and Wisconsin have vowed to return federal high-speed rail funds that had been granted to those states. The governor-elect of Florida is also a rail skeptic, and more and more obstacles are being thrown in front of California’s rail plans.

The prospects for high-speed rail are so dire that the Onion recently suggested that President Obama would shift his support to high-speed buses instead. Even the Washington Post has sounded caution about spending much more money on this obsolete form of travel.

The California High Speed Rail Authority, which wants to spend a mere $43 billion on the first leg of a proposed 220-mph rail network, has gained a reputation as a paragon of mismanagement and conflicts of interest. The authority’s chair, Anaheim Mayor Curt Pringle, has accused its staff of incompetence. Reports from the state auditor, the University of California Institute for Transportation Studies, and a committee of transportation professionals have all concluded that the authority’s cost projections are too low and its ridership revenue projections too high.

Nevertheless, in a blatant political move, the Obama administration gave the authority a $900 million grant just a week before the election on the condition that most of the money be spent in the district of a Democratic member of Congress who was fighting a close reelection campaign. The representative, Jim Costa, won reelection by a mere 3,000 votes. The rail authority dutifully decided to start building the rail line in the heart of Costa’s district, from the small town of Corcoran — known mainly as the home of Charles Manson and fellow prisoners — to an even smaller spot named Borden — population zero. This plan was quickly dubbed the train to nowhere and generated opposition not just from Republicans but from Costa’s fellow Democrat, Dennis Cardoza, who represents the congressional district just north of Costa’s.

Although California voters approved $9 billion in bonds for the rail project, the approval was conditional on getting matching funds. So far, the state has received only about $2 billion from the federal government, which means it only has about $4 billion to spend on construction — less than 10 percent of the amount needed to build from Los Angeles to San Francisco. Given the improbability of finding the other 90 percent, and the fact that Republicans in Congress hope to take back some of the money that has already been granted for high-speed rail, the California rail project seems all but dead. The authority’s only hope is to spend enough money building a train to nowhere that politicians will feel compelled to fund the rest.

Meanwhile, Florida was elated when the Obama administration funded half the cost of an 168-mph line running the 80 miles from Tampa to Orlando, with the promise of more funding later. But the state’s enthusiasm was greatly diminished when the administration announced that it expected the states to come up with at least 20 percent matching funds–funds Florida does not have. Even Orlando Congressman John Mica (likely the next chair of the House Transportation and Infrastructure Committee) has backed away from supporting the line. So the state’s new governor might be able to kill the project.

The Ohio and Wisconsin projects aren’t even worthy of being called high-speed rail, as Wisconsin’s average speed was projected to be just 59 mph and Ohio’s an even more lethargic 38.5 mph. Yet the Wisconsin project was going to cost nearly $1 billion, nearly all of which the feds agreed to fund, while Ohio’s would be more than half a billion, about $400 million of which was initially funded by the feds. Secretary of Immobility Transportation Ray LaHood vowed that these lines would be built no matter what the incoming governors said, then said that if they cancelled the projects, he would just give the money to other states. While that seems likely, Congress could override such a transfer.

Meanwhile, in a spectacular display of poor timing, Amtrak announced its own Boston-to-Washington high-speed rail plan just a week before the election. Current Amtrak trains reach top speeds of 130-150 mph but average only 80 mph on this route. For a mere $117 billion, Amtrak proposed to build a brand-new line capable of reaching 220-mph top speeds, meaning average speeds of about 130-140 mph. But Amtrak planners must have forgotten to low-ball their cost estimates, for the proposed cost-per-mile of $274 million was nearly three times the projected cost of the California line and more than 10 times the projected cost of Florida high-speed rail. No doubt Amtrak will shelve its plan in anticipation of a more favorable political environment.

New transportation technologies are successful when they are faster, more convenient, and less expensive than the technologies they replace. High-speed rail is slower than flying, less convenient than driving, and at least five times more expensive than either one. It is only feasible with heavy taxpayer subsidies and even then it will only serve a tiny portion of the nation’s population.

A few months before the election, LaHood estimated the administration’s high-speed rail construction plans would eventually cost taxpayers $500 billion, and that’s not counting operating subsidies. BNSF CEO Mark Rose thinks the cost will be closer to $1 trillion. If nothing else, the tea parties may be able to take credit for saving taxpayers at least that amount of money.

Slow Death for High-Speed Rail is a post from Cato @ Liberty - Cato Institute Blog

In October, I speculated that the upcoming elections could be the nail in the coffin for the Obama administration’s plan for a nationwide system of high-speed rail. Indeed, some notable gubernatorial candidates who ran, in part, on opposition to federal subsidies for HSR in their states proceeded to win. However, Transportation Secretary Ray LaHood made it clear in a recent speech to HSR supporters that the administration intends to push ahead.

LaHood’s message was targeted specifically to incoming governors John Kasich in Ohio and Scott Walker in Wisconsin, who argued that HSR doesn’t make any economic or practical sense for their states.

LaHood said that states rejecting federal HSR subsidies won’t be able to reroute the money to other uses, such as roads. Instead, LaHood said the rejected money will redistributed “in a professional way in places where the money can be well spent” — i.e., other states. And sure enough, other governors were quick to belly up to the Department of Transportation’s bar in order to grab Ohio and Wisconsin’s share.

From the Columbus-Dispatch:

New York Gov.-elect Andrew Cuomo has said he would be happy to take Ohio’s money. Last week, California Democratic Sens. Barbara Boxer and Dianne Feinstein wrote LaHood saying that California stands ready to take some, too, noting that several states that elected GOP governors this month have said they no longer want to use the rail money for that purpose.

“It has come to our attention that several states plan to cancel their high-speed rail projects. We ask that you withdraw the federal grants to these states and award the funds to states that have made a strong financial commitment to these very important infrastructure projects,” Boxer and Feinstein said in their letter to LaHood.

This is a textbook example of why the Department of Transportation should be eliminated and responsibility for transportation infrastructure returned to state and local governments. If California wishes to pursue a high-speed rail boondoggle, it should do so with its own state taxpayers’ money. Instead, Ohio and Wisconsin taxpayers now face the prospect of being taxed to fund high-speed rail projects in other states.

If California’s beleaguered taxpayers were asked to bear the full cost of financing HSR in their state, they would likely reject it. High-speed rail proponents know this, which is why they agitate to foist a big chunk of the burden onto federal taxpayers. The proponents pretend that HSR is in “the national interest,” but as a Cato essay on high-speed rail explains, “high-speed rail would not likely capture more than about 1 percent of the nation’s market for passenger travel.”

High-Speed Federalism Fight is a post from Cato @ Liberty - Cato Institute Blog

Over at Downsizing the Federal Government, we focused on the following issues this week:

• Unfortunately, the party favored by tea party supporters at the moment has no interest in shuttering the Department of Education.
• Columnist Robert Samuelson is right: the Obama administration’s high-speed rail dreams “represent shortsighted, thoughtless government at its worst.”
• Attention GOP: the electorate wants spending cuts, and they will support the policymakers who take the lead on cuts if they are pursued in a forthright and serious-minded manner.
• New Republican members of Congress will be looking for ways to cut the budget deficit and also to increase economic growth. One way to do both is to privatize government assets.
• Will the House Republican leadership embrace spending cuts proposed by their own members in the conservative Republican Study Committee?

This Week in Government Failure is a post from Cato @ Liberty - Cato Institute Blog

On November 1, the Washington Post published a devastating critique of high-speed rail written by journalist Robert Samuelson. In fewer than 800 words, Samuelson blows up just about all the arguments put forth in favor of rail. An 8-word summary: costs are too high and benefits too low.

One person who remains unconvinced is Matthew Yglesias, who dismisses most of Samuelson’s arguments because some of them resemble the work of a “car-subsidy shill,” namely me. Apparently, if you believe, as I do, that all modes of transportation should be paid for by users, and not by tax subsidies, then you, too, are a “car-subsidy shill.”

Yglesias did not even read Samuelson’s article, instead reading only a Cato-at-Liberty blog post by Tad DeHaven about that article. But after a mere three or four paragraphs of analysis, Yglesias somehow concludes that $1 trillion for high-speed rail is “a bargain.” His analysis, such as it is, comes down to two points. First, Randal O’Toole opposes high-speed rail, so therefore it must be a good thing. Second (pulling out his mortgage calculator), at 4.1 percent interest over 30 years, $1 trillion is really “only” $58 billion per year. “Let’s do it!” he concludes.

I’ve never met Yglesias, so he probably doesn’t know that I personally love trains and hate driving. But as an policy analyst, I have to put my personal preferences aside and ask a couple of questions that never seem to occur to Yglesias. First, what are the benefits? Second, what do you have to give up to pay the costs?

The answer to the first question is: negligible. High-speed trains will carry less than 10 percent of the number of passenger miles carried by the Interstate Highway System (all the cost of which was paid out of user fees), and virtually no freight (interstate highways not only carry 20 percent of all passenger miles but about 15 percent of all freight ton-miles in the United States).

The history of transportation shows that new technologies succeed when they are faster, more convenient, and less expensive than existing technologies. High-speed rail is slower than flying, less convenient than driving, and (based on Amtrak’s Acela) at least five times more expensive than either. That means, as Samuelson says, “High-speed rail would subsidize a tiny group of travelers and do little else.”

Moreover, really successful new transportation technologies significantly increase mobility. Yet Florida predicts that only 4 percent (see p. 13) of the riders on its 168-mph trains would be new mobility. California’s 220-mph trains would create even less new mobility: the California High-Speed Rail Authority’s latest estimate predicts that less than 1 percent (see p. 9) of its ridership would be new mobility. Here’s an arithmetic lesson for Yglesias: something that creates almost no new mobility, and merely substitutes high-cost transportation for a few marginal travelers previously using low-cost modes, is not a good deal.

Nor is high-speed rail the environmental answer to anything. The environmental costs of construction are high, while the environmental benefits of operations are low, leading Florida to conclude in its environmental impact statement that “the environmentally preferred alternative is the no build alternative” (see p. 2-38). In fact, both cars and airplanes are becoming more energy efficient so rapidly that, by the time a national high-speed rail system could be built, rail would be the brown form of passenger travel.

On the cost side, Yglesias only asks whether my $1 trillion estimate, which is “based on the costs estimates of the California system,” is valid considering that “California is an above-average cost jurisdiction.” That’s a legitimate question that would have been answered if he had bothered to read the footnoted reference. (I divided routes into low-cost and high-cost lines and used different estimates for each.)

Samuelson’s cost estimate was only $200 billion, but that was for high-speed rail in California and Florida and moderate-speed rail (90- to 110-mph) everywhere else. The $1 trillion is for a true national network of high-speed (150-220-mph) rail. I was not the first to use a $1 trillion estimate; that was Matt Rose, the CEO of the BNSF Railway, who probably knows a little more about rail costs than either Yglesias or me.

Beyond that, how could anyone conclude that $58 billion per year is a low price for anything, especially in today’s economy? Where is this money going to come from? Not the states, most of which are financially strapped. Perhaps we could cut all other federal spending on surface transportation–but that was only $54 billion in 2009. I know: let’s pass a health care law that will save money. But we already did that, and now federal health-care costs are projected to rise by, coincidentally, $58 billion between 2009 and 2011. Darn–there goes the money for high-speed rail. (All these numbers are from page 69 of the 2011 federal budget historical tables.)

High-speed rail riders aren’t going to pay $59 billion per year–they won’t even pay the operating costs of high-speed rail on most routes, which Yglesias managed to ignore. Amtrak claims its Acela trains earn a profit (not counting capital costs), but the Acela shares a lot of its operating costs with other Boston-to-Washington trains, which lose money. Between the two of them, they barely broke even in 2009 (see p. C-1). No other high-speed rail route in this country is likely to do as well.

By the way, in order to break even on Boston-to-Washington trains, Amtrak charged Acela riders 72 cents per passenger mile. That’s more than five times the average fares charged by airlines and intercity bus companies. Fares on Amtrak’s low-speed trains are only twice air and bus fares, which I am sure Yglesias thinks is a bargain.

I don’t know why Matt Yglesias thinks spending $1 trillion on trains that only a few people will ride would be a bargain. But I have no doubt that high-speed rail would be a high-cost burden on taxpayers.

Yglesias on High-Speed Rail is a post from Cato @ Liberty - Cato Institute Blog

Washington Post columnist Robert Samuelson provides a blistering critique of the Obama administration’s plan for a national system of high-speed rail. Samuelson dismisses HSR as “pork-barrel” and “a perfect example of wasteful spending masquerading as a respectable social cause.”

The pork-barrel nature of HSR was underscored by last week’s politically-timed release of $2.5 billion by the Obama administration for rail projects across the country. From the news side of the Washington Post:

Eight days before midterm elections, embattled Democratic candidates cheered the release of billions in federal funds for high-speed rail projects from New Hampshire to California, saying they would help create jobs in their economically bruised states.

The Transportation Department notified lawmakers of the money on Monday and will make a formal announcement on Thursday. The timing of the announcement raised questions about whether the administration was trying to help some Democratic candidates.

The biggest winners of an estimated $2.5 billion pot of money were California and Florida, which have competitive governor, House and Senate races. But numerous other states scored as well.

California will get another $902 million to advance the design and construction of a high-speed rail system initially running from San Francisco to Los Angeles. The money is in addition to $2.25 billion in stimulus money that’s headed to California for high-speed rail.

Samuelson singles out the illogic of California HSR in particular. The state’s “budget is in shambles” he notes and it simply could not afford to fund the debt and operating subsidies that its proposed high-speed rail line would entail. And even if the money were there, it makes no sense for the government to spend billions of dollars on a mode of travel that would benefit so few individuals.

Federal taxpayers can’t afford high-speed rail in California or anywhere else. A Cato essay on high-speed rail points out that the cost of California’s HSR could be $81 billion and a national system could cost $1 trillion. Samuelson is right: the Obama administration’s HSR dreams “represent shortsighted, thoughtless government at its worst.”

High-Speed Pork is a post from Cato @ Liberty - Cato Institute Blog

Vice President Joe Biden is an affable fellow, which sometimes makes his tendency to exaggerate the truth somewhat amusing. However, Biden’s latest tall tale is as unamusing as it is wrong.

From the New York Daily News:

“Every single great idea that has marked the 21st century, the 20th century and the 19th century has required government vision and government incentive,” he said. “In the middle of the Civil War you had a guy named Lincoln paying people $16,000 for every 40 miles of track they laid across the continental United States. … No private enterprise would have done that for another 35 years.”

I’ll go straight to the 19th century railroads issue by referencing the work of two Cato scholars who probably know a little bit more about the topic than Joe Biden.

First, Randal O’Toole discusses railroads and land grants in his book Gridlock: Why We’re Stuck in Traffic and What to Do About It:

Early American railroads were built almost entirely with private funds. These railroads provided such superior transportation that by 1850 they had put most toll roads and canals out of business. Individual states still competed with one another for business—and may have offered various favors to the railroads serving those states…. For the most part, however, no federal and few state subsidies went to railroads in the eastern United States.

The Pacific Railway Act provided land grants and low-interest loans to the companies completing the railroad from Council Bluffs, Iowa to California. Later laws provided land grants (but no low-interest loans) for railroads from St. Paul to the Puget Sound, Los Angeles to New Orleans, Los Angeles to St. Louis, and Portland to San Francisco. In total, about 170 million acres were granted to the railroads, but Congress eventually took back about 45 million acres for nonperformance, leaving the railroads a maximum of about 125 million acres.

Congress expected that the railroads would sell the land to help pay for construction. In many instances, there was no immediate market for the land. Much of it was not farmable, and the United States had a surplus of wood so there was little market for timberland. In the latter half of the 20^th century, the energy and timber resources on lands granted to the Northern Pacific, Southern Pacific, Sante Fe, and Union Pacific railroads proved very profitable. But this did not help them build the railroads in the first place.

In January 1893, the Great Northern Railway completed its route from St. Paul to Seattle without any land grants (except a small grant to a predecessor railroad) or other federal or state subsidies. The railway competed directly with the Northern Pacific, and to some extent with the Union Pacific, which served some of the same territory. The Great Northern’s builder, James J. Hill, knew that the other railroads had been built primarily for the subsidies, and as a result, they were poorly engineered and often followed circuitous routes. Hill built the Great Northern along the most direct route his engineers could find, so his operating costs were far lower than competitors’.

When the economic crash of 1893 took place a few months later, the Northern Pacific, Union Pacific, and almost all other western railroads went into receivership…Many people predicted that the Great Northern would not be able to compete and would follow the others into bankruptcy. But Hill managed to stay out of receivership, and the Great Northern remained the only transcontinental built in North America without government subsidies that never went bankrupt.

By 1930, American railroad mileage peaked at about 260,000 miles…only 18,700 of these miles were built with land grants or other federal subsidies.

Second, Jim Powell writes about government corruption and 19th century railroad subsidies in his book on Teddy Roosevelt, Bully Boy: The Truth About Theodore Roosevelt’s Legacy:

Whenever politicians interfered in the railroad business, however, corruption and inefficiency inevitably occurred. The most dramatic case involved construction of the first intercontinental railroad. Railroad lawyer Abraham Lincoln supported the project, and he made it a priority after he became president in 1861…

Stephen Ambrose and other historians have faulted private markets for lacking the capital or the imagination to build the transcontinental railroad. Certainly it was true that private entrepreneurs and financiers did not see the point or risking huge sums to build a railroad across a vast, empty, and sometimes mountainous terrain. Private entrepreneurs and financiers added value by developing the rail network bit by bit, supporting the expanding freight business. The process was gradual. Grandiose schemes like the transcontinental railroad drained resources from some regions to benefit special interests.

There was no money to be made from operating a railroad through a desolate wasteland, yet the federal government rewarded railroad contractors with big subsidies: a thirty-year loan at below market interest rates; twenty sections (12,800 acres) of government-owned land for every mile of track; and an additional subsidy of $48,000 for every mile of track laid in mountainous regions.

Thomas Durant, Oakes Ames, and other officers of the Union Pacific Railroad, which went a thousand miles west from Council Bluffs, Iowa, started the Credit Mobilier company in 1867 and retained it to do the construction. Credit Mobilier distributed to shareholders profits estimated at between $7 million and $23 million, depleting the Union Pacific’s resources. In an effort to stop congressional investigations, the officers bribed Speaker of the House James G. Blaine and other congressmen with Credit Mobilier stock. Seldom modest about their thievery, congressmen voted themselves a 50 percent pay raise. The Union Pacific Railroad fell deep into debt, without enough revenue from passengers or shippers, and went bankrupt in 1893.

It is not surprising that Joe Biden, an individual who has spent his entire career in government, possesses a child-like devotion to the federal government’s capabilities. Biden is a major proponent behind the Obama administration’s misbegotten plan to build a national system of high-speed rail. That Biden stands to achieve historic notoriety for helping facilitate this latest government boondoggle is only fitting.

See Cato essays on federal transportation subsidies and the Department of Transportation timeline, which notes the Credit Mobilier scandal:

1872: The New York Sun exposes the Credit Mobilier scandal, perhaps the largest business subsidy scandal of the 19th century. Credit Mobilier is a construction company financially controlled by the leaders of the Union Pacific Railroad that makes huge profits at taxpayer expense. Congressman Oakes Ames (R-MA), who is an agent of Credit Mobilier and part-owner, distributes shares of the firm’s stock to members of Congress at a discounted value. In return, those members treat Credit Mobilier favorably in a variety of ways, such as by voting to appropriate funds for the firm. The scandal illustrates the corruption that usually results when the government intervenes in the economy and subsidizes businesses.

It Ain’t So, Joe is a post from Cato @ Liberty - Cato Institute Blog

The President is continuing his push for the federal government to go deeper into debt in order to fund infrastructure projects. While nobody disputes that the country has infrastructure needs, the precarious nature of federal and state finances indicate that policymakers need to starting thinking outside the box. Specifically, policymakers should be looking to make it easier for the private sector to fund and operate infrastructure projects.

As my colleagues Chris Edwards and Peter Van Doren have explained, the main problem with government infrastructure spending is the lack of efficiency:

More roads and transit capacity may or may not make sense depending on whether the benefits exceed the costs. One sure way to find out is to have private provision and user charges. If users are not willing to pay the costs of extra or newer capacity, then calls for taxpayer involvement probably imply subsidy of some at the expense of others rather than efficiency.

A lot of what the the president wishes to spend taxpayer money on — for example, high-speed rail — is of questionable economic value. Unfortunately, policymakers all too often allocate resources on the basis of politics rather than economics.

For more on this topic, interested readers should check out our essays on the Department of Transportation. Also, an essay on privatization argues that “The benefits to the federal budget of privatization would be modest, but the benefits to the economy would be large as newly private businesses would innovate and improve their performance.”

Obama and Infrastructure is a post from Cato @ Liberty - Cato Institute Blog

Wisconsin has become a battleground over the Obama administration’s plan to create a national system of high-speed rail. Of the $8 billion in HSR grants awarded to the states in the stimulus bill, $810 million of it went toward a high-speed route between Milwaukee and Madison.

Ironically, this Wisconsin “high-speed” route would only achieve speeds of 79 mph initially and 110 mph by 2016. As a Cato essay on high-speed rail points out, HSR aficionados don’t even consider 110 mph to be true high-speed. In fact, passenger trains were being run at speeds of 110 mph or more back in the 1930s. And those “high-speed” trains didn’t prevent the decline of passenger trains after World War II.

The Cato essay also notes that the 85-mile line between Milwaukee and Madison “is only a tiny portion of the eventual planned route from Chicago to Minneapolis, and no one knows who will pay the billions necessary to complete that route.” In fact, to build a national system of true high-speed rail on the 12,800 mile network envisioned by the administration, the cost could be close to $1 trillion.

Where would the money come from? State governments are hoping that it would be all from federal taxpayers. As I recently discussed, the states’ interest in grabbing new federal HSR money has dropped now that Congress is requiring a 20 percent state match:

The states already have dedicated revenue sources for federal highway aid matching requirements (also 20 percent). With state tax revenues flat due to the recession, where would the money come from to pay for high-speed rail projects? Proposing new taxes to fund high-speed rail would probably be political suicide. And most state policymakers recognize that shifting money away from more popular programs to pay for high-speed rail won’t be any more politically rewarding.

The issue is even affecting elections in states that are in line to receive federal funding for high-speed rail. Scott Walker, a Republican candidate for governor in Wisconsin, recently said he’d send back the $810 million in stimulus funds the state has received for a rail line between Madison and Milwaukee. Walker appears to understand that his state has more pressing infrastructure needs and that high-speed rail could become a fiscal black hole.

On Tuesday, Walker won the GOP primary to replace outgoing Democratic Governor Jim Doyle, who is an ardent supporter of the Milwaukee-Madison route. Walker’s Democratic opponent, Milwaukee mayor Tom Barrett, supports the route’s construction. According to Stateline.org, the outgoing Doyle administration plans to have $300 million of the money under contract by January, which Walker says he would cancel if elected.

Wisconsin Democrats have made hay out of the fact that former Republican Governor Tommy Thompson first championed the idea of a regional network of high-speed rail. Unfortunately for HSR proponents, Thompson’s past involvement with federally-subsidized rail is a reason not to build the route.

From a Cato essay on Amtrak subsidies:

Amtrak reform legislation in 1997 stipulated that its board be replaced with a “reform board” of directors. The Clinton administration nominated, and the Senate confirmed, politicians that included the then-governor of Wisconsin, Tommy Thompson, and the mayor of Meridian, Mississippi, John Robert Smith. Mayor Smith tried to create a route that would have lost millions linking Atlanta and Dallas via Meridian. Governor Thompson succeeded in creating a route from Chicago to Janesville, Wisconsin. It was eventually discontinued after Thompson’s departure from the board due to low ridership and financial losses.

As is the case with Amtrak, HSR can’t compete with more efficient modes of transportation like automobiles and airplanes without massive subsidies. At a time when the federal debt is heading toward the moon, policymakers should be looking to the private sector to take care of our transportation needs. The country simply can’t afford to sink taxpayer money into high-speed rail when it makes so little economic sense.

High-Speed Rail Battle is a post from Cato @ Liberty - Cato Institute Blog

Today is the 40th anniversary of Earth Day, a time to highlight and discuss ways to work toward a cleaner planet. Cato’s energy and environment research promotes policies that would help protect the environment without sacrificing economic liberty, goals that are mutually supporting, not mutually exclusive.

• Why we should thank capitalism for environmental gains: “It is businessmen — not bureaucrats or environmental activists — who deserve most of the credit for the environmental gains over the past century and who represent the best hope for a Greener tomorrow.”

• Finding the right balance: “Today, America’s environment is cleaner—and Earth Day has indeed helped ensure that. …We should renew our promise to keep the environment clean—without adding to human misery or stalling improvements in the human condition.”

• Want clean air? Try this.

• Is high-speed rail really an environmentally friendly alternative to driving and air travel? “Planners have predicted that a proposed line in Florida would use more energy and emit more of some pollutants than all of the cars it would take off the road.”

Earth Day Links is a post from Cato @ Liberty - Cato Institute Blog

Over at Downsizing Government, we focused on failures in the following departments and agencies this week:

• Export-Import Bank: Call it the “Boeing Bank”
• HUD: Federal Housing Administration woes continue and housing subsidies for the dead
• Transportation: High-speed rail lobbyists squabble over taxpayer loot

Also, in addition to losing more money, Fannie Mae and Freddie Mac lose their inspector general.

The Week in Government Failure is a post from Cato @ Liberty - Cato Institute Blog

In a four-part series on the New York Times Economix blog, Harvard economist Edward Glaeser scrutinized high-speed rail and concluded that the benefits are overwhelmed by the costs. After making generous assumptions regarding the costs, user benefits, environmental benefits, and effects on urban development, Glaeser concludes that all the benefits of high-speed rail would still be less than half the costs.

As Washington Post writer Robert Samuelson observes, the Obama administration’s vision of high-speed rail is “a mirage. The costs of high-speed rail would be huge, and the public benefits meager.” Yet even Samuelson falls victim to the common assumption that high-speed rail “works in Europe and Asia” because population densities in those places are higher than in the United States.

The truth is that high-speed rail doesn’t work in Europe or Asia either. Japan and France have both spent about as much on high-speed rail as they have on their intercity freeway systems, yet the average residents of those countries travel by car 10 to 20 times as much as they travel by high-speed rail. They also fly domestically more than they take high-speed rail. While the highways and airlines pay for themselves out of gas taxes and other user fees, high-speed rail is heavily subsidized and serves only a tiny urban elite.

Obama uses the fact that France, Japan, and a few other countries are racing one another to have the fastest high-speed trains to argue that we need to join the race. That’s like saying we need to spend billions subsidizing buggy whip or horse collar manufacturers or some third-world country will beat us in those technologies. The fact is that high-speed trains will never be as fast as flying on long trips and never be as convenient as driving on short trips, and there is no medium-length trip in which high-speed rail can compete without heavy subsidies.

The rail advocates go ballistic whenever anyone questions their fantasies, mostly engaging in ad hominem attacks (“you must be paid by the oil companies!”) or accusing skeptics of lying about rail. The reality is that Glaeser (like me) “almost always prefer trains to driving.” If anything, he was too generous in many of his assumptions about high-speed rail.

For example, Glaeser built his case around a hypothetical high-speed line between Dallas-Ft. Worth and Houston, the nation’s fifth- and sixth-largest urban areas which together house close to 10 million people and are located about 240 miles apart, supposedly an ideal distance for high-speed trains. If the numbers don’t work for this market, how are they going to work for Eugene-Seattle, Tulsa-Oklahoma City, New Orleans-Mobile, St. Louis-Kansas City, or any of the other much smaller city pairs in the Obama high-speed rail plan?

The rail nuts don’t want to hear Glaeser’s (or Cato’s) numbers because they fantasize the Field of Dreams “build it and they will come” myth; that building rail will “create the demand for the rail lines.” That may have been true in nineteenth-century America, when no alternative forms of transportation could compete with rail. But it wasn’t true in twentieth-century France or Japan (where heavily subsidized high-speed rail carries only 4 to 6 percent of passenger travel), and it won’t be true in twenty-first-century America.

Building high-speed rail will be like standing in the chilly vestibule of an Amtrak train in mid-winter Chicago and burning million-dollar bills to keep warm. But that’s what happens when you base your transportation policies on a slogan from a Kevin Costner movie rather than on real data.

High-Speed Fail is a post from Cato @ Liberty - Cato Institute Blog