Opinion

Bad love: The administration and high-speed rail

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Carlos Bonilla
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      Carlos Bonilla

      Carlos E. Bonilla is a partner in Airline Forecasts, an aviation consulting and investment advisory firm. He served as Special Assistant for Economic Policy to President George W. Bush from 2001-2003. At the White House he held the labor portfolio, was part of the tax policy team at the National Economic Council, and did extensive work on aviation issues. Prior to that he was an adviser to the George W. Bush election campaign.

      Bonilla was a Senior Vice President at The Washington Group, a government affairs firm, from 2003-2008. At the Washington Group he provided strategic advice and representation to a variety of clients, primarily in the transportation and health care sectors. He served as an economist at the House Budget Committee from 1998-2001 before joining the White House.

      Bonilla currently focuses primarily on transportation issues. He is a member of the Board of Directors of Mesa Air Group where he serves on the Audit Committee.

Today’s budget will flesh out the financial details of the president’s ardor for high-speed rail. In the stimulus package in 2009, in the State of the Union Address (where he argued for giving 80 percent of Americans access to high-speed rail) and via Vice President Biden’s speech on spending an additional $53 billion over the next six years, the administration has been arguing for a massive spending effort on trains as fast as planes instead of automobiles. But does it make sense?

First, $53 billion is not close to enough to build high-speed rail. Only last year Amtrak estimated that high-speed rail just on the Northeast Corridor would cost $117 billion (in 2010 dollars). The president’s plan includes extending beyond the densely populated Northeast corridor to encompass “emerging and regional corridors.” This is going to cost a lot and the administration is hiding the real price tag.

Second, it is a money loser. A careful financial analysis (see my longer article at AmericanActionForum.org) indicates that if things go well, the Northeast corridor high-speed rail is designed with a built-in loss of $6.25 billion per year. To put this in perspective, it amounts to as much as $406 per passenger. Of course, things do not always go well. A combination of 20 percent higher costs and 20 percent lower revenue (if, for example, airlines competitively reduce fares to retain traffic) produces a system with a built-in loss of $14 billion a year.

The administration’s vision for high-speed rail is likely a fiscal black hole. The Northeast Corridor is the most densely populated section of the country, the one most accustomed to rail travel, and the area with the best public transportation system to accommodate rail travelers once they reach their destinations. Amtrak’s fiscal projections for this project may be the best that can be expected for any of the high-speed rail corridors promoted by the administration.

This should come as no surprise. The administration evidently fell in love with trains by watching Europe. But in Europe, trains lose money and require tons of taxpayer subsidies. The French government provides a subsidy for track renewals, a capital infusion to offset debt, a payment to subsidize costs of maintenance, subsidized travel for large families, subsidies for members of the military and police, and payments to cover pension costs. Yikes.

Finally, despite President Obama’s flippant comment that high-speed rail could be travel “without a pat-down,” rail is not safer. Just a week after the president’s State of the Union address, the U.S. State Department issued a travel alert for the United Kingdom citing “the potential for terrorists to attack public transportation systems, aviation and other travel infrastructure.”

Since 9/11, 793 deaths worldwide have resulted from terror attacks on rail systems, both urban and inter-city (non-conflict zones only). This includes 191 deaths in Madrid when ten bombs exploded in 2002, 39 in London in 2005 as part of a coordinated attack that also claimed 13 bus riders, and 209 dead in 2006 in Mumbai. In contrast, only 42 deaths have been aviation related, with 36 of these occurring this past month in Moscow when an explosive device was detonated in the international arrivals hall, an area of the airport that was unsecured in Moscow and which is unsecured in the US as well.

It is hard to envision spending over a hundred billion dollars on a new high-speed rail system without implementing security measures to protect it. Eurostar, the operator of the trains in the Channel tunnel, has this to say about passenger screening on its web site:

Eurostar terminals x-ray all luggage and security screen all passengers and their hand luggage. They also have measures in place that are not visible. Eurostar works with the authorities in France, UK and Belgium to ensure its security measures meet their requirements as well as extra measures over and above what the authorities ask for.

Get ready: here comes the “pat-down.”

America needs 21st-century transportation networks and other infrastructure. It does not need and cannot afford the president’s love affair with high-speed rail.

Carlos Bonilla is a transportation expert with the American Action Forum.

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  • cbonilla

    Jared — highway users pay 18.4 cents a gallon on gasoline to support the highway network via the Highway Trust Fund. Additional taxes are levied on tires, heavy trucks and diesel fuel. Of the 18.4 cents 2.86 cents is diverted to the mass transit account to subsidize mass transit — buses, urban rail ,etc.

    Users of the aviation system pay a ticket tax in addition to the jet fuel tax. Additional fees are imposed via PFCs (passenger facility charges) to support airport improvements), landing fees, en route fees for use of air traffic control, etc. In addition airlines lease their space in the terminals.

    As I said, this is a discussion worth having, but lets have it before we spend billions of dollars. Who should pay, and how much?

    Carlos

    • sawdustking

      That 18.4 cent per gallon federal tax is only about 1/3 of the tax you pay since most states charge around double that in state tax to pay their share of the road maintenance.

      I’m all for high speed trains as long as they pay for themselves, which I don’t think is possible. It also seem to me that they could be much more vulnerable to terrorist attack than airlines. A few pounds of black powder under a rail out in the middle of nowhere could kill hundreds.

    • jaredrodriguez

      http://subsidyscope.org/transportation/highways/funding/

      Some routes on Amtrak pay for themselves (ie. Acela), and others must be subsidized. As a whole, the entire system cannot pay for itself. Neither can our sprawling road system.

      I’m interested in the UK model, where operators are sometimes private, and the infrastructure is state-owned. We currently have the opposite system in some places – CSX owns infrastructure and Amtrak operates. If this were the case, I would also like to see a VMT or increased tolls. The Fed gas tax is not pegged to inflation and hasn’t been raised in some time.

      I personally do not drive (I live in New York), but I am surely paying for that 3rd (stimulus funded) beltway around Houston.

      • sawdustking

        As far as living in NYC and not driving, you still benefit from the nations roadways every time you buy any product delivered by truck. However, your tax should consist of only the increased price of the products to offset the road taxes. The federal gas tax hasn’t been raised since the early 90s. A couple of years ago they were looking at an $8 billion shortfall (so you may have a point on subsidizing road use). Raise the federal gas tax 10 cents. I’m fine with that.

        Don’t get me started on the stimulus.

        I live in Iowa and there is an Amtrack route that runs through the southern part of the state. I know there’s a higher speed route from Boston to D.C., but the freight lines around here are not safe to run over 50mph on. Greyhound is cheaper and just as fast. Running passenger trains on freight lines hasn’t been viable in 60 years. Dedicated passenger rail would be necessary. There’s an old saying in auto mechanics, speed costs, how fast do you want to spend it. If wishes were horses I could hop on a 300mph mag-lev and be in Florida 5 hours later but the massive infrastructure cost of that would make flying cheaper.

        You do make one good point in that we are all fine with the government providing us with roads, why not rails. I’m not against public investment, so if congress came up with a public high speed rail line that could pay for itself in 10 or 15 years and I felt that they weren’t playing tricks with the numbers I’d be fine with that. But it has to be paid off by passengers and it has to be proven between Boston and D.C. before we try it anywhere else. I’m not holding my breath on that.

        • http://www.facebook.com/people/Jared-Rodriguez/1705243 Jared Rodriguez

          Great conversation! I agree with nearly everything you’ve said above. I think the concept of spreading the funds around the country is naive – focus it on the NE Corridor. A recent study (I can’t remember exactly what it was) concluded that the Northeast Corridor and the corridor between NYC and Albany deserves much of the investment. The ROI on those corridors would be decent. Agreed, the problem with the system is the spreading thin of funds across the entire nation. But then, understandably, I’m sure Americans will begin complaining that funds are not being equally distributed. I would reply to them: Exactly! It doesn’t make financial sense!

          • sawdustking

            Bottom line is that if it can’t make money in the NE corridor it won’t make any in Wyoming. There’s a proposal to run a line from Iowa City (where the University of Iowa is) to Chicago. That’s nuts. Sure there are a lot of students from Chicago but there are only about 30,000 students total. Iowa City to Chicago is about the same distance as New York to Washington D.C.! And there’s virtually nothing in between. The Quad Cities have maybe a half million people total and that’s about it. It’s a 3 hour drive.

            Definitely a good conversation. A few years ago I was much more interested in rail, but then I bought into the whole AGW BS back then. I’m smarter now, but still if we can find more efficient ways to use our resources I’m all for it.

      • cbonilla

        On Acela paying for itself. Possible, but there are all sorts of games to be played here, notably how one allocates the infrastructure costs between the regional trains and Acela.

  • jaredrodriguez

    Please, understand this, and you will begin to understand the situation that we’re in. Here’s a good conversation on the topic. http://www.reddit.com/r/politics/comments/84pku/biden_we_subsidize_our_highways_and_airports_more/

    The gas tax pays for just 51% of the cost of maintaining our current highway system. http://www.houstontomorrow.org/livability/story/pew-report-highways-are-increasingly-subsidized/

    Unfortunately, gas taxes and tolls have never paid for roads and bridges entirely. Also, read the Power Broker by Robert Caro (It’s about Robert Moses). You will begin to understand how the system (as it stands today) was created entirely (and is maintained entirely) by massive amounts of subsidies.

    “Not a single road in Texas pays for itself.” http://www.houstontomorrow.org/livability/story/txdot-no-road-pays-for-itself/

    • cbonilla

      Jared – I will review when i have a moment, but I’ll argue that the highway system has less in the way of subsidy than any other federally funded mode of travel, especially if we credit back to the highway trust fund the 15 percent that has been siphoned off for mass transit. Per Robert Samuelson today, the DOT found that over 1990-2002 passenger rail service had the highest subsidy rate, $186 per thousand passenger miles, subsidies for air travel were about $5 per thousand passenger miles, and no net subsidy for drivers.

      • sawdustking

        $186 per thousand passenger miles?!? That would be like the government paying for all the gas in my pick up truck!

  • jaredrodriguez

    I enjoyed your article, but I believe you’ve failed to mention your idea of a 21st Century Transportation Network. You also compare air travel to rail. I think what you’re not taking into consideration is the loss that airlines operate at. We subsidize the airline industry with Trillions of dollars of investment in terminals, ancillary transportation, and runways. We also subsidize travel by automobile with Trillions of dollars. Intercity Rail, on the other hand, gets the least amount of Federal subsidy out of any other transport mode. Perhaps we should eliminate all subsidy for roads and runways (remove all subsidies for all types of travel), and then see how rail competes. I believe it would ultimately rise to the top as our airports would begin to decay, mid-air collisions become commonplace, and mega-infrastructure for our roads begins to collapse.

    • sawdustking

      These “subsidies” you mention are paid with use taxes. If you want to drive on public roads you pay tax on your gasoline, you pay to license you vehicle (for trucks this is generally several thousands of dollars a year per vehicle). Airlines pay fees to airports and charge their customers. These aren’t subsidies at all because they don’t artificial reduce the cost of travel. If you no longer had to pay a gas tax but everywhere you went you had to drive on toll roads you’d spend just as much money. Amtrack is supported by a billion dollars a year in taxpayer money. I have never taken Amtrack, but I’m still compelled to pay the company so that others ride for less. This is what a subsidy is. Personally I think we’ve had more than enough of that sort of thing in this country.

      • cbonilla

        Sawdustking — in case you’re not aware of it, there is significant diversion taking place on tolls charged road users. In Northern Virginia users of the Dulles Greenway are paying a surcharge to build the dulles metro extension. This happens all over the country. I have heard, but have not been able to confirm, that toll revenue was siphoned off from the chesapeake bay bridge to rebuild the port of baltimore — a hidden vacation tax.