Monday, December 02, 2013

High-speed rail issue as "a test of character"

From Amazon

Paul Krugman considers how those writing about public affairs should deal with it when they've been wrong on an issue:

You don’t just want to look at whether people have been wrong; you want to ask how they respond when events don’t go the way they predicted. After all, if you write about current affairs and you’re never wrong, you just aren’t sticking your neck out enough. Stuff happens, and sometimes it’s not the stuff you thought would happen. So what do you do then? Do you claim that you never said what you said? Do you lash out at your critics and play victim? Or do you try to figure out what you got wrong and why and revise your thinking accordingly?...At that point this becomes more than an intellectual issue. It becomes a test of character.

The SF Chronicle editorial writers, who have supported the high-speed rail project all along, fail that test:

California needs a high-speed-rail system to ease traffic, direct growth and to knit a sprawling state and its economy together. But a Sacramento judge says the $68 billion plan must also follow its own financial rules in a decision that could slow the project and drive up its costs.

This begs the essential question: How much does the state really "need" this project? Good place to start finding out is by reading this study. Yes, the project must follow the law in the legislation 2704.8 (J) that accompanied the project. And, just as important, it must adhere to the promises made during the campaign to pass Proposition 1A in 2008, which, by the way, only passed with 52% of the vote.

The Chronicle:

What happens next will be critical, not only for the 500-mile line connecting San Francisco to Los Angeles but for the future of high-speed rail. The world of 200-mph trains has taken hold in Europe and Asia, where the ultra-fast systems flourish.

The high-speed rail systems around the world were built with public money and are then subsidized by governments after they are built. See this study comparing the finances of the California project with European and Japanese systems. It's important to understand that, unlike systems in other countries, Prop. 1A prohibits any public subsidy to operate the California system if/when it's built. Voters were promised that those who use the system would pay for it, not state taxpayers:

“High-speed rail is good for society and it’s good for the environment, but it’s not a profitable business,” said Mr. Barrón of the International Union of Railways. He reckons that only two routes in the world---between Tokyo and Osaka, and between Paris and Lyon, France---have broken even (NY Times, May 29, 2009).

The folks at the Community Coalition on High-Speed Rail comment:

It should be pointed out these two routes were implemented on top of existing slower speed rail systems, so the right of way was more easily available and the ridership was in place. Additionally, the local and regional rail systems at both ends of each route had been in place for years. This is the exact opposite of the situation in California. The DG’s letter and the IUR’s position also contradict the US Congress Research Service report of April 18th 2007 of three high-speed rail operators---France, Japan and Spain. Their national governments paid the capital costs, or in Japan shared them with local government on a two-to-one ratio. And the governments subsidized their operations about $2-3 Billion annually.

The Chronicle:

The judge also told the rail authority to come up with a fuller picture on how it plans to find billions in private money to complete the plan along with full environmental approvals.

"Private money"? Why would anyone invest in the California high-speed rail project? Why has there been no private investment in this project so far? Because investors require a return on their investment. Of course companies---and even governments---are willing to sell California train cars and bullet train technology, but Prop. 1A prohibits any government subsidy to operate the system once it's built, unlike systems in Europe and Asia, which are built with public money and subsidized with public money after they're built. Collecting interest on the bonds authorized by Prop. 1A is the only profitable role that can now be played by private money.

Look at the 2009 California high-speed rail business plan to see how wildly unrealistic this project always has been:

Federal Grants: $17-19 billion
State Grants (Prop. 1A bonds): $9.95 billion
Local Grants: $4-5 billion
Private Funding: $10-12 billion

The Feds have already chipped in $3 billion, and no one seriously thinks there will be any more from that source. "Local grants" refers to cities and counties, but no one can seriously claim that even prosperous cities like San Francisco are going to contribute on that scale to the project, which is why big city mayors---including Ed Lee---support the boondoggle; it's free state and federal money for them.

The Chronicle:

Some critics are determined to send the project back for another statewide vote, noting that it has changed in some respects, such as adjusting the Peninsula stretch to use Caltrain tracks...The northern end will also take shape using a "blended" approach that will put high-speed trains on Caltrain commuter tracks to save money...But it would be a mistake to start over---any plan of this magnitude is going to require adaptation.

The "blended" system was proposed to get political support in northern and southern California by spreading the money around to local governments. The problem is that sharing tracks with other systems results in a slower system that no longer qualifies as the high-speed rail promised to state voters in 2008, not exactly a minor "adaptation" in the project. This is why previous supporter Quentin Kopp turned against the project. (See also Kopp's later declaration in support of the successful litigation against the project.)

High-speed rail must go forward, judiciously and expeditiously.

Onward "expeditiously" to state bankruptcy!

The high-speed rail project is also a test of Governor Brown's integrity.

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At 12:10 PM, Anonymous Anonymous said...

This underscores the failure of your - and many other failed thinkers.

Voters were promised that those who use the system would pay for it, not state taxpayers:

“High-speed rail is good for society and it’s good for the environment, but it’s not a profitable business,” said Mr. Barrón of the International Union of Railways. He reckons that only two routes in the world---between Tokyo and Osaka, and between Paris and Lyon, France---have broken even (NY Times, May 29, 2009)."

Looking at the P&L of the railroad itself is looking at a forest and only seeing one tree. The P&L of the railroad itself does not account for economic benefits and tax savings that exist because of the railroad. Caltrain is a money losing enterprise. But if we were not subsidizing Caltrain, we'd have to spend an order of magnitude more money to subsidize more freeway lanes, or accept that there will be congestion and suffer the economic consequences.

"Good for Society". Apparently you prefer "Bad for Society"

At 3:57 PM, Anonymous Anonymous said...

Anyone who has been to Japan has seen the ravages that high speed rail has inflicted on the country. It's been in a high-speed rail-induced recession for the past 20 years at least.

At 4:29 PM, Anonymous Anonymous said...

Rob if it's not high speed rail, please offer a better alternative for how we can reduce the 35,000 Americans killed every year driving and how much time Americans spend in traffic each year. If you don't offer an alternative, you commentary is useless.

At 4:34 PM, Anonymous Anonymous said...

How much money have we spent building and maintaining I-5? Have we made our money back? Does it break even every year?

At 7:06 AM, Anonymous Gregski said...

If high-speed rail enthusiasts were truly committed they would pool their own financial resources to purchase a controlling stake in the Union Pacific or the Burlington Northern and then direct its management to construct and operate a trans-state passenger rail system.

Naw, it's far cheaper and easier to enlist the police power of the state to confiscate taxpayer wealth to underwrite their boondoggle.

Let's be thankful that the taxpayers were wise enough to insist on financial prerequisites before encumbering themselves with debt, and that a judge was faithful enough to uphold the necessity of those prerequisites.

At 9:41 AM, Blogger Rob Anderson said...

Yes, state voters barely passed Prop. 1A in 2008 only because of the protections for taxpayers written into the proposition. What Democrats and the unions---even dumb projects create jobs---wanted was something like what's been done in Europe and Asia: taxpayers build the system, turn it over to a private operator after it's built, and continue to subsidize its operation forever (see this, this, and this).

The reality: there's no profit in high-speed rail without taxpayer subsidy. Amtrak gets $1 billion in annual federal government subsidies. That's why Warren Buffet invested in freight rail, not passenger rail.

At 9:48 AM, Anonymous Anonymous said...

If high-speed rail enthusiasts were truly committed they would pool their own financial resources to purchase a controlling stake in the Union Pacific or the Burlington Northern and then direct its management to construct and operate a trans-state passenger rail system.

If those high speed rail enthusiasts would then be paid by the state and federal government the resultant savings from reducing highway maintainance costs for I-5, and the cost of adding runways to airports, they would quickly take you up on that offer.

At 3:32 PM, Blogger Rob Anderson said...

Why would Warren Buffett sell Burlington, unless the offer was too good to refuse? Anyone who thinks high-speed rail is a good investment without government subsidies is surely a dumb investor.

See Buffett explain to Charlie Rose why he bought the freight rail company in the first place.

At 6:17 PM, Anonymous Anonymous said...

"share of workers who get to work by private car declined in 99 of America's 100 largest urbanized areas"

Why is this happening?

At 10:25 PM, Anonymous Anonymous said...

Gas taxes and tolls don't make up for the amount of spending we do on road repairs, police, rights of way, land for free parking, and the like to build the road network, but somehow public transit is expected to have a farebox recovery ratio greater than 1 when automotive transit is not expected to?

At 10:26 PM, Anonymous Anonymous said...

Driving is heavily subsidized. What is the farebox recovery ratio for spending on roads?

At 10:27 PM, Anonymous Anonymous said...

Railroads and streetcars were hugely profitable in the US, until the government subsidized cars by:
- giving everyone high-quality roads
- setting road tolls to zero or almost nothing
- making dense housing illegal to build with zoning laws
- requiring businesses to provide free parking
- requiring home builders to provide free parking
- all the crap US does internationally to secure oil supply lines
- not taxing pollution, noise, or other car externalities
- enacting crazy regulations on railroads; for example, American railroads can't buy European trains, they must build their own custom-designed trains at enormous expense
and on and on and on it goes, all at taxpayer (or business owner) expense. An American on a road trip thinks cars are cheap because everyone else is forced to absorb the cost.

At 10:31 PM, Anonymous Anonymous said...

Bobby I bet your blog woulda been popular in like 1940:

At 10:39 PM, Anonymous Anonymous said...

Hey Rob what'd you think of the government having to bailout the auto companies? The U.S. government has lost about $9.7 billion in connection with its rescue of General Motors.

At 10:41 PM, Anonymous Anonymous said...

We seriously need to stop wasting money on transportation in this country:

At 10:55 PM, Anonymous Anonymous said...

You understand that road tax does not cover the cost of roads/highways, which cost extra billions of dollars a year. Right?

At 7:48 AM, Anonymous Gregski said...

Rob, are these rail zealots really as ignorant as they sound?

Alternatives to high-speed rail? How about TOLL ROADS? This is an inter-city transportation system that HAS attracted private investment in several places in North America.

Does I-5 make a "profit". probably, if you add up all the excise taxes drivers pay for the gasoline and diesel fuel that is combusted on that highway.

If gas, diesel and tolls aren't raising enough revenue then they can be increased by the state. This would be a time-honored and appropriate act of statism, unlike the corporatism of state-owned and managed railways.

Of course, gas and diesel taxes probably wouldn't have to be increased if we spent the revenue on the roads that people drive on instead of worthless boulervardification projects on Masonic Avenue.

At 11:10 AM, Blogger Rob Anderson said...

Like the bike fanatics, the rail zealots---there's a lot of overlap here---want to change the subject to cars instead of focusing on the specifics of this poorly conceived project. Here's a good place to start learning about it.

At 11:19 AM, Blogger Rob Anderson said...

Randal O'Toole is also a good source on rail issues.

At 12:03 PM, Anonymous Anonymous said...

Rob trains and cars are related bc they're both ways for people to go places.

At 12:03 PM, Anonymous Anonymous said...

Rob please tell me how much we spent building and maintaining our highways in California, and how much revenue they bring in. Thanks.

At 3:16 PM, Blogger Rob Anderson said...

I don't know and I don't know why I should care. This post is about California's high-speed rail project. Maybe you should do some research and report back on your findings, which you can then post on your blog.

At 3:45 PM, Anonymous Anonymous said...

Rob high speed rail is about transportation, as is the highway network. Having rail will mean those people dont add to car traffic. They are linked, and related, and that;s why it's important to bring up cars and rail together. Your ignorance of that is telling. We subsidize the highways in California with billions of dollars every year. We don't collect nearly what it costs us to build and maintain them. So you saying that HSR shouldnt be built for the same reason is a flawed argument on that alone.

At 3:46 PM, Anonymous Anonymous said...

Rob I read that link and it uses the same flawed logic you use. "The CHSRA’s Train Will Need A Subsidy Forever". So have our highways, which we have subsidized for decades and will continue to do so.

At 9:30 AM, Blogger Rob Anderson said...

You can riff on the subsidy argument all you want, but when you focus on this particular project, you soon learn that Prop. 1A forbids any government subsidy to operate it if/when it's built. That's what the legislation says(2704.8 (J: "The planned passenger service by the authority in the corridor or usable segment thereof will not require a local, state, or federal operating subsidy.") and, just as important, that's how it was sold to state voters.

Unfortunately for you train fetishists, the state doesn't even have enough money to begin building the system, and it can't show the court how it's going to get it.

Judge Kenny is tasked with upholding that law and the will of California voters, which is why he ruled against the CHSR Authority.

At 12:49 PM, Anonymous Anonymous said...

So, Rob, I'll repeat because you continue to dodge the question: how much do taxpayers spend in California each year subsdizing the highways?

At 12:57 PM, Blogger Rob Anderson said...

And I'll repeat my response because you ignore it: the California High-Speed Rail project cannot by law be subsidized by the taxpayers. Your point, such as it is, is moot for this project. Since this is your obsession, why don't you do some research to find out the answer?

At 8:22 PM, Anonymous Gregski said...

Gotta love the mind-set, here, Rob.

The motor-road system is subsidized. That's dishonest, unfair and dysfunctional.

Here's how to make things better: Let's borrow and spend hundreds of billions to create another transportation system that does the same thing and subsidize it too!

At 10:04 PM, Anonymous Anonymous said...

Hi Rob, found some research you asked for. Looks like our highways lose over $100 billion a year:

Why do you think trains shouldn't be subsidized the way highways are?

At 2:53 PM, Anonymous Gregski said...

"Why do you think trains shouldn't be subsidized the way highways are?"

The question presupposes that Rob is in favor of subsidizing highways. I don't recall ever reading of such favor in his blog.

Has it ever occurred to you that plenty (I suspect most) Americans of post-juvenile sensibility are opposed to being forced to pay for transportation services they themselves don't use?

I am sensing a desire for a fool's paradise in which everybody's ride is magically paid for by someone else. OK, maybe the magic someone else DOES exist: future generations of yet-to-be-born Americans who will be stuck repaying the Chinese for the money we borrowed to subsidize your rides in your lifetimes.

And truly, why should you care? You get your choo-choo rides now and you'll be dead when the tickets need to be paid for.

At 7:35 PM, Anonymous Anonymous said...

The question presupposes that Rob is in favor of subsidizing highways. I don't recall ever reading of such favor in his blog.

Rob has stated "cars are never going away". The only way this can be true, is if we continue to subsidize roadways and gasoline production. Ipso facto, Rob believes we should subsidize roadways and gasoline production.

At 11:02 PM, Anonymous Gregski said...

Yep, Rob, you called it. You try to start a conversation about trains or bikes and all your readers want to write about is cars.

Why are they posting on your blog instead of Road and Track or Motor Trend?

At 1:54 AM, Anonymous Anonymous said...

Gregski I love you bro.

At 1:55 AM, Anonymous Anonymous said...

Bob, is it true that you support subsidizing the highways with taxpayer funds?

At 5:29 PM, Blogger Rob Anderson said...

Yes, of course. Our highway system has already been built, so it's mostly a matter of maintenance now, much of which is paid for through the gas tax.

High-speed rail hasn't been built yet, which makes it a huge initial investment.

But the whole notion of "subsidizing" the California HSR project is moot, since the authorizing legislation makes that illegal.


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