High-Speed Rail: A Big-Ticket Item That Drives Deficits

WASHINGTON—On Tuesday President Obama promised to rein in the burgeoning budget deficit and put in place a “pay as you go” rule, in which dollars can only be spent if they are saved elsewhere or if Congress raises taxes to pay for them.

Speaking from the East Room of the White House, he declared, “This, in part, requires the kind of line-by-line review of the budget that is ongoing to remove things that we don't need and make the programs we do need work more efficiently. There are billions of dollars to be saved this way. But much of our effort will entail going after the big-ticket items that drive the deficits.”

One such big-ticket item is high-speed rail, an expensive form of transportation that will reach only small segments of the country and that will not substitute for highways. Mr. Obama’s initial payment for high speed rail would be funded partly through $8 billion from the $787 billion stimulus plan, and partly through a separate five-year, $5 billion investment proposed in the 2010 budget.

Developing a true, nationwide high-speed rail network would cost far more than $13 billion. Building true high-speed lines—capable of speeds of 150 to 200 miles per hour—on newly-laid track, as well as incremental improvements in existing rail infrastructure, could cost between $250 billion and $500 billion, perhaps more. Mr. Obama’s initial payment would be just the first drop in the bucket.

Some Americans admire the railroads they see on trips to Europe and Japan and think America should have similar trains. But this ignores the exceptionally different demographic and economic environments.

European and Japanese population densities are high, which makes train travel more efficient, even though railroads benefit from substantial government subsidies, paid for by higher levels of individual taxation. Their fuel prices, including taxes, are higher, making driving more expensive relative to other travel options. Their land area is relatively smaller, so travel time by train is more competitive with air travel.

The administration claims that high-speed rail would be faster, cheaper and easier than building more freeways or adding to an already overburdened aviation system—but has published no supporting analysis. Potential benefits cited are job creation; decreased traffic congestion; reduced dependence on oil; increased rural development; and a potentially rich new market for rail equipment makers.

Proponents of high-speed rail have exaggerated its benefits. Transportation jobs can be created through expansion of highways, using private funding from tolls rather than taxpayer dollars. And additional high-speed rail is unlikely to ease traffic congestion, because traffic congestion occurs within cities, rather than outside them.

Evidence from Japan and Europe indicates that expansion of rail does not stop increases in road transportation and therefore would not reduce dependence on foreign oil. In fact, the opposite has occurred. Since high speed rail was built, rail has lost market share to cars.

It’s unclear how the $13 billion would be divided among the different high-speed rail initiatives that are in various stages of planning. Would it be spent in California, Texas, the Midwest, Florida, Nevada and North Carolina, or would it be focused on the Northeast Corridor, which has high ridership? What is certain is that the decision will come down to political rather than efficiency considerations.

Obstacles to high-speed rail, as well as funding, include the complex and lengthy environmental review and approval process for construction; the specific technology requirements for entirely separate rights of way for true high-speed rail; and the need to increase investment substantially in other modes of transportation.

While comparable for station-to-station travel, rail loses the "high-speed" advantage over cars when travel is suburb-to-suburb. Because steel wheels on steel rails cannot be quickly stopped, rail trains need miles of empty space in front of them. Expressways, on the other hand, can carry over 2,000 cars, or 1,000 buses, per lane per hour, so have much bigger carrying capacities.

Last year Amtrak had an operating loss of over $1 billion. The question for good government is whether expenditures on rail would be more, or less, beneficial than other governmental expenditures.

Many are comparing the development of a high-speed rail network with President Eisenhower's initiative in pushing for the interstate highway system. But this is deficient because the highway system was created to serve an evolving, growing, congested transport mode. Passenger service on fixed rails, on the other hand, is an old and outmoded technology. In addition, the highways were designed to be paid for by users, by means of a dedicated fuel charges, but rail services have to be paid for by taxpayers.

If Mr. Obama is looking for a big-ticket item that drives deficits, he need look no further than high-speed rail.