Time to Derail the Dems' Bullet Train Dreams

Buried within the latest stimulus was an $8 billion earmark for high speed rail. But despite the Dems' enthusiasm the plans don't make economic sense.

Among the many obsessions Democrats are currently preoccupied with, high-speed rail is the most perplexing—not because it isn’t the type of project that Democrats typically embrace (high-speed rail is, in fact, the epitome of such), but rather it’s a project that--like many in recent history--provides minimal economic benefit relative to cost. Demand for high-speed rail (HSR) is what happens when liberalism tends to get ahead of itself, and when the temptations of idealism tend to squeeze out considerations of practicality. Most recently, buried within President Obama’s stimulus package, was an $8 billion earmark for high-speed rail throughout the country, including an additional $1 billion annually.

It’s quite fun to imagine trains zipping around the country, allowing us to grab dinner in NYC and be back to DC in time to watch Sunday’s HBO lineup with no security lines or traffic delays to deal with. The consistent strain of Europhilia and occasional Sinophilia (namely, Tom Friedman) that runs through idealistic liberals has caused advocates to point to the success of high-speed rail in other countries as, among other things, evidence of America’s decline, structurally and otherwise. Commentators love to cite this country’s lack of HSR as a sign that Americans lack the ability to “have a bold vision about our future” or that we “lack the willingness to take the bold sort of steps that have defined our past,” or similarly vapid phrases.

Critics, however, are not so convinced, and the reason is simple: high-speed rail is expensive, in both initial construction and long-term operation costs. This country also has air and road travel that gets the job done just as well, typically at cheaper rates. Finally, constructing high-speed rail often requires the construction of entirely new rights-of-way, a process that requires significant planning, funding, and, most abhorrent, the confiscation of property in order to make way for track. None of this would be so unpalatable were it not for the fact that America’s transportation system, despite its imperfections, is able to operate fluidly enough without exceeding capacity.

Let’s look at three regions that have built high-speed rail lines that have drawn envy from advocates of HSR: Japan, China, and Europe. Japan’s geography is conducive to high-speed rail, due in part to the fact that the thin island runs mainly along a north-south axis which allows essentially one corridor in order to provide access to it’s major cities. The Shinkansen line linking Tokyo and Osaka was originally built in order to solve problems of excess capacity, and earned enough money to cover operating costs and original construction costs. However, once Japan’s high-speed lines expanded, they have operated at a loss. The lesson that Japan teaches is that geography matters: for the United States, this means that high-speed corridors along the California coast (already planned), and the Northeast Corridor (semi-existent) are most conducive to high-speed rail, which relies upon limited turning in order to maintain top speed. In addition, cities running in a line are more cost-effective, as less ground has to be traveled in order to incorporate every city.

China, meanwhile, is building a significant portion of its high-speed infrastructure from scratch, which means it gains a far greater marginal utility per dollar spent on high-speed rail. China, realizing that if it must build rail lines might as well build them to equip high-speed, has done just that. In the United States, meanwhile, with significant rail infrastructure already in place, overhauling the system to simply shave off time from commutes or add limited convenience provides far less benefit per additional dollar spent. In addition, the Chinese government is far less sensitive to the political and ethical considerations of property confiscation, otherwise known in America as eminent domain, which is widely required for any sort of significant rail development. It isn’t exactly in the American government’s interest to go about confiscating property to spend billions of dollars in this political climate.

Europe, meanwhile, benefits from a densely populated cluster of cities and surrounding suburbs, where most economic activity occurs. In addition, American air infrastructure is far more sophisticated than that of Europe, due mainly to our geography, just as Europe’s trains are suited to its geography. In addition, the price of gas in the EU is substantially higher than in America, as are toll fares, meaning that driving is far less cost-efficient in Europe than it is in America.

A key aspect of America’s current rail infrastructure is that much of it is devoted to freight. As The Economist noted back in July:

…the problem with America’s plans for high-speed rail is not their modesty. It is that even this limited ambition risks messing up the successful freight railways. Their owners worry that the plans will demand expensive train-control technology that freight traffic could do without. They fear a reduction in the capacity available to freight. Most of all they fret that the spending of federal money on upgrading their tracks will lead the Federal Railroad Administration (FRA), the industry watchdog, to impose tough conditions on them and, in effect, to reintroduce regulation of their operations.

Furthermore, “American rail freight is among the cheapest in the world, costing less than half as much as in Japan or Europe. After adjusting for differences in purchasing power it is cheaper even than in China.” This is significant, and should not be overlooked. 70% of coal, which must often be transported from isolated rural areas dominated by the mining industry, is carried by freight. In light of these facts, it’s difficult to justify expanding passenger rail service considering that

[Freight] capacity will have to rise by nearly 90% to meet forecast demand by 2035. The investment bill could rise yet more because of a change in the pattern of trade: in 2014 the Panama Canal opens a second lane, doubling its capacity and allowing it to carry bigger container vessels and bulk ships. Coming through to Gulf of Mexico and East Coast ports, these vessels will increase the need for better rail links inland.

Finally, and most concerning, is the fact that “the trouble for the freight railways is that almost all the planned new fast intercity services will run on their tracks. Combining slow freight and fast passenger trains is complicated.” The result is that either high-speed rail will have to be built on top of already existing infrastructure, limiting top-speeds and disrupting pre-existing freight routes, or entirely new routes will have to be constructed. The complications from the former have been explained, those from the latter are perniciously expensive.

Edward L. Glaeser, professor of economics at Harvard University, has estimated the costs of high-speed rail in the United States. Glaeser based his estimates around a hypothetical 240-mile link between Houston and Dallas, in which he used GAO estimates of $50 million per mile in construction costs. Taking into account interest and capital costs, he concluded the actual cost to be “$2.5 million a mile per year, or $600 million for a 240-mile line.” Adding conservative annual maintenance costs to that figure brings the total to $648 million per year. He continues:

How many riders will take high-speed rail between Houston and Dallas? Amtrak gets about 11 million customers in the Northeast Corridor, which has four large consolidated metropolitan areas together totaling 44 million people. If that four-to-one ratio held in Texas, then the high-speed rail link could expect three million riders, and more to come as Texas grows.” The resulting conclusion is that “1.5 million trips times $68 a trip means $102 million for benefits minus operating costs. Annual capital costs came in $648 million, more than six times that amount. If you think that the right number is three million trips, then the benefits rise to $200 million, and the ratio between the per rider net benefits and costs drops to one-to-three. This is the cruel arithmetic faced by people, like myself, who would love to be pro-rail.

Even if we assume, like critics such as Ryan Avent, that Glaeser’s numbers neglect a substantial number of not-so-obvious future economic benefits, an annual shortfall of hundreds of million dollars is, ultimately, what HSR would face. Even if it led to exponential economic development and significantly increased ridership, it’s difficult to make up such a deficit—it’s simply too big.

Let’s assume that the routes such as Dallas-Houston, or Portland-Seattle, or NYC-Chicago are ideal because they offer an alternative to air travel by providing direct links between large commercial hubs. It brings delight to imagine popping onto a train in New York and arriving in Chicago a few hours later as the outdoor scenery whizzes by, without any stops. It seems to me that this is what most people envision when they think of high-speed rail. Yet such a route seems politically impossible. Can you imagine a world in which politicians willing to fund such a route would do so knowing that a high-speed line would be passing through their constituent towns without stopping? One can already hear the echoes of indignation.

Robert Samuelson recently took down two-pillars that high-speed rail advocates tend to rally around: environmental benefits and congestion relief. While these two benefits are typically tacked onto arguments in favor of rail in a way similar to the “But wait! There’s more…” type of tag lines, the numbers aren’t so impressive:

High-speed inter-city trains (not commuter lines) travel at up to 250 miles per hour and are most competitive with planes and cars over distances of fewer than 500 miles. In a report on high-speed rail, the nonpartisan Congressional Research Service examined the 12 corridors of 500 miles or fewer with the most daily air traffic in 2007. Los Angeles to San Francisco led the list with 13,838 passengers; altogether, daily air passengers in these 12 corridors totaled 52,934. If all of them switched to trains, the total number of daily airline passengers, about 2 million, would drop only 2.5 percent. Any fuel savings would be less than that; even trains need energy.

Indeed, inter-city trains - at whatever speed - target such a small part of total travel that the changes in oil use, congestion or greenhouse gases must be microscopic. Every day, about 140 million Americans go to work, with about 86.5% percent driving an average of 25 minutes (three-quarters drive alone; 10 percent carpool). Even assuming 250,000 high-speed rail passengers, there would be no visible effect on routine commuting, let alone personal driving. In the Northeast Corridor, with about 45 million people, Amtrak's daily ridership is 28,500. If its trains shut down tomorrow, no one except the affected passengers would notice.

Matthew Yglesias, meanwhile, argues that spending $1 trillion on a national high-speed rail system would be a bargain, based on thirty-year bond interest rates. But is it really? Do the costs truly outweigh the benefits? It would appear, from the collected and injected analysis above, that this is not the case. Even if a nationwide high-speed rail system would bring improved convenience to some parts of the country, the price tag is still difficult to justify, especially in these times. Simply wishing to upgrade our already extant rail system while we face huge budget deficits in order to keep up with the rest of the world is the equivalent of buying a big screen television in the midst of a bankruptcy, simply because your neighbors got one.

Such an ambitious plan to implement a national high-speed rail program illustrates the trend over the past few decades that every policy receive federal focus and devotion. If Texas deems it economically imperative that they develop a high-speed rail system, then let them vote on it, develop it, and pay for it. We shouldn’t be paying billions (Yglesias’ “bargain” $1 trillion system would cost $58 billion per year over thirty years) to subsidize a tiny portion of Americans who would potentially use high-speed rail.

Republicans, anxious as they are to make budget cuts, might not feel so radical contemplating placing—at the very least—a freeze on the earmarked $1 billion a year dedicated toward high-speed rail. Until Americans begin genuinely clamoring for a high-speed rail system, we should be hesitant to commit financially to such a tenuous venture. Speaking on the subject of China’s high-speed rail system, Zhao Jian, a professor at Beijing Jiaotong University claimed that his government “just wants to have the biggest and fastest number one train set in the world.” The United States would be wise to avoid this temptation.