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High-Speed Rail Initiative Stoked by Obama Budget

Politics / Infrastructure Feb 11, 2011 - 06:45 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleJason Simpkins writes: U.S. President Barack Obama is poised to submit his fiscal 2012 budget on Monday, and one of its outlays will be $8 billion for high-speed rail development.

Obama first outlined his vision for an expansive high-speed rail network in 2009. The initiative promised to create jobs, lower carbon emissions, increase efficiency, and improve commerce.

Since then, Republican opposition has worked hard to derail the project, which it deems an unaffordable waste of taxpayer funds. But just when it appeared his critics had taken control of the debate, the President redoubled his commitment to the project, calling for $53 billion to be spent on high-speed rail projects over the next six years.

Obama said in his State of the Union Address that he wants 80% of Americans to have access to high-speed rail by 2025.

Speaking at Philadelphia's abiding 30th Street Station, Vice President Joe Biden lamented that the United States, which "taught the world" about transportation in the 19th and 20th centuries, has seen its vast network of roads, rails and bridges fall pitifully below global standards.

"If we don't get a grip, folks, they're going to be teaching us," he said of the United States' global competitors. "This is about seizing the future. If we do not, you tell me how America is going to be able to lead the world in the 21st century."

Biden claims to have taken more than 7,900 train trips during his time as a senator.

To be sure, America's railway system is a global laughing stock. The fastest passenger trains in the United States run at the maximum allowable speed of 79 miles per hour, while trains in Europe and Asia typically travel in excess of 125 mph.

To get America's trains up to speed, the administration has already doled out some $10.5 billion.

California has gotten the biggest slice of government funds, taking in about 30%. Thirty percent of the $53 billion announced by the Obama administration would bring total funding for California's high-speed rail project to $27.6 billion. That's more than half the estimated $43 billion cost of the total project, which aims to link Los Angeles and San Francisco.

California has the largest and most advanced project, with construction set to start next year in the Central Valley. The state so far has secured $9 billion of funding from state bonds and $3.6 billion from the federal government. Another $16 billion over the next six years could be enough to entice private investors to finance the remainder of the necessary investment. It also could be enough to extend the first stage of construction - a $5.5 billion, 120-mile line between Fresno and Bakersfield - toward the San Francisco Bay Area and its 7.5 million residents.

Still, the project's outcome is far from guaranteed. Well-funded critics have argued that the total cost of the high-speed rail project will run over its $43 billion budget. Californians Advocating Responsible Rail Design projects the actual cost for the project will be $63 billion.

The California High-Speed Rail Authority also has been criticized for taking into account $10 billion in funding from the private sector and $5 billion from local governments, even though it has no firm commitments from either.

What's more is that the state of California is already faced with a $28 billion budget gap.

California's situation is not unique. Critics of high-speed rail at both the state and federal level are adamant that it's too costly. In fact, newly elected Republican governors in Ohio and Wisconsin chose to abandon the high-speed rail projects signed on to by their predecessors, returning $1.2 billion to the federal government. That money was subsequently dispersed to the 12 states that are continuing their programs.

California got more than half of the money diverted from Wisconsin and Ohio, and Florida wasn't far behind. Still, Florida Gov. Rick Scott, a Tea Party candidate, has indicated he too might pass on the high-speed rail offer - despite the fact that the federal government has now agreed to put up more than 90% of the $2.6 billion cost for the Orlando-Tampa line.

There is bipartisan support for high-speed rail, but disagreement on whether it should be financed with tax dollars or through private investment. U.S. Rep. John L. Mica, R-Fla., who chairs the House Transportation Committee, says too many taxpayer dollars already have been wasted on projects that haven't lived up to their billing.

"With the first $10.5 billion in administration rail grants, we found that... what the administration touted as high-speed rail ended up as embarrassing snail-speed trains to nowhere," he said. "Rather than focusing on the Northeast Corridor, the most congested corridor in the nation and the only corridor owned by the federal government, the administration continues to squander limited taxpayer dollars on marginal projects."

The Northeast Corridor links Washington, New York and Boston. The Acela Express, a special train that runs between New York and Washington with a stop in Philadelphia, is the closest the United States has to high-speed rail. Its highest speed is 150 mph, but it averages less than 70 mph.

Of course, the Northeast Corridor is one of the 10 corridors the Obama administration has targeted for high-speed rail. Amtrak, America's government-run passenger rail service, has put forth a 30-year $117 billion plan that would have trains traveling at 220 mph from Washington to New York. The plan would include a new station in Baltimore and a new, six-mile tunnel under the center of that city.

Amtrak President Joseph Boardman has said the system would reduce the travel time between Washington and New York City from 162 minutes (2 hours and 42 minutes) to 96 minutes (1 hour and 36 minutes) and the New York to Boston time from 215 minutes (3 hours and 35 minutes) to 84 minutes (1 hour and 24 minutes).

Amtrak is asking for $4.7 billion annually over 25 years to fund the project. However, the carrier says the service would generate approximately $900 million annually, and would create more than 40,000 full-time jobs annually over the 25-year construction period. Construction would include new track, tunnels, bridges, stations and other infrastructure.

"Amtrak's High Speed Rail plan will create jobs, cut pollution and help us move towards a modern and reliable transportation system network in the Northeast," said U.S. Sen. John Kerry, D-Mass. "As countries around the world continue to build out their transportation systems, we cannot afford to fall further behind. This is an important down payment on the massive commitment necessary to bridge our infrastructure gap."

Rep. Mica was far more dismissive.

"Amtrak's Soviet-style train system is not the way to provide modern and efficient passenger rail service," he said.

Indeed, it's becoming increasingly clear that the only thing politicians can agree on is the fact that other countries are leaving us behind.

New York Mayor Michael Bloomberg threw his support fully behind high-speed rail at a congressional hearing last month, as he recounted a 2007 visit to Shanghai, where he boarded a magnetic levitation train that travels at 250 mph.

"I had a full cup of coffee and I watched the coffee," said Bloomberg. "It didn't vibrate once. It was really quite amazing. And other countries are trying to do the same thing, create other modes of transportation that are much more efficient, much more rapid and answer the needs in a global world."

China this year will unveil the key links of a bullet-train network that will stretch across that country's 3,696,100 square miles of rugged terrain. Beijing is spending $113 billion a year on railway infrastructure. The 105-mile high-speed rail line that connects Shanghai and Hangzhou cost $4 billion and took just two years to build. The 688-mile north-south line connecting Beijing and Wuhan will be completed by December of this year, as will the epic 1,291-mile east-west route between Shanghai and Chengdu.

"[High-speed trains] work everywhere else in the world," Alstom Transport Vice President Chuck Wochele, whose French firm hopes one day to be building trains for the U.S. market, told TIME magazine. "Unfortunately, it's been politicized in the U.S."

Source :

Money Morning/The Money Map Report

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