Monday, February 14, 2011

The Affordability of High Speed Rail

As you probably know, Robert Samuelson comes from the "If I favor something, we can safely assume that its cost will be 'pocket change'" school of economics. And although he has since admitted that he grossly underestimated the cost of the Iraq war, he has not backed away from his definition of what constitutes "pocket change" - the type of expenditure our nation is rich enough to make without any serious reflection about costs. In terms of discretionary spending:
People inevitably ask that question, forgetting that the United States has become so wealthy it can wage war almost with pocket change. A war with Iraq would probably cost less than 1 percent of national income (gross domestic product).
So we can spend amounts of up to, say, $140 billion per year and dismiss the expenditure as "It's only pocket change". In terms of recurring spending:
[The defense budget] now runs about $350 billion annually. That's a lot of money but, in an economy producing more than $10 trillion annually, isn't much of a burden. It's slightly more than 3 percent of GDP.
So we're now talking "$500 billion per year isn't much of a burden". Except, of course, if we're talking about Medicare or Social Security in which case a comparable sum magically becomes an unsustainable burden.

I'm not thrilled with Samuelson's formulation as it seems to be too easy a dodge - you break down the spending you support into small chunks, with self-interested projections about future costs, while aggregating the costs you oppose, such that your agenda can be paid for with "pocket change" and everything else is "unaffordable." If you have $1, a penny may be "pocket change" but that doesn't mean you have more than 100 pennies to spend - you still have to do the math and set priorities.

If we give Samuelson the benefit of the doubt, we can acknowledge that when he made his "pocket change" argument he argued that, as affordability was not a valid issue, the next step should be to examine whether we should "afford" something. But when Samuelson doesn't support an expenditure he consistently rejects his own "pocket change" formulation in favor of the lament, "It costs too much". The latest case in point, high speed rail.
Vice President Biden, an avowed friend of good government, is giving it a bad name. With great fanfare, he went to Philadelphia last week to announce that the Obama administration proposes spending $53 billion over six years to construct a "national high-speed rail system." Translation: The administration would pay states $53 billion to build rail networks that would then lose money - lots - thereby aggravating the budget squeezes of the states or federal government, depending on which covered the deficits.
Strangely, I'm having a difficult time understanding why Samuelson sees $140 billion (<1% of GDP) as "pocket change" that trumps the "can we afford it" argument, but $9 billion is an astronomical, unaffordable sum.
High-speed rail would definitely be big. Transportation Secretary Ray LaHood has estimated the administration's ultimate goal - bringing high-speed rail to 80 percent of the population - could cost $500 billion over 25 years.
So in Samuelson's "worst case scenario" with 80% of the population ultimately served by high speed rail lines, an initial infrastructure investment of $20 billion per year is a "stupendous sum". The point is, thanks to his "we can afford it" argument in relation to the Iraq War and all things military, Samuelson's "we can't afford it" argument about high speed rail is... a train wreck. In his present argument he rails about costs because he opposes the program and his policy arguments are weak; in the former argument he spoke of our nation's wealth and of much larger expenditures as "pocket change" because he supported the program and similarly could not compose a compelling policy argument.

Samuelson's policy argument rests upon a broad range of assumptions: First, he presents an anecdote about an opponent of rail transportation from the Cato institute who found that bus travel from DC to New York City was considerably cheaper than rail. Never mind if that's the fair comparison at present - is the train cheaper, for example, than air travel?

Second, he assumes that high speed rail is going to be the equivalent of low speed rail, such that people choosing between rail and other forms of travel won't consider the speed and convenience of high speed service. I suggest that he travel from London to Paris by three methods, car (and ferry or hovercraft), air and high speed rail, then get back to us on which was the most convenient. Samuelson argues that air travel is presently "quicker" than trains; perhaps he has forgotten that we're talking about "high speed rail"?

Third, he assumes that oil prices will remain low. I'm not sure what date Samuelson would accept as the date for "peak oil", but it's more than safe to assume that the cost of bus travel and air travel will rise. Samuelson may not be aware of this fact, but once you build a railroad and buy the trains and cars it's a relatively cheap way to get people or freight across long distances. You don't see trucks hauling coal from mines to the nation's coal-burning power plants - it's sent by train.

Fourth, Samuelson appears to believe that the nation's interstate highway system is free. That it doesn't require massive, annual investment. That we don't need to invest hundreds of billions of dollars in roads and bridges just to maintain the status quo. That a growing population will find a cross-country drive as pleasant as he did, back in the dawn of the era of the interstate highway, rather than as a congested drive across potholed roads and crumbling bridges.

When I was planning my last cross-country trip, I looked at rail travel. I quickly dismissed it as a possibility. Why? Because unless your goal is to spend a good chunk of your vacation admiring the landscape (or cityscape) through a train window, it eats too much time to travel by train. There are issues even in a short-term trip, such as from Ann Arbor to Chicago, due to the number of stops the train must make at small town stations, the many stretches of urban track for which the speed limit is low, and the periodic stops to allow freight trains to pass - freight carriers own the tracks and they get priority. I would hope that a high speed rail system didn't follow a similar "stop in every town" model, as frequent stops would significantly reduce the benefit of "high speed".

It's also not much fun to be on a train full of people who constantly chatter on cell phones or leave their cell phones on while sleeping through phone calls and voice mail alerts that come through every five or so minutes. The comfort level of the cars and seating was suboptimal - not that air travel is great, but the incremental cost for offering more space and better seats is much lower for rail travel. But I didn't even consider bus travel. I suspect that, while he might not admit it, were Sameulson to travel across the country by Greyhound he would recognize why most people who can afford an alternative eschew long-distance bus trips despite the price point. Perhaps he could simply stop by a few bus stations and absorb the ambiance. Seriously, are you left with the same impression as me - that the extent of Samuelson's experience with mass transit bus and rail travel is reading the anecdote of the guy from Cato - that for Samuelson, a limo to the airport then flying coach would be "slumming it"?

I'll admit having some skepticism of high speed rail, not so much in theory but in practice. I am skeptical that the planners will avoid having the train stop every fifteen minutes, doubling or tripling the duration of a "high speed" trip between more significant population centers. I'm skeptical that the companies that run high speed trains will invest in the level of moderate to high comfort you can enjoy in many other nations. I'm skeptical that governments will provide for the construction of relatively direct rail lines between population centers. I would like to see a solid plan in place before spending is authorized.

But with rising fuel prices, by the end of the next quarter century (assuming he's still alive) even Samuelson might be troubled by the cost of air travel. So rather that presenting "we can't afford it" arguments that he would probably reject out-of-hand if we were talking about, say, invading Iran, perhaps Samuelson can do us the favor of looking at the facts.

5 comments:

  1. That is, he does not acknowledge opportunity costs.

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  2. I think in many ways the biggest hurdle to high speed rail is going to be the current state of the deficit and the economy.

    Right or wrong and no matter what the "long term" economic impact might be, all we are going to hear about is the cost.

    CWD

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  3. That's called democracy. Times are good, "We don't need it." Times are tough, "We can't afford it."

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  4. . . . they could call the portion built in MI the "People Mover II" in honor of the last "mass transit" project that was completed in MI. : )

    CWD

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  5. Or the emigration express.

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