You Wonder Why We Have Deficits? Federal Train Subsidies

Amidst Harry Reid's $1.1T omnibus spending bill and the wrangling in Congress over retaining current tax rates, here's a disturbing bit of news from the editorial pages of the Wall Street Journal, entitled Subsidy Trains to Nowhere.

The article noted that, even as newly-elected governors in Ohio and Wisconsin plan to cancel ill-advised rail projects in their states, thanks to federal subsidies, their voters will continue to pay for bad rail projects elsewhere in the US.

California's questionable Los Angeles-San Francisco rail line comes under scrutiny. Here's the detail from the editorial on that project,

"Consider the case of California, which is one of the states getting cash for trains that the Midwesterners didn't want. Earlier this month its high-speed rail authority approved construction on the first 65-mile segment of a 500-mile bullet train. The first miles will connect the small towns of Borden and Corcoran in the Central Valley for a mere $4.15 billion. Yes, that's billion.

One other detail: The segment won't even begin operating until more of the line is completed, which on present trend could be never. Read on and weep.
In the mid-1990s, California created a high-speed rail authority to prepare a plan for an economically viable rail system. It took a decade for the authority to get legislative approval to ask voters to approve a $9.95 billion bond ballot measure to partly fund the $40 billion project. The authority said that, for a one-way $55 ticket, the system would serve 94 million passengers between Los Angeles and San Francisco and create hundreds of thousands of "sustainable" jobs. It assured taxpayers the railway would operate at a surplus and without subsidies.
The authority has presented plenty of forecasts, one shakier than the next. It now projects that ridership will reach 39 million passengers a year by its 10th year, down from that projection two years ago of 94 million. The experience of other high-speed rail systems suggests they'll be lucky if they get a quarter of that, and five million riders is more likely.

The authority estimates a project cost of $42.6 billion, but a more realistic price tag would put the cost between $62 billion and $213 billion. It also predicts that one-way tickets for the two and a half hour ride from L.A. to San Francisco would cost $105 (up from $55), but the cost-per-mile in Europe and Japan suggests a ticket price closer to $190. Many would choose to fly.
The authority also predicted 450,000 permanent jobs; that's twice the size of the state government's active work force. Did they hire Joe Biden as their stimulus consultant?
Stanford economist Alain Enthoven, former World Bank analyst William Grindley and financial consultant William Warren document all of this in a study that's been reviewed and endorsed by more than 70 business leaders. Their conclusion: Unless the federal government provides $19 billion in seed money, the railway will never achieve a positive cash flow. State taxpayers will end up subsidizing a fantastic boondoggle, even though the authorizing legislation prohibits subsidies."


It's hard to believe anyone with common sense would even bother with such a project, isn't it? Moreover, if it were financially viable, why wouldn't private money be bidding to buy the rights to this project, while the state of California provided required rights of way, permits, etc.? Why would the federal government even need to be involved?

Certainly this sort of Dirksenian "a billion here, a billion there, and pretty soon you're talking about real money" attitude adds hundreds of billions of unnecessary dollars to the federal budget and, now, deficit.

It's one thing for government to assist genuinely productive and profitable enterprises. It's another for it to shovel money into projects of questionable value just to claim they employ workers. It's never valuable to have people dig holes, then fill them in, when the money you pay them for this valueless activity is borrowed from a potential enemy.

My 7th grade civics teacher, now Secretary of Transportation, Ray LaHood, should know better than to be frittering away taxpayer money and, worse, a future generation's wealth servicing the debt to pay for these boondoggles.