High-Speed Rail and the Poverty of Obamanomics
Hard on the heels of his speech to the U.S. Chamber of Commerce, in which he jawboned the owners of private businesses to increase hiring in return for federal tax breaks and other subsidies, President Obama has included in his budget request for fiscal year 2012 a proposal to make a $8 billion down payment on a six-year, $53 billion taxpayer-financed “investment” in high-speed rail.
The president’s budget proposal is a bad idea for at least two reasons. First and foremost, the public sector has little or no incentive to spend the taxpayers’ money in ways that maximize the ratio of benefits to costs. What is more important, no public transit system in the country, with the possible exception of New York City’s subway, generates passenger revenues sufficient to cover operating costs, let alone capital costs. All others gush red ink year after year.
Passenger fares on public transit modes typically are set at rates below full cost in order to maximize ridership and to “prove” that transportation via bus or rail is a worthy public service.
It may be reasonable to assume that high-speed rail transportation in the Northeast corridor, linking Washington, D.C., Philadelphia, New York and Boston, could pay its own way, but that conclusion depends on the relative cost of rail versus air and automobile travel among those same cities.
The social benefits of publicly financed transit options seem to have been accepted broadly, although no hard-nosed economic analysis supports it. Should we be surprised that President Obama, who has time and time again demonstrated his ignorance of the principles of economics, thinks spending tens of billions of the taxpayer’s dollars on a pie-in-the-sky rail system will allow America to “grab the future”? Meanwhile, our highways and bridges are crumbling....