Free Markets, Free People
Good old California, probably the most debt ridden state in the union, and it still can’t manage to break its big spending ways. It certainly seems intent on wasting buckets of money it can ill afford on a poorly conceived public project.
When the California legislature undertook the most expensive public-works project in American history, they also created an independent review board to ensure that the LA-to-San Francisco high-speed rail project would have solid financial footing. Perhaps they intended this panel to be a public-relations rubber stamp, but if so, it just proves that their miscalculations weren’t limited to cost projections. Yesterday, the California High-Speed Rail Peer Review Group sent a “scathing” letter to the political leadership in Sacramento, calling the project’s finances and costs “fundamentally flaw[ed]”.
What did the letter say?
In a report Tuesday, a panel of experts created by state law to help safeguard the public’s interest raised serious doubts about almost every aspect of the project and concluded that the current plan “is not financially feasible.” As a result, the panel said, it “cannot at this time recommend that the Legislature approve the appropriation of bond proceeds for this project.”
The project’s newest “official cost” is $98.5 billion, three times the original “official estimate” of $33 billion. Of course the Rail Authority thinks the panel is full of beans. And Governor Jerry Brown?
Brown spokesman Gil Duran said in an e-mail that the Peer Review Group’s report “does not appear to add any arguments that are new or compelling enough to suggest a change in course.”
Of course he doesn’t. Because Moonbeam, elected to get the California financial house in order, sees nothing wrong with another hundred or so billion in debt for a debt strapped state.
The intent is obviously to go forward with this boondoggle regardless of its feasibility. Morrissey points out, the board was intended to be a device to appease critics and to rubber stamp the project. The fact that it hasn’t worked out that way is inconvenient, but is not going to stop something that they really want. The fact that the voters voted to do a project with a $33 billion dollar price tag in 2008 and has now seen that estimate triple should provide more than enough of an argument whether “new” or not, to stop the California equivalent of the “Big Dig”.
Sounds like California’s political class has learned nothing from their financial travails of the last several years.
What sounded “feasible” in 2008 is obviously anything but feasible, financially, in 2012, especially when the projected cost has tripled since its voter approval. That alone makes it infeasible. It completely changes the game. It is a classic “bait and switch” – a lowball estimate to gain approval and a commission which no one obviously planned on listening too empaneled to give the project of veneer of accountability.
But as usual, politicians have again decided to ignore reality and go ahead with an unnecessary and hugely expensive boondoggle despite mounting evidence, and cost, that it should be abandoned.
You just read about things like this and shake your head. What in the world is wrong with those people? What part of “we can’t afford this sort of nonsense anymore” do you suppose they don’t understand? Or is it they just don’t care? Politics and an agenda, coupled with crony capitalism, overrule common sense once again.
Well here we go – the government apparently plans on getting further into a business in which it has no track record of success. Yes friends, if “Amtrak” doesn’t remind you of why this isn’t a good idea, how about doubling down on it?
You remember Amtrak:
In FY 2007, Amtrak earned approximately $2.15 billion in total revenue and incurred about $3.18 billion in expenses. Amtrak relies on an annual federal appropriation, which in FY 2007 totaled $1.294 billion, including $521 million in operating funds, $495 million in capital and $277 million for debt service. While Amtrak relies on federal appropriations to support its operating and capital needs, the federal government’s investment in Amtrak was less than 2 percent of the entire federal transportation budget for FY 2007.
Only 2%? Well, we’ll take care of that:
The president’s plan identifies 10 potential high-speed intercity corridors for federal funding, including California, the Pacific Northwest, the Midwest, the Southeast, the Gulf Coast, Pennsylvania, Florida, New York and New England.
It also highlights potential improvements in the heavily traveled Northeast Corridor running from Washington to Boston, Massachusetts.
Of course Amtrak runs service in all of those places.
The president cited the success of high-speed rail in European countries such as France and Spain as a positive example for the United States.
And, of course, Spain and France are physically so much like the US it is frighting:
US - 9,161,923 sq km
Spain – 499,542 sq km
France – 545,630 sq km
Texas – 691,030 sq km
Travel by train has been a part of the culture of both France and Spain for literally centuries. Not so in the US. This is not an “if you build it they will come” moment.
“My high-speed rail proposal will lead to innovations that change the way we travel in America. We must start developing clean, energy-efficient transportation that will define our regions for centuries to come,” Obama said at an event near the White House.
You can read the plan here. It can pretty much can be summed up by Obama’s statement. Not a single bit of analysis about whether there is a demand, whether or not it will be profitable, and, frankly whether it’s economically viable at all. It’s all about social concerns, not how much it costs.
This is government betting your money that it can change your habits. It isn’t a business plan that’s been produced, it’s a social engineering plan.
Is this the role you’ve imagined for government? As most who understand economics would tell you, if there is a market and it is a profitable market, some entrepreneur or entrepreneurs will enter that market. But you can be assured that won’t enter a market unless there is a profit to be made – which should tell you all you need to know about this boondoggle.
And whether or not you ever board a single one of these trains in your lifetime, you will pay for it.