Should California return its High Speed Rail money?

This LA Times cover story yesterday describes the activities of California Republican Representative Jeff Denham (Atwater) and Kevin McCarthy (R-Bakersfield), who hope to claw back the money already awarded from the Feds–about $3 billion. It’s not just a clawback–it seems from the story they’d like the money reallocated to highways for the Central Valley.

I suspect the proposal has quite a bit of support, even among some Dems, as the consequences would be obvious: more money for us!

I think at this point that Brown has to get a credible commitment out of the legislature for the remaining funds, or else the money should revert–but not with a fat earmark for the Central Valley. And they have to find a way to get credibility back for CalHSR.

It would be a bit ironic, and not in a good way, if the hsr project, which has been justified largely on its contributions to environmental improvements, wound up acting as the budgetary compost for a ton of highway projects. Ouch.

Here are some of my comments in a story about the new HSR cost estimates in a story by David Futch of the LA Weekly.

In apology to the Transport Politic, and more public choice theory

I heard from Yonah Freemark yesterday and he took me to task for being too sarcastic yesterday, too dismissive with how I represented his writing and arguments, and not reading his points carefully enough.

He’s right. I am often too sarcastic, and I am sorry that I let my incredible frustration with the HSR politics in this state fall on Freemark. He is, in general, a fantastic writer and his blog, the Transport Politic, is a great resource.

I still think he is a) making the wrong argument here and b) being a bit of diplomatic enabler for the pro-HSR world with the points he emphasizes in the piece. And I’m still annoyed by circle graphics. He told me his representation is accurate, and I believe him, of course, but I still hate circle graphics, bubble charts, etc, etc in general.

But I was too bombastic, which means he himself didn’t get a fair read and I made him into a whipping boy for people who just line up behind CalHSR no matter what that agency does. I shouldn’t have done so, and he was right to be annoyed with me.

So let’s see if I can do this without being as grouchy or sarcastic as I was yesterday (it’s going to be hard because I’m grouchy every day.)

1. Freemark’s first point was that $98/74.5 billion is a small fraction of total GDP and a (roughly) third of what we spend on Caltrans.

My point about why this is bad liberal logic: The conservative response to such statements is not “oh, HSR doesn’t really cost that much.” Their response, and perhaps it is the right one, is likely to be “Holy cow, we need to cut Caltrans!”

When liberals bring up relative spending amounts, they are trying to get people to see the priorities implicit in the budget numbers.

SO while Freemark is trying to help people make sense of the sticker shock from the new business plan, there’s a “preaching to the choir” aspect to it. People who have supported this project from the beginning just think it’s worth it. They see it as the future of infrastructure, they see it as trying to build for the next 100 years.

For those of us who do not think this project should be the priority, the relative spending argument falls flat. What we hear in this discussion is: we spend too much on Caltrans, so you want us to go ahead and spend too much on HSR, too. Huh?

(I’m not actually convinced we spend too much on Caltrans, btw. I’d need to think that through more, but it’s what the relative spending arguments translate to.)

And as long as we’re talking about this: imagine what we’d have for public transit if we’d spent what we’ve spent on DARPA all these years. We’d have Wallace and Grommit style transit that picks you out of bed in the morning, dresses you, fixes you a healthy breakfast, props your news reader in front of you, glides you into the bathroom, and whisks you away to your work with nary a stop, transfer, or fare.

But if you value the military and don’t value transit, there’s no problem here, right?

2. Gabriel Rossman points out in the comments: to me the really interesting public choice model of CA HSR is how they’re deliberately building a commitment trap, both in terms of laughably low cost projections just long enough to get the plebiscite through and in terms of how they’re building the easiest (and most useless) leg first.

I didn’t talk about this because I’ve talked about it here before, but Rossman hits the nail on the head with public choice.

This is the major reason why there was so much heat in my tone yesterday. I am very annoyed, even with well-intended writers I genuinely respect like Freemark, and with the train advocacy world in general, given their response to the new business plan.

The California HSR political machine doesn’t deserve their fidelity at this point. The politics have been deeply cynical and self-serving. CalHSR advocates may say that this project is “for all of us,” but that agency’s leadership has schilled the project for years with a deliberately low price-tag. They pooh-pooh’d critics who pointed out there’s no way that such a large project is going to cost less than $90 billion, only to turn around and finally admit it—but, of course, those critics were only right because not enough money has fallen from the sky for us to get started faster. People who are generally supportive of transit and rail investment like Freemark have spent years in good faith discussing the project as a clear public good based on diddled cost estimates. They should have had chance to make a case for the project on solid ground from the beginning instead of constantly having to do backflips and contortion acts with every new dodge and sleight-of-hand from the agency.

This is one reason why I think all of us–even those of us who might support such a project–should be furious at this point. They have undermined our ability to thoughtfully and ethically deliberate the role we want for HSR–if any–in our state. They have behaved exactly the way critics of government predict government agents behave when they serve themselves rather than us. And I don’t buy the excuse that the public can’t handle the truth or has to be gulled into doing what’s right.

Watching CalHSR over the years, and their diplomatic enablers in the blogosphere, has been galling to me because it’s been like watching a comedy skit where there is a person dancing to the music and then the musicians start playing faster and faster and faster and while the dancer tries heroically hard to keep up. At some point, it’s obvious to everybody, the dancer should mutiny. The dancer tried to do his job; he tried to participate in the activity in good faith, and the musicians made his job impossible through their bad behavior.

Here’s the reality.

A) There will be no private investors willing to put money into the project until the taxpayers have eaten most of the construction costs. The private sector would love to help us build it (construction contracts, yay!) and they would love to run it once it’s built. That’s the private sector interest. Funding it? Not so much.

B) Building anything in California is expensive. It may be relatively less expensive to build in the Central Valley than along the coast, but it is still not cheap, not compared to places like Iowa where a Federal dollar goes a long way.

C) The Feds are not going to fund a significant portion of this project unless something radically changes. That means Californians are going to pay for almost all of the construction costs.

D) The price tag for construction is somewhere between $90 to $105 billion.

E) If we want it, Californians will have to forego $100 billion of other things. We could cut $100 billion out of highway funding. Or $100 billion out of education. Or $100 billion out of social programs. But that’s the price tag, and Californians have to face up to it. We could ask taxpayers to go without $100 billion of their own purchasing power and propose a new tax to pay for it. All of the above are possibilities, real possibilities, and that’s where the discussion should be.

There’s the choice. No sugar-coating. No contortions. No obfuscating. Do we want it enough or not? It’s not “oh, we can have this and private sector/the Feds will give it to us.” Nope. It’s just Californians, having to decide what they want. Do we want it or not?

(It’s still reasonable to say “yes” if I say “no.” But let’s give people the ability to say yes or no in an ethical deliberative process.)

Public Choice Theory, HSR, and Strippers Thrown in For Good Measure

Public choice is in the air, a little like fall for me.

Yesterday in planning theory class, one of my brilliant students brought up public choice economics, without calling it that, because it’s not something that makes its way into much undergraduate education (I think he went to Princeton, where such things do come up in undergraduate education).

My brilliant colleague, Peter Gordon, notes Tyler Cowen’s remarks about how about public choice economics is neglected in today’s macroeconomic debates.

Why such a neglected field? I’m not sure, other than things go in and out style in economics just like everything else. Back in the day when I was studying, urban economics and labor economics were unpopular fields, in favor of game theory and econometrics. Now at least urban economics has come back, along with public finance, as a sexy field.

Perhaps it is time for James Buchanan Renaissance, as certainly the ideas are very relevant to those who currently suspect government workers from enriching themselves at the expense of the public.

Anyhow, the basics for public choice are laid out actually pretty well in Wikipedia. I love how people have made Wikipedia better and better over the years.

So here are James Buchanan’s two brilliant books, which many students no longer read due to how old the books are. It’s a pity.

The Demand and Supply of Public Goods, first published in 1968.

The Calculus of Consent by James Buchanan and Gordon Tullock.

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Nonetheless, Buchanan is still out there, tearing things up. He recently starting taking his own profession to task over the 2008 crisis and their failures in dealing with it: Economists have no clothes.

If you read Peter’s blog, he’s nonplussed by my reactions to the announcement that HSR is now expected to cost $98 billion. Dear Peter always suspects me of being naive, but I did expect more of a reaction from supporters. Instead, it’s more of the same: the HSR is worth it, worth it, worth it, worth it, no matter what it costs. The Transport Politic embodies the response nicely. It has a supposedly convincing graphic that the state can afford the HSR project because–check it out!–the yellow circle representing the high speed rail project is such a tiny, tiny dot compared to the state’s entire product, and look! at how much bigger that big big big Caltrans dot is! According to this graphic, we’re just dumping money into to the auto-oriented bureaucracy*, so that by comparison, $98 billion for the train project seems absolutely reasonable.

Ok. First off, I hate circle graphics because they almost never accurately reflect proportions right. Does this tell us anything that a straight up pie chart wouldn’t? No it doesn’t.

And then there’s the assumption that a train project, because it costs less than one of the state’s biggest agencies, is actually a pittance, or not that expensive, after all.

Under this logic, we could invest $98 billion of tax money in strippers and call it effective public policy. Yay, us! We poured $98 billion–oh, excuse me $74.5 billion (cough)–into a hole in the ground, but it’s ok because it’s not as much we spend on other things! Wooooo!

Maybe the HSR project is, indeed, worth it worth it worth it worth it, but that graphic–oye–and that logic. Urk. Bad liberal logic in a nutshell.

So what does public choice theory have in it to explain the problem? Well, first, public choice theorists would note that the $286 billion wrapped up in Caltrans represents an ever-expanding bureaucracy where public managers have a strong motivation to expand their roles and powers. I think the average public choice theorist would argue that state departments of transportation have outlived their usefulness now that that interstate highway system has been built (I don’t think that, btw), and yet here they are, hanging on, continuing to gather resources because that is the motivation of the bureaucrat absent the profit motive: more power, more revenue, more things to command.

IOW, public choice theorists argue that with Caltrans, you are looking at the future of the California High Speed Rail Authority, which is already starting off on the “we’ve already taken billions to do very little but produce renderings and marketing plans” foot, with a $98 billion project. So that if it gets the funds to do that, it will simply continue to seek more and more rationales for its continued existence.

For the Cal HSR folks, they have no real choice–they were forced to own up to the reality of the finances at some point, after they spent years dithering, and now they must continue to the carry the banner for the project. Yes, it’s going to be wildly expensive, but look at how wonderful the trains are. Their jobs is to do their job, and their job is to try to get a train built.

*BTW, Caltrans spends a lot of its time and money focusing on transit support.

Is the $98 billion admission smart or dumb politics for HSR?

The California High Speed Rail authority released a business plan that upped the cost of the state’s high speed rail from I believe $42 billion (In my defense, their decoy numbers have jumped around a bit) to $98 billion. The story appears in the Los Angeles Times here.

Take a look at the story; the additional costs are associated in the business plan with extending the construction by another 10 years. Whenever I read a business plan from these folks, the lizard part of my brainsays we are dealing with a lemon market and I become immediately critical of every single claim the seller makes. So what? The admission that the cost is likely to be just shy of $100 billion (my best students estimated it at $105 billion) strikes me as a gambit to try to wring as much money as possible from both Federal and state supporters.

See, for example, exhibit a: this story covering a letter from the California High Speed Rail Authority telling legislators what everybody with any sense already knows: no private money is going to darken the agency’s door until the state and the Feds have eaten all the capital risk. Quelle surprise.

Given the emphasis and increasingly persistent calls for Federal help, I think this “It’s going to to cost us $98 billion if we have to extend construction dates” is a scare tactic. Give us more money to get started sooner and that scary, scary $98 billion price tag goes down! Like magic!

Only it doesn’t really go away because we’re at the end of 2011, there’s no way that project could be constructed by the 2020s anyway, even if all of us immediately stopped flinging away money on silly things like education and medical care for foster kids in favor of giving it all to the California High Speed Rail Authority.

It’s a pretty good gambit. If they get the federal money faster than they are currently, they can always say that the feds didn’t give them enough to prevent the delays and see? We told you it would cost more if you didn’t fund us up front. They have a built-in rationale for the likely cost over-runs.

There’s part of me that thinks I’m giving them too much credit with the scare tactic. After all, they do politically dumb things all the time, like, say, planning to demolish the school attended by the children of one of the state’s leading Republicans. D’oh! Just to be clear: the goal is to make sure that the project goes close enough to Senator Bedfellow’s constituents that they get to have some of the billions, but not so close that his kids’ school is going to have to rebuild somewhere else.

I’m happier that the closer-to-reality price tag is out there; it at least forces people to wake up. The HSR authority is right that the longer construction and financing period will increase costs, and people should be aware of that. And they should also be aware that most of us who follow this kind of work do not think that this project can be delivered for anything under $90 billion under even happy assumptions. And they should be aware that private investors are not going get themselves leveraged for construction costs; the best we will get is clawbacks in leasing the facility later.

So here are the questions: If this is a gambit, should the feds jump in to give them more cash upfront to try to jumpstart the project and try to curtain the higher costs? If the business plan is not a gambit, is the project worth $98 billion to the state? Proponents say that’s still cheaper than expanding airports and highways, but those generally run $4 to $5 billion a pop, so doing the math might help us. Even if it’s not cheaper than expanding airports and highways, perhaps that price tag is still worth it?

I will leave you with one more story from the LA Times, this one from Sunday, on the predatory subprime lending in used cars in Los Angeles. A woman who has a child with asthma, faces a two-hour bus ride to get to her $27000 a year job at UCLA. So she buys a used car from loan sharks because cars are immensely useful. 1) Nobody who makes $27K can afford to live anywhere near UCLA, so we have an affordable housing problem; 2) the subway to the sea would probably cut down her transit ride time by a lot, but I still think she’d have so many transfers it would be cheaper and faster for her to drive; 3) if she works at UCLA, why can’t her child receive care there for his asthma and 4) if I were going to spend $98 billion on something, it would probably be on 1 through 4.

Facing the reality of new infrastructure: LA Times story on CalHSR routing

Yesterday’s LA Times ran a story entitled California bullet train: The high price of speed. The tag line for the Facebook entry was “What HSR Would Destroy in California.”

From the story:

Almost every city and county along the proposed route loses something, but none more than Bakersfield. More than 228 homes and more than a half dozen churches would be taken, many of them in low-income minority communities on the city’s east side. The rail authority’s plans have both homeowners and government agencies confused.

Ok, now we need to quote somebody saying something along the lines “can’t make omelets without breaking a few eggs” right? We’d be right back to Interstate Era planning.

I’m not sure why this story is a surprise to anybody, as this is a huge, new project. There simply isn’t existing right of way for large stretches. And while you can criticize the HSR authority, the story of how Bakerfield boosters originally welcomed the plan only now to have misgivings as it gets more and more real should give us all pause. Are they just a bunch of hypocritical NIMBY folks? I don’t think so. The California High Speed Rail Authority has been pretty strategic in marketing the project early for ballot measures. Their mantra has been: ” The system will be great, don’t worry about the details, or the lines on the map, what’s important is that it’s coming to you.”

Then, with implementation, the lines on the map and promise of a new service accompany the very real sacrifices that come with building such a large project. It’s not what you envisioned. It’s your friends and neighbors being forcibly moved. The abstract jobs jobs jobs! idea constantly pushed comes along with the likely destruction of existing businesses.

It’s a hard, obviously redistributive act of government–and it always is, every time something like this gets built. We try to cloak everything in “win-win” language, but there are few real win-wins in projects like this. The building of the Interstate System was exactly the same.

My students in planning theory had to discuss this idea of how do you create knowledge about the future? It is, as Yoda says, always in motion. Your decisions shape it. What should have been done differently here, if anything?

A collection of HSR links from around the web

The LA Times features Rand’s Martin Wachs in this story, describing how the state of California is probably going to have to go it alone if it wants to build high speed rail. I told you so, California, four years ago! Here’s the money quote:

The project’s first phase would take the rail from downtown San Francisco to Anaheim for an estimated $43 billion, but outside groups put the cost at $65 billion or higher. The nonpartisan Legislative Analyst’s Office said it could hit $67 billion. (A second phase would extend lines to Sacramento, Riverside and San Diego.)

It’s hard for me to grapple with the Dem’s attachment to this project. Maybe if Obama had started with this instead of health care, things would be different. But as it is, the national plan has all the markers of a sinking ship, and advocating for it when entitlement spending is going under the knife strikes me as rearranging deck chairs on the Titanic of social liberalism.

Gulliver’s column at the Economist this week argues against high speed rail investment simply because the country’s existing inter-city train system is doing a pretty good job. It’s a small country that doesn’t take long to traverse as it is.

My husband’s uncle, regular reader, sent me this link from the National Review, written by Michael Barone. Barone’s piece has the marks of the National Review, with private-sector, private-sector, Rah-Rah tone to it, but he does make an excellent point: that is, the private sector, who has yet to show up in any meaningful way to the High Speed Rail party other than construction companies willing to bid for government contracts. Instead, there is quite a bit of intercity transport provided via private bus companies:

The buses have bathrooms, AC power outlets, and free Wi-Fi. They’re not as fast as the much more expensive Acela train, but they tend to run on schedule.

Bus travel used to be decidedly downscale, with a clientele that scared off middle-class travelers. That’s because, back in the days of heavily regulated transportation, bus lines followed the passenger railroad model, with stations in central cities, routes with multiple stops, fares propped up by monopolies, and operators with no economic incentive to provide comfortable or pleasant service.

Chinatown and Megabus operators ditched this model for one that works for travelers for whom money is scarce and time plentiful. Who needs a station? Inter-city buses can occupy curb space briefly just as city buses do. Who needs multiple stops? You can make money on people who want to go from one specific location to another.

Now, the service is still a four-hour ride, and this is where I suspect that people will argue with Barone. His last statement comes here:

So the private sector provides cheap inter-city transportation while government struggles to waste $53 billion. Please remind me which is the wave of the future.

That’s a bit too pat, but still. Advocates will argue that the four-hour bus ride is just too long and we need nicer facilities. But we do have nicer facilities–the Acela train. I’m sympathetic to Barone’s point here because I think the rail-only advocates do tend to be one-eyed about their pet technology, when everyday travelers really don’t care about what under the vehicles (rail or wheels). They only really care about comfort, cleanliness, speed, frequency, and geographic coverage (limited to their preferred locations). Previously, those were better delivered with trains, but there are improvements possible with bus technology as well. Advocates say “cha! that’s not true.” But if we can get improvements in those dimensions without spending billions, why shouldn’t we do so? That still wouldn’t necessarily be a substitute for HSR along the corridor: your $20 Megabus passenger probably isn’t going to opt into HSR if they aren’t opting into the Acela now. But service quality improvements are still probably worth getting anywhere we can get them.

So what do you think? BTW, if the immediate response is “Oh, we’ll save the environment” more with HSR, not many reading The National Review are going to buy that argument.