Tuesday, November 2, 2010

One Person's Green Infrastructure Is Another's "High Speed Pork"

"High Speed Pork" is the heading on a column in yesterday's WaPo by the non-economist economics commentator Robert J. Samuelson, who is not related to Paul A. Samuelson or even the game theorist Larry Samuelson. He has decided that high speed rail projects in the US are not worth the money and should be cancelled. Drawing on a Congressional Research Service study, he argues that even the most beneficial of the 12 under consideration, between LA and SF in CA, is not worth it in terms of diverting either air or auto traffic, with the real problem of auto traffic being commuting, according to him, although it occurs to me that in the future such lines might also be used for freight, thus possibly taking some of the burden of trucking. He also argues that the green externalities are trivial, and that the only foreign lines making money are Tokyo-Osaka and Paris-Lyon.

My guess is that overly high discount rates are being used for these calculations. I see many other countries building these, including China and into areas not all that heavily populated, and I see oil prices and externality costs rising in the future. I think investing in these projects is a good idea for the long term, with the US behaving abysmally shortsightedly on these matters, egged on by bozo RJS.

At a personal level an old friend of mine in Wisconsin has been heading up the effort to build these there for a long time, starting under Republican Governor Tommy Thompson and going through the past 8 years of Dem Governor Jim Doyle. A likely outcome of today's election is that all this is going to go down to waste as the likely GOP winner, Scott Walker, has declared his total opposition to these projects. So, adios to this, although they did manage to get a line built between Chicago and Milwaukee. But I fear a lot more of this cancelling in the future is going to go down in the next couple of years as a result of today's election.

11 comments:

Tom Bozzo said...

Yesterday's news in Madison was that Gov. Doyle signed a deal with the Feds committing the state to spending the money for the Milwaukee-Madison line and allowing the State to contract out the bulk of the work. The idea seems to be to tie Scott Walker's hands against killing the project (n.b.: Tom Barrett is the pro-train Democratic candidate for gov).

It's unclear what executive power Walker has to kill the project at this point. The current legislature voted to accept the Federal money, and as the project is 100% federally funded there's no state funding to withhold a la NJ. Depending on the partisan control of the legislature, it should be a hard sell to give the money back (assuming USDOT insists on reimbursement, as they should), esp. if the usually pro-Republican construction industry wants to see it spent.

Barkley Rosser said...

Thanks for the info, and thanks for the correction on which candidate is which. Hope that Doyle can indeed tie those hands pretty tightly. A lot of work has gone into all that.

rjs said...

watch who you're calling a bozo...

yorksranter said...

The fact he claims that only Paris-Lyon and Tokyo-Osaka are making money shows what's doing the work in his argument: they are the oldest HSR projects in existence and have had over 30 years to amortise costs. Obviously, if you compare a project that has fully amortised its capital costs with one that's just opened for business, the first will be more profitable at the topline level.

Of course, if you choose to amortise more slowly, or more quickly, or look at the operating level, you'd get a different answer - this is just an example of picking your assumptions to make your argument work.

Gary said...

Rail will become much more economic as fuel costs rise but long lead in time so invest early

Tom Bozzo said...

Barkley, while the reporting is sketchy, the latest news suggests that Walker's hands weren't tied tightly enough. The contractors working on the first parts of the WI rail project got stop orders literally hours after being given the green light to proceed.

I'd heard that the Walker camp was trying to figure out (given the pre-existing hole in the next WI biennial budget) how much money they were willing to spend, or take out of the hides of social services recipients as the case may be, to keep the no-new-rail pledge.

rosserjb@jmu.edu said...

Tom,

I am not surprised. I was in Madison less than a month ago for my mother's funeral and talked with my friend who attended it. He was very gloomy about what Walker would do, which was partly what lay behind parts of my initial posting here.

rosserjb@jmu.edu said...

I have just read that not only have the 300 workers working on the Madison to Milwaukee line been laid off, but that in Ohio, newly elected Gov. Kasich has ordered a halt to the planned Cincinnati-Columbus-Cleveland line, big surprise. No, this is going to be a general cutback. No more of that green infrastructure investment. It kills jobs, you know.

TheTrucker said...

The political realities will be mixed. Many will lose jobs over this, but the FED is now in the game with real Quantitative Easing. The Democrats will rightfully claim that these infrastructure projects will have been financed by QE and job growth would be much better with them. Republicans will claim that the improving economy is because of their austerity measures and their control over those free spending democrats. It is hoped that the REAL economists will belly up to the bar on this and tell the truth. I posted an article in Usenet News sci.econ today entitled "Dean Baker Hits a Homer" which has not yet made it into GoogleGroups. But the link in the article was to Bakers article in June.

TheTrucker said...

The political realities will be mixed. Many will lose jobs over this, but the FED is now in the game with real Quantitative Easing. The Democrats will rightfully claim that these infrastructure projects will have been financed by QE and job growth would be much better with them. Republicans will claim that the improving economy is because of their austerity measures and their control over those free spending democrats. It is hoped that the REAL economists will belly up to the bar on this and tell the truth. I posted an article in Usenet News sci.econ today entitled "Dean Baker Hits a Homer" which has not yet made it into GoogleGroups. But the link in the article was to Bakers article in June.

Redspect said...

"We support public administration and local governments in driving profitable projects and working with our private partners." B2G