Two Very Different Op-Eds

This week the debate over high speed rail - which, bizarrely, we're still having even after California voters approved Prop 1A a year ago - returns to the opinion pages of two of California's most prominent newspapers. Two op-eds examine the project and reach very different conclusions about the project's value to the state. First up is Daniel Curtin, president of the California Conference of Carpenters, writing in the San Francisco Chronicle:

California voters know we must change to meet the environmental challenges we face. They realize that every passenger who travels these sleek trains will reduce greenhouse-gas emissions that auto or air travel would have spewed into the atmosphere. They know that 800 miles of high-speed rail will reduce congestion between urban centers and encourage low-polluting urban in-fill development....

On high-speed rail, California leads the nation and San Francisco leads the state. An intermodal transit station, the Transbay Transit Center, is ready to break ground. Some 8,000 construction jobs will be directly created by the project and tens of thousands of jobs will be generated from the economic activity, according to plan documents. In a state with more than 12 percent unemployment and a city with just more than 10 percent of its workforce out of work, this will provide a desperately needed economic stimulus...

Just as the New Deal-inspired Oakland-San Francisco Bay Bridge served as an economic bridge from the Great Depression to a prosperous future, so will the Transbay Transit Center and high-speed rail be our generation's transportation corridor from economic adversity to a greener, more prosperous future.

There are two ways one can read this op-ed, and they are not mutually exclusive. The first is as a call to support the economic stimulus value of high speed rail. In this deep recession, where California's unemployment rate is higher than it's been for 60 years, we can use any job we can get. Especially 8,000 construction jobs on just the TBT alone.

And that takes us to the second reading of the op-ed, which is as an argument for the Transbay Terminal project as being a fundamental piece of the high speed rail project. Quentin Kopp is still pushing alternatives to the current location of the TBT train box, and we keep hearing rumors that Kopp doesn't want the TBT to happen at all (rumors which he has denied to me). As the decision on HSR stimulus funds nears, it makes sense for TBT supporters to push out op-eds like this extolling the virtues of the project, including the badly needed jobs it would create.

Not everyone things jobs are important in a state experiencing at least a 12.2% unemployment rate. Dan Walters, who writes on state politics at the Sacramento Bee, writes today that we should "take bullet train claims with a grain of salt". As you'll see, it's Walters' column that requires the salt:

Ironically – or perhaps prophetically – the California High Speed Rail Authority's Web site bolsters the economic viability of a proposed statewide bullet train system by quoting an official of Lehman Brothers....

If nothing else, the fact that the rail authority is still quoting defunct and disgraced Lehman Brothers about financing the bullet train should make us skeptical that the system will materialize during the lifetime of any Californian now breathing, or that it would generate all the economic and social wonderfulness its advocates are claiming.

This is a ridiculous and misleading line of attack. If Lehman Brothers had collapsed because of its work supporting high speed rail, then Walters might have a point. But it didn't. As Andrew Ross Sorkin at the New York Times explained yesterday, Lehman's collapse was due to a CEO, Dick Fuld, who wasn't skilled at negotiating these kind of deals, and due to the Bush Administration's willingness to let Lehman fail.

None of that undermines the work Lehman staff did on high speed rail. Specifically, Lehman told the CHSRA that the project could "leverage significant private participation." There is every reason to believe this is still the case. Global money still seeks a safe return on investment, and as the CHSRA found in 2008 when they solicited statements of interest, at least 40 companies showed their desire to participate in the project.

The case for private investment remains solid. Every HSR route around the world has generated an operating profit. As oil prices rise, ridership will as well, as SNCF argued last month. Obviously the exact amount of money CHSRA can expect from the private sector will depend on credit and economic conditions, but it is still reasonable and plausible to expect that some investment will materialize.

Walters doesn't stop there:

Such skepticism is especially warranted now that Gov. Arnold Schwarzenegger and other promoters, having persuaded voters to pass a $9.95 billion bond issue that California can ill afford, are asking the Obama administration for half of the federal money set aside for high-speed rail – nearly $5 billion.

Even if the feds come through with that kind of dough, which is highly unlikely, it would be less than half of the federal funds that California needs. It would also fall well short of the $40 billion or more it would take to link San Diego, Los Angeles, San Francisco, Sacramento and points in between with 200-mph trains.

This is just plain wrong. The White House has repeatedly said California will receive a large share of the HSR stimulus funds. It is entirely possible we will indeed receive nearly $5 billion from the feds. Even $3 billion would be a substantial sum.

Does it fall well short of the $40 billion total to build both phase 1 and 2 of the project? (Note how Walters throws in the Sacramento and SD extensions, which will not be built until about 2030, to make HSR seem more costly.) Yes. And that's why President Obama and the Congress are looking at long-term funding of HSR. Right now there is the battle over the $4 billion in HSR funding for 2010 going on in the US Senate. The stalled Transportation Bill is likely to include a permanent HSR funding solution once it is finally passed and signed. Walters doesn't give the reader any of this information, which makes it obvious that CA is quite likely to get the federal money it needs to build the project.

Schwarzenegger et al. are asserting that private investors would put up about half of the total cost. They also contend that the system could operate at a profit without subsidies, based on rosy ridership assumptions.

Well, if that's what Arnold is claiming, Arnold is indeed wrong. I've never heard CHSRA suggest private investors would contribute more than 25% of the cost.

As to operating at a profit, here again Walters is simply wrong. The Acela generates operating surpluses, as do all other HSR projects around the world. And of course, neither California's freeways nor its airports operate at a profit without subsidies (and in fact, freeways aren't expected to operate at a profit, period).

Then there are the assumed economic benefits that would accrue. Building the system obviously would create some direct design and construction jobs and at least some ongoing jobs for operation. But the rail authority has bootstrapped that direct benefit into upward of a half-million additional jobs that would be created, it's said, simply by the economic activity generated by having a new transportation system in place.

The "economic activity" claim is a projection subject to quite a lot of change up or down in the future, but it IS based on legitimate studies. Further, it is based on the proven concept that mass transit creates a Green Dividend - economic activity generated through the reallocation of money previously spent on oil. It may not be as high as 450,000. But at this rate, in a state facing high unemployment for many years to come, even something that falls 50% of that goal is still well worth building.

Grandiosely, authority board member Rod Diridon Sr. of San Jose contends that the project "will generate 600,000 construction-related jobs … and another 450,000 transportation-related permanent jobs, providing a long-term stimulus to the California economy."

The claim appears to be way overblown. But even if true, it would represent a tiny portion of California's economy decades hence. There are about 18 million Californians in the work force now. In 2030, when the bullet train is projected to become operational, 450,000 permanent jobs would represent less than 2 percent of needed employment – if, indeed, they ever appear.

Walters doesn't give any evidence or explanation as to why the claim is "way overblown" - meaning Walters' own statement is baseless. But even if he were right, does he really believe California can afford to pass on even 2% of needed employment? Walters is writing as if it were 1998, when the economy was booming and jobs were plentiful. Here in 2009, it's clear that we are not in a position to turn down jobs like this, especially when the estimates run into the hundreds of thousands for both short-term and long-term employment.

Ultimately Dan Walters shows himself to once again be a leading apostle of the notion that the California of the 20th century, dependent on sprawl and oil, is somehow still a viable basis for economic prosperity here in the 21st century. To believe that, you have to believe that the current recession either isn't happening, or is an acceptable cost of doing business. Most Californians don't see it that way. That's why they approved the high speed rail project, and that's why it's going to get built.

California's going to get those jobs, whether Dan Walters wants them or not.