Thursday, January 8, 2009

New Republic: Obama Needs A Bigger HSR Commitment

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

The New Republic's Senior Editor John Judis has a column out today concerned that Obama's stimulus is too modest and doesn't adequately prepare a new basis for American prosperity - and that high speed rail should be at the core of the solution.

First, his assessment of the problem:

Still, I worry that the president elect is underestimating the problem he and the country faces.

We may not simply be facing a steep recession like that of the early 1980s, from which we can extricate ourselves in a year or two, but something resembling the Great Depression of the 1930s....There's much to like in Obama's plan. But there are two important ways he may have to go further. Most economists agree that what finally pulled the U.S. out of the Great Depression was military spending for World War II....I am not suggesting that the United States start a world war in order to solve the world's economic problem. But I am suggesting a strategy that could be called the fiscal equivalent of war.

It would consist not merely of updating or repairing the nation's infrastructure, but in undertaking massive new investments that would expand the scope of American industry, and address other urgent problems in the process: global warming, over-reliance on petroleum, and the need to revive America's domestic manufacturing capabilities--not just to provide jobs, but also to provide tradeable goods that can reduce the country's current account deficit.

This blog has made similar arguments since March of 2008, so it's good to see a prominent political magazine getting into the act. This economic crisis is as serious as it gets, but Obama has not shown he grasps that. The stimulus is laden down with tax cuts for business and block grants to state DOTs for transportation projects - which in most states are highway projects.

So Judis argues Obama needs to more centrally embrace a much bolder economic stimulus - high speed rail.

One area that is ripe for such investment--and that is not, from what I have seen, a declared priority of the Obama administration--is high-speed rail....Investing in high-speed rails would be very expensive, but unlike tax cuts--the benefits of which can be siphoned off in the purchase of imported goods--the money spent would go directly to reviving American industry and improving the country's trade balance. That doesn't just mean jobs creating dedicated tracks or new rail stations: Though the U.S. abandoned train manufacturing decades ago to the French, Germans, Canadians, and Japanese, this kind of production could be undertaken by our ailing auto companies or aircraft companies--if the federal and state governments were to place orders. And building trains that would run on electricity would be a paradigmatic example of the "green jobs" that Obama often touts.

What Judis is explaining is a key value of both HSR and the stimulus. If we are going to spend nearly $800 billion, shouldn't we be taking steps to ensure that money stays here in the US, building things that will provide long-term value?

So far Obama has been making the consistently wrong moves on the stimulus, and even members of his own party are expressing concern and criticism. It's time for the president-elect to offer the bold solutions he promised in the campaign, and putting HSR at the center of a Green New Deal as John Judis suggests would be an excellent way to start.

UPDATE: The Judis article is getting lots of coverage around the blogs: Matt Yglesias, Atrios, and Ryan Avent, to name a few. Yglesias and Avent seemed too willing to accept that HSR can't be built quickly - the beauty of Judis's argument was that we needed to accelerate how quickly we can build sustainable transportation infrastructure. Environmental rules are good, and surely there are ways we can improve them to help get good projects built more quickly. Too often those rules are posited as working against mass transit. They ought to be working together.


Anonymous said...

This sudden turn to a tax break and spending is just ridiculous and is more of the same. Tax breaks have done nothing at all. People want the issues taken care of, the way we need to do it is generate jobs to soften unemployment. Once there jobs, people might spend again instead of save money for when they get fired. That is the issue, with an unstable job market, people will not spend money on extras and on essentials only. Construction workers will have money for family expenses and allow investment in other businesses. Tax breaks will not do the job, we need jobs, and an electrified 110 mph cross-country railroad for passengers and freight would be the way to go with the rest of the $350 billion.

SO Mr. President Elect, I would recommend from myself and transportation buffs that the course needs to be changed. The people voted for it, and I'm sure there are some willing to start a removal of office petition.

Anonymous said...

I too am disappointed with his lack of attention to rail. While we know Biden is fan, which I appreciate as an amtrak employee, Obama has been hesitant to really give much detail at all so far. Maybe he is just waiting till he is sworn in, or keeping a low profile so as not to ruffle feathers too soon... I don't know. The response I got from Feinstein was that she is 100 percent behind CA HSR and I'd assume Boxer and Pelosi are too. Whether they will have the clout to get the money for Cali remains to be seen. EVerybody on gods green earth including - oh what a surprise - republican small business owners - are lining up for handouts now. and all the states are crying "poor" Meanwhile, places like Turkey, India, and Mexico are moving ahead with HSR while America sits around with its finger in its nose like a big retard.

Peter said...

Well here's some pretty crappy news, from the meeting yesterday (anyone go?):
Cash crunch slows high-speed rail project

"At an authority meeting Thursday, officials said they had halted payments on engineering and design contracts in progress and are holding off on awarding new contracts."

Alon Levy said...

The article makes some really outrageous economic nationalist statements.

For a start, the idea that the US automakers will be able to convert to making trains is laughable. Rolling stock isn't a big industry. The entire Taiwan HSR rolling stock costs about $1 billion; this is about the same as 60,000 cars. That's why Bombardier Transportation and Kawasaki Heavy Industries each have about one tenth the number of employees of Toyota and one twentieth the revenue. Most of the capital cost of rail goes to construction, not manufacturing. So if GM and Ford try to move away from cars and into trains, even if they do manage to compete with Bombardier and Kawasaki, they'll have to shrink by an order of magnitude.

Rafael said...

I've argued before that trying to spend this much money all at once and do so well is nigh-on impossible. Block grants to state DOTs might make sense if those agencies' plans are aligned with the strategic objective of weaning the country off petroleum from non-friendly states within 10 years. With very few exceptions - e.g. California - state DOTs are totally dominated by the asphalt crowd. They don't even have the expertise to plan, let alone execute an rapid rail or HSR project in the near term. Some individual cities and counties have light rail expertise, but politically, it will be difficult for states to favor them without a specific mandate from Congress to do so.

A better approach that is at least as compatible with the stimulus notion might be generous lines of credit to states as such. First, loans eventually have to be repaid. That alone will encourage state politicians not to treat the money as a windfall. Ideally, Congress would attach strings in the form of a gradual ramp-up of state taxes on gasoline and diesel over the next 8 years, compensated by a gradual ramp-down of state sales taxes (or other regressive taxes where there is no sales tax).

Second, if there aren't enough sufficiently mature, eligible projects in the transportation sector, the stimulus money can be spent on any number of other efforts: repairing existing roads, repairing water and sewer mains, water and sewage treatment plants, storm drains, improving the energy efficiency of state- and/or county-owned buildings, creating bicycle paths and routes, quiet zones near freight rail lines, selected grade separations, electric light rail/streetcar services, pedestrian zones near existing transit hubs, etc.

There's tons of obvious stuff other than building new highways or adding lanes that states could spend their money on. I haven't even mentioned the obvious, like re-hiring teachers and other employees (often women) that have been let go to try and balance budgets.

What I'd like to see from the Obama administration is a clear commitment to a multi-year program of strategic investments that goes beyond the immediate stimulus, i.e. legislative agenda for the entire first term. I realize that technically, it's up to Congress to define that but with Democrats in charge of everything, it should be possible to hammer something out. I get the impression everyone and their grandmother is currently trying to somehow shoehorn their pet projects into the stimulus package, as if that were the only spending the incoming administration is ever going to do. rapid rail/HSR, the overlay grid for electricity distribution, renewable electricity plants etc. are all intelligent strategic investments with long-term value, but they're not going to create lots of jobs in the next six months.

The stimulus must be targeted at retaining government jobs and creating new ones in the private sector, quickly. A $1000 check to middle-class families is politically expedient but ineffective in terms of rapid job creation, as it will most likely be spent on paying down debt or deposited for a rainy day. This shores up consumer confidence and/or bank capitalization a little, but it takes many months for that to translate into new loans to businesses and new jobs for those seeking work.

A temporary reprieve on payroll taxes and FICA, especially for small and newly created businesses, would create more private sector jobs and do so sooner. Making it temporary means Obama will still have scope to reduce income taxes, as promised, in the 2011 timeframe. By then, the Bush tax cuts will have expired, increasing the fiscal leeway.

Gamecoug said...

Grade separations are the best way to get stimulus dollars into the rail system. It'll help speed up existing rail traffic, save lives, and pave the way to better things in the future. The nice thing is, almost every state has 10 or 15 spots where they'd like a grade separation installed. That way you can sprinkle it throughout the country.

I completely agree that long-term HSR spending is entirely necessary in certain areas, and long term rapid rail is necessary in a lot of other areas. But, it should be considered separately from the stimulus. It doesn't mesh well with the short term stimulus goals, and I think it does HSR a disservice to keep trying to shoehorn it into that role.

BBinnsandiego said...

Your argument for a sustainable stimulus is logical, well thought through, and unfortunately exactly the opposite of what's going to happen. Obama wants a bipartisan package. To get republican votes he's going to compromise. 40% of the stimulus has already been earmarked for tax cuts of dubious stimulus value.

To get the republicans on board for the spending he's got to promise that the spending doesn't commit the Treasury to more spending in the future. Spend 40 million to replace or repair a bridge and your done. Spend the same 40 million on engineering for HSR or a subway and you've committed to future spending in the billions. It's a nonstarter for a bipartisan bill.

Too bad Obama isn't more of a fighter.

Rafael said...

@ BBinnsandiego -

Obama was talking about a middle class tax cut all through the election campaign. It's not something he came up with now to placate Republicans.

I reckon it would actually be smart politics to use the current economic situation to tell voters that all spending/tax cuts need to be targeted narrowly at job retention and creation right now. Employment is critical to stemming the flood of the foreclosures that have blighted property values by a lot more than $1000 per family.

This means making it easier to avoid layoffs at state and local governments as well as large businesses, but also to grow payroll at small ones and, to encourage entrepreneurs to start up businesses of their own.

A temporary reduction in payroll taxes and FICA in 2009 and 2010 would be helpful. So would beefing up loans and grants via the Small Business Administration, since banks aren't lending right now.

A third component could be competitions with juicy prizes (cp. Ansari X-Prize program) to attract private capital - i.e. angel investors and VCs - to sexy green tech R&D projects that mesh with long-term objectives. Example: combined rail-HVDC power distribution concepts, combined road/rail and storm drain tunnels (cp. SMART in Koala Lumpur), SNG and biomethane production, CNG tanks incorporated into the load-bearing structure of tractors for 18-wheelers, foldable electric bicycles with batteries and chargers integrated into the frame, retrofit particulate and NOx aftertreatment systems for large diesel engines etc.

The idea of prize competitions is to induce high-risk/high-reward investment in useful technology that does not require a lot of retail consumption right away. Consumer confidence will take some time to recover after the unemployment rate peaks, which probably hasn't happened yet.

By limiting the jobs-oriented tax cuts to two fiscal years, Obama can re-enlist bipartisan support for a middle class tax cut effective Jan 1, 2011. That would have to be passed just before the 2010 mid-term elections. The Republicans will probably try to also make the Bush tax cuts permanent but ultimately yield to avoid losing any seats in the Senate.

Just because cloture votes in the Senate require 60 seats, Obama will not have to bend over backwards to meet Republicans half-way all the time. He does want broad support for the stimulus package to get off on the right foot and also, to avoid giving the GOP a lot of political ammunition if it doesn't work as well as everyone hopes. However, once the stimulus package is out of the way, the Dems can espouse more progressive policies such as trimming the Pentagon budget to fund civilian infrastructure projects. If need be, they can force Mitch McConnell to read phone books in his Depends for a while.

Perhaps Obama's avoiding any talk of a multi-year strategic investment program to keep Congress focused narrowly on the stimulus, which is an emergency measure. If so, I figure he's still got a thing or two to learn about herding cats. IMHO, the GOP is struggling for relevance right now, so they'll vote for anything that lets them claim credit for a relatively minor tweak here or there. The bigger problem by far is managing expectations among his fellow Democrats - not everything will be possible and, most of that not right away.

Rafael said...

@ BBinnsandiego -

economist Jeffrey Sachs also argues for a multi-year strategy, after listening to concerns from Chinese leaders.

It's far from clear that China will buy a huge amount of fresh debt issued by the US, at very low yields no less. No-one else has that kind of money to spare, not even the Gulf Arabs. It's not enough to focus on one monster bill to be passed next month.

Unknown said...

There has just been a response to the round 2 of "Open for Questions" where he responded to intercity rail, on youtube.

They responded directly to the rail question by saying it will be a "major part of the stimulus" package.

Even though he hasn't been saying it in the speeches, they are claiming that there will be investment. How much a part is a good question, and hopefully they will not shy away from that.