Finally, Some Stimulating Details

Yonah at The Transport Politic breaks down the transit funding in the draft stimulus package and generally finds it wanting:

the bill does virtually nil for intercity rail, providing only $1.1 billion for Amtrak and state-based rail provision. The bill notes that the Northeast Corridor alone needs $10 billion in upgrades. How will this funding solve that problem, or tackle those of other corridors around the country? Where’s the money for high-speed rail operations?

The closest the proposed stimulus comes to funding HSR is this:

• “Preference” for FRA-compliant rolling stock; implication is that agencies could buy non-FRA compliant stock (i.e., lighter European or Asian trains) - this would be a change in policy, which currently doesn’t allow such trains
• Preference for projects “that support the development of intercity high speed rail service;” $300 million won’t actually allow for the creation of HSR, but it could help push towards that goal… this implies that local non-HSR corridors would not be as likely to get aid
• Federal share can be up to 100% of total cost, also a change in policy

Some of this suggests a willingness to shift priorities, but overall the funding here is just too tiny to make a significant dent in our transportation needs, our HSR needs, or even our economic needs. Several economists including Krugman are saying the stimulus ought to be doubled, which sounds about right to me.

Rep. Jim Oberstar, chair of the House Transportation Committee and passionate rail advocate, has been rather outspoken in his anger about the underfunding of transit in the proposal. He explains what may have happened to make the stimulus plan so weak:

Basically CBO got numbers from the Bush administration DOT that said it was not possible to spend money on these projects within 90 days, meaning they're not "shovel ready". Oberstar explains that's BS and it's ridiculous to be taking numbers from the Bush folks at DOT that are getting ready to high-tail it out of town. He's really mad about this and I know he's going to fight to get more spending on infrastructure.

Meanwhile former Providence, Rhode Island Mayor Joseph Paolino opines for HSR on the NEC in the Washington Post:

Constructing a system for high-speed rail will be expensive, but these are not normal circumstances. Obama takes office next week amid the worst economic crisis since the Depression. Large public investments and innovation are key to reviving the economy and putting people back to work. High-speed train service on the Northeast corridor would be an excellent place to start moving our citizens, and our economy, into the 21st century.

Obama and his economic team, including the stuck-in-the-1990s Lawrence Summers, clearly are not thinking in terms of fundamental change, or even in the terms of real economic recovery. Until they shed their hesitant and small-minded approach to the stimulus they're going to be doing America a disservice. I don't want much - just some money for actual HSR projects in the stimulus as a down payment on and a sign of future intentions to fund HSR in California, the NEC, the Southeast, the Midwest, Texas, and the Pacific Northwest.

Come on, Obama. Time to show America the change you've been promising.

Federal Stimulus for HSR?

The economic crisis that has been slowly unfolding over the last year or so is growing worse by the day, and the incoming Obama Administration and its allies in Congress are already discussing plans for a new economic stimulus package, one that will likely include infrastructure spending. The figures being tossed around so far have been between $50 and $150 billion.

Paul Krugman today argues we need to think bigger - MUCH bigger:

All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

If we are talking about stimulus of that size, then $12-$16 billion for California high speed rail should be no problem. Some might argue that since construction won't begin until 2010 that it's not a good use of stimulus money. But as Krugman has argued before, this downturn is going to be long:

The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn’t needed. Well, that argument has no force now, since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.

That makes Congress and the White House the next stop for our own high speed rail project, even as we continue to keep a close eye on the state legislature to ensure there's no backsliding. Quentin Kopp is optimistic about our prospects in Congress, according to an article in today's issue of Bond Buyer:

"I am satisfied from my readings that enthusiasm has increased in Congress for high-speed rail," said Quentin L. Kopp, chairman of the rail authority's board...

Kopp, a veteran of 12 years in the California Senate and a decade and a half on the San Francisco Board of Supervisors, laid out the challenge in political terms.

"Now we have to fend off other states," he said.

Of course a $600 billion package would make the competition among states for HSR dollars less intense. Even if there is much competition, California is in a very strong position to lay claim to federal HSR dollars. Nancy Pelosi and Dianne Feinstein have already shown their support for HSR, and having two of the most powerful members of Congress in your corner is a pretty damn good place to start.

Over email rafael pointed out that the renewable energy aspects of HSR would also appeal to President Obama's own desire to put energy independence at the forefront of his own policy efforts:

California HSR plus local/regional HSR feeders may become much more attractive to an Obama administration looking for worthwhile public works projects if proponents stress that these will run on renewable electricity. Transportation planners may care more about system capacity, but politicians are keen on energy independence right now.

What exactly is federal funding going to look like? It's highly unlikely that it's going to be a check for $12 billion. From the Bond Buyer article again:

the Authority expects to pursue funding sources that include straightforward federal grants, tax-credit bonds, and funding derived from carbon credits.

One thing we will need to ensure, along with the delivery of federal funding period, is that such funding is stable. Some mixture of the above seems quite workable assuming it adds up to the requisite amount.

It's clear that the global economic crisis is worsening, and all eyes are going to be on Washington DC for answers. We're going to have to make sure Congress and President Obama do the right thing for California and the nation by passing a large economic stimulus bill early in 2009 - a bill that must include funding for California high speed rail.

"Building Out of Economic Chaos"

The Washington Independent, an online news source, has been running a 3-part series on a new economic stimulus package being considered in Congress and one of their entries is Building Out of Economic Chaos, making the point that infrastructure stimulus is a necessary part of getting this country back on its feet.

Democratic leaders appear more and more confident they can win the fight over a large stimulus bill. Infrastructure funding — which could replace thousands of local jobs lost in the downturn — seems increasingly to be driving the debate.

“There is a backlog,” said Rep. James Oberstar (D-Minn.), chairman of the Transportation and Infrastructure Committee. “There is a demand. There is a hunger. There is a need to invest. Our cities are crying out.”

The lame-duck Bush Administration, composed of new Hoovers, blocked a House infrastructure spending bill in September. But Democrats are going to try again, riding the wave of a successful November election and armed with arguments that undermine the deniers:

“Infrastructure spending is never an effective means to create rapid stimulus,” the White House proclaimed in its veto threat.

Yet many state and local officials argue that a great number of projects could begin almost immediately. Corzine, for example, said that New Jersey has roughly $1.5 billion in projects ready to start within 90 days. Jerry E. Abramson, mayor of Louisville, said the city has $250 million in unfunded infrastructure initiatives set to go within 120 days. Nationwide, state transportation departments have more than 3,000 projects, totaling $17.9 billion, ready to launch within 90 days, according to a survey conducted by the American Assn. of State Highway and Transportation Officials.

In addition, many economists say the current recession will last long enough that the timeline criticism is irrelevant. “That argument has no force now,” Paul Krugman, the Nobel prize-winning economist, wrote in his Oct. 16 New York Times column, “since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.”

On that theme, economists point out that labor markets rebound from economic slumps far more slowly than other indicators. During the recession of 2001, for example, it took 30 months for unemployment to bottom out, according to John Irons, policy director at the Economic Policy Institute. Four years passed before employment rates rose above pre-recession levels, he added.

California High Speed Rail is just such a project that could begin very quickly with federal stimulus. Of course, we will not receive that money unless we pass Proposition 1A.

California has a clear choice on Tuesday. Either we slide deeper into recession and abandon tried and true solutions to revive our economy, or we pass Prop 1A and start the long road back to prosperity.

Your choice, California.

Pelosi, Feinstein, Newsom for Prop 1A

At a press conference in San Francisco today Speaker Nancy Pelosi, Senator Dianne Feinstein, and San Francisco Mayor Gavin Newsom all spoke out in favor of Proposition 1A. Their presence ought to dissuade some of the Prop 1A critics who claim that federal funding is uncertain - in 2009 these two members of Congress will be among the most powerful politicians in America and will be in a VERY strong position to help fund California High Speed Rail. They emphasized the environmental and the economic benefits of the project, and DiFi had some strong words for the HSR deniers:

One newspaper said now is not the time because we can’t afford it. I would say we can’t afford not to do it.

Which is of course the truth. As Paul Krugman explains in today's column deficit spending by government to prime the economic pump is an absolute necessity for getting the country out of the recession.

It's not just leading national politicians and Nobel laureate economists making this point. Average Californians grasp the necessity of passing Prop 1A as part of an overall economic stimulus program, as shown by this letter in the Modesto Bee:

California has budget problems because our legislators have been unable to control spending growth and have been unwilling to raise taxes. The current budget uses gimmicks and tricks and is unbalanced. Our state government is dysfunctional. Killing beneficial infrastructure projects will not solve California's problems. We need to invest in California. In the long run this will lead to better lives for the state's residents and will result in increased state and local tax revenue. We need to approve the high-speed rail measure, and we need to demand that the Legislature do its job. These are compatible goals.

JOHN MENSINGER

Modesto

Thanks John for helping inject some common sense into the debate. Killing Prop 1A will do absolutely NOTHING to help California's economy or budget. Nothing at all. Especially when you consider that the cost of doing nothing is not zero - whether it's the cost to consumers of higher gas prices or the cost to the budget of expanding roads and airports, Prop 1A and HSR is the affordable solution.

Fighting Back Against the New Hoovers

Not content with denying to Californians the numerous tangible benefits of high speed rail, Prop 1A opponents have retreated into a revival of Herbert Hoover's economic policy in order to try and defeat the most important project Californians have considered in nearly 50 years. Their argument is that in an economic crisis, we should turn to austerity instead of following the tried and true path of deficit spending on infrastructure that provides short-term job relief and long-term economic value.

For a couple weeks this blog has been doing yeoman's work in fighting back against this nonsense, one of the few voices directing Californians to learn from our past successes instead of repeating our mistakes.

No longer.

Today we have numerous articles and media outlets starting to push back against the New Hoovers. From newspaper editorial pages to leading economists there is a growing consensus that we must use deficit spending - in our case, bonds - to spur economic growth through infrastructure projects.

Even conservative observers and federal deficit hawks are seeing the need for deficit spending, as the conservative Washington Times reports:

Conservative Financial Times columnist Samuel Brittan said the fears that short-term stimulus spending by governments will raise deficits miss the point. Even the $700 billion Wall Street rescue plan approved by the U.S. government — part of a more than $2 trillion international bailout of banks by governments around the world — does not change the equation.

"Maxims about debt that might be prudent for families can be the height of folly for government," he wrote.

British economist John Maynard Keynes is credited with the basic insight, arguing that the Great Depression was prolonged because Western governments insisted on balancing budgets, raising taxes and cutting spending at a time when private economic activity had ground to a halt.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan research group, said both candidates must put together a credible long-term plan to deal with the exploding deficit, but that the government should be priming the pump in the short term.

These conservatives are joined by Nobel laureate Paul Krugman, who writes in today's column:

And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold....

All signs point to an economic slump that will be nasty, brutish — and long....

And this is also a good time to engage in some serious infrastructure spending, which the country badly needs in any case. The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn’t needed. Well, that argument has no force now, since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.

The growing unanimity of opinion on the need for deficit spending for infrastructure projects is striking. Krugman, MacGuineas and Brittan join leading economic figures like Nouriel Roubini and Lawrence Summers in calling for bold action to mitigate the deepening economic crisis.

They are joined today by the Fresno Bee editorial in favor of Prop 1A which clearly understands the need for infrastructure stimulus, and directly refutes some of the fiscal arguments against HSR:

Sadly, much opposition has come from people who say they like the idea of 220-mph trains zipping up and down the state, but don't think we can afford it right now, in a time of budget disaster and economic crisis.

That sounds prudent, even reasonable, but it ignores an important fact of American history: Many of our most important public works projects have come in times of deep economic distress -- and they have been crucial elements in our recovery in those times.

Recall the Great Depression, when voters in the Bay Area passed bonds to build the Golden Gate and Bay bridges -- projects that lightened the impact of the Depression on that region and were critical to the postwar economic boom. Shasta Dam was built during the Depression, and remains a linchpin of the state's water system.

The closing paragraph of the editorial is a powerful, stirring statement that deserves to be quoted in full:

The high-speed rail project is immense, and that can be daunting. The current economic situation is likely to get worse before it gets better. In the past, Californians have risen to such challenges with vision and determination. Voting "yes" on Proposition 1A is a declaration that we still possess those qualities, and have not surrendered them to a timid faith in a status quo that is no longer sustainable.

I've never seen it put so well. The Fresno Bee clearly understands that our state's very future is at stake and that Californians should be able to meet that challenge just as we have done in the past.

And what about the arguments that the financial crisis makes this a bad time to float bonds? The Sacramento Bee reports "unprecedented demand" for California's short-term bonds:

California has secured commitments for nearly $4 billion in short-term loans thanks to unprecedented demand from individual investors Wednesday, averting a need for federal assistance and allaying fears of a cash shortage....

California secured orders for $3.92 billion in short-term bonds from individual investors Tuesday and Wednesday, 98 percent of its original $4 billion goal, according to state Treasurer Bill Lockyer....

This week's bond sale reassured state officials that traditional lending markets would suffice.

Translation: capital markets WANT state bonds. If we float Prop 1A bonds they will be quickly gobbled up by a hungry market desperate for a safe investment.

All the HSR deniers have left is what was at the core of their belief all along - opposition to passenger rail:

"This is like losing your job and then using your credit card to put in a new swimming pool to help provide work for others," said [Kris] Vosburgh [of the Howard Jarvis Association] of the jobs argument.

Have fun with that ridiculous "swimming pool" analogy in the comments...