High Speed Rail: Hardly an Investment in Future

ByBrian Picone

After learning that my PolicyMic colleague Chris Sedor had written on the benefits of high speed rail, I wanted to invite our readers to consider an alternate perspective. With President Barack Obama likening opposition to rail projects with “Third World" infrastructure policy, it is important to point out the consequences of government investment in high speed rail. Such investments will certainly help select groups to “win the future” — but they are a net loss for the taxpayer and have questionable environmental benefits.

High speed rail proponents are fond of touting such projects as “investments in our future.” However, the term “investment” is misleading. Investment implies that the party doing the investing will also suffer the consequences if an endeavor loses money. But when high speed rail projects lose money — as they do almost universally — the taxpayer is on the hook, not the politicians who vote in favor of them.

Even advocates of high speed rail admit that such projects almost never cover their operating costs. Iñaki Barrón de Angoiti, director of high-speed rail at the International Union of Railways in Paris, admits that while he favors such projects, they “are not a profitable business.” He goes on to point out that only two high speed rail routes in the world actually break even – one from Paris to Lyon and one from Tokyo to Osaka. Of course, rail proponents fail to mention the 11 other countries that consistently require large taxpayer subsidies to keep their lines operational.

Furthermore, the French and Japanese systems claim profitability based on flawed accounting principles. The French accounting system treats taxpayer subsidies for the high speed rail as “commercial revenues." This makes the French program’s $1.75 billion in profits much less impressive – especially considering that, according to a 2008 study by Amtrak, French taxpayers spend close to $10 billion per year subsidizing the high speed rail system.

The Japanese system has an even worse record. Within two decades of being established, Japan’s high speed rail system had accumulated such massive amounts of debt that the entire system had to be privatized. Japanese taxpayers were then stuck with the system’s $280 billion in debt, which they are still paying off today. If Japan and France are the world’s two best examples of high speed rail success, then perhaps we should reconsider.

Even China, a nation that is no stranger to infrastructure investment, is shying away from high speed rail. In 2010, the Chinese Academy of Sciences urged the government to reconsider further investment in high-speed rail, due to the current system’s tremendous debts. According to Zhao Jian, a professor at Jiaotong University in Beijing, “high speed rail is a big loss … the operation cost is too high.”

Claims that investment in high-speed rail will create new jobs are dubious. The California High Speed Rail Authority (CHSRA) predicts that 98% of its future riders are folks that would otherwise drive or fly to their destinations. This means that nearly all of the employment created by such high speed rail projects will simply be re-allocated from the airline and automobile industry. This may change the composition of employment in the U.S. economy, but not the level — while still giving the appearance of job creation.

Some proponents suggest that the environmental benefits of high-speed rail justify its costs. However, Berkeley professor Arpad Horvath claims that high speed rail “can be either better or worse for the environment than air or car travel.” The environmental benefits of high speed rail projects, Horvath explains, can only be realized if trains can achieve “very high” levels of ridership. According to three of Horvath’s colleagues at Berkeley, however, this is doubtful. They found that the high ridership projections published by CHSRA were “flawed and unreliable," adding that the forecasts were “based on professional judgment instead of on observed data.” California’s State Auditor and Legislative Analyst’s Office have also questioned the projections. A Reason Foundation study predicted that actual ridership would be 50% less than CHRSA’s actual projections – calling into question any potential environmental benefits of the project.

Of course, some people will benefit from high speed rail projects. Large corporations that build trains, banks that finance public debt, and wealthy people who can afford expensive train fares will be better off. But while they’re off “winning the future,” average citizens and taxpayers will be, as usual, footing the bill.

Photo Credit: Neil T