High-speed railway corridor in US, a reality or fantasy?

By Carl Bagh: Subscribe to Carl's RSS feed

August 23, 2010 3:28 PM EDT

High-speed rail corridor project in US faces another hurdle as the federal funding now requires participating states to foot 20 percent of the bill.

The Obama administration has allocated $8 billion as part of the $862-billion stimulus package to create 13 regional high-speed networks. States submitted $102 billion in grant request.

Much debate is centered on the economic viability if the project - with questions over who manages the rail network - state or private, whether the project is self-sustainable too whether there are plausible direct benefits of such an endeavor.

However, it seems the anti-rail camp offers quite a convincing argument form the cost-benefit analysis of the project. The major proponent of this camp, Harvard economics professor Edward L. Glaeser in his series of articles in NY Times, derided the project as "dull arcana of rail costs and direct benefits."

He argues that on a hypothetical high-speed rail route between Dallas and Houston, the operating expenses will run about 30 cents a passenger mile, or some $72 per passenger for the 240-mile trip; the Texas route might attract 1.5 million trips a year; track maintenance could cost $200,000 a mile per year (or $648 million); and the train, traveling at 150 mph, would save riders just one hour over the same airline flight.

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Much of the cost-benefit analysis takes the project in isolation. Instead, the argument should focus on the right mix of the three modes of transportation -- flying or road or rail -- rather than on whether rail versus flying or driving.

The high-speed rail ought to be integrated into a holistic transport solution combining road, air and rails. Most of the rail-stations in Europe are well supported by an inner-city bus network - a missing component in the US. Also the rail stations link all the major airports in Europe, thus each component feeds the other.

The indirect benefit of inter-city rail corridors is hard to quantify as it increases economic activity in sub-urban areas connected by rail, which is not the case in air transportation. Also the environmental benefits are hard to contest.

Essentially, US needs a quality public-transport system in its attempt to become less relian on oil.

The case against the rail-corridor has also used the failure of Amtrak - which shares common rail lines with cargo trains rather than dedicated high-speed passenger trains - in its non-rail stance. The beleaguered company has been dismally funded in comparison to air transport.

But the case for speed rail has an advocate in none other than the top investment guru, Warren Buffett. His Berkshire Hathaway invested $26 billion in cash in February 2010 to acquire Berlington Northern Santa Fe railway at $100 per share while the shares were trading at $77.

However, the $8 billion Federal fund earmarked for the project is a paltry sum compared to what the government paid to save the likes of Citibank and AIG, $460 billion combined, or $1 trillion spent in Iraq and Afghanistan. And taken into account the estimates, that the Los Angeles to San Francisco rail-network will cost $45 billion over a 10 year period to build, the allocated sum seems pittance.

The allocation reveals government's short-sighted approach towards the high-speed rail network and seems an effort to spruce up the existing railway network rather than an impetus to bring about a rail renaissance.

For the rail-network to become successful, it will have to be subsidize by the government. Just as subsidizes which other sectors avail -- say the Aviation sector receives billions in funds for Federal Aviation Administration operations, airline security, noise mitigation funds for homeowners, air service to small communities, and airports themselves benefit from tax-free financing on everything from cargo buildings to retail stores, not to mention the fact that every gallon of gasoline consumed is subsidized.

High-speed rail corridor is a government venture in France and much of Europe - as the primary premise of public economics is that governments fund projects which private sectors are unable to fund and the benefits of which cannot be quantified in short-run, as in the case of NASA or defense projects..

While the argument takes a political shape centred around a stimulus package, the paucity of a high-speed rail network to address one acute problem - lack of a unified transport grid - deserves focus now.

This article is copyrighted by International Business Times, the business news leader