Obama’s Budget Plan and HSR

Feb 27th, 2009 | Posted by

President Barack Obama has released the basic outline of his FY 2010 budget plan (which would actually go into effect on October 1, 2009) and it includes $5 billion for HSR over 5 years – or, $1 billion a year. Obviously that’s not going to be enough to build any HSR projects around the country, but would maybe possibly provide a few drops in the bucket. As Yonah at the Transport Politic notes, the proposal “doesn’t appear to mark sea change in vision for U.S. mobility” but is subject to change in Congress.

The budget fight may well resemble the stimulus battle in some key respects, as moderate Democrats and the small handful of sort-of-moderate Republicans could unite to try and pare back some of the more ambitious moves Obama is proposing, including the attack on 30 years of neoliberal economic policy signaled by Obama’s plans to start going after wealth through taxation.

A key issue is whether the budget requires 50 votes or 60 votes to pass – the absurd and undemocratic filibuster rule was what caused the weakening of the stimulus plan (despite the $8 billion for HSR), and if the budget is subject to the same 60 vote requirement, then the end product is likely to be significantly weaker than what Obama is proposing here.

Ultimately the real transportation policy battle may come when the transportation bill comes up for reauthorization later this year. A Congressional commission is calling for a higher gas tax and ultimately a vehicle miles traveled (VMT) tax, and while the Obama Administration backed off Ray LaHood’s suggestions along those lines earlier this week, I suspect that may have been because they weren’t yet ready to go there. We will see what happens later in the year.

Finally, it’s great to have seen a lot of pushback against Republican HSR lies this week. It helped that Bobby Jindal made himself look ridiculous with his “Disneyland ride” comments – what he’s actually wound up doing is inoculating HSR against that kind of criticism by implying HSR deniers think like Jindal does. Sort of a Sarah Palin “I can see Russia from my house!” moment. With Obama’s approval ratings through the roof, and his administration finally showing signs of wanting to chart a truly new course in American politics, that creates the conditions to both grow and consolidate public support for high speed rail. There’s a lot of opportunity here, but we’ll have to push it through.

Note: I usually don’t mind thread drift in the comments, but for now I’d ask folks who want to discuss the Peninsula HSR plan to keep it in yesterday’s post for the time being, until I post again on the topic, which will likely be this weekend.

  1. Kyle – Boston
    Feb 27th, 2009 at 09:29
    #1

    As stated, $1 Billion a year isn’t what is needed for major HSR construction, nor is the stimulus HSR funding. I don’t know if it will be in the transportation bill either (although I hope there is a large amount for public transport in general).

    What I’m actually hoping is that Obama introduces a second stimulus bill in a year or two, after an overall national rail plan is created and ready to go. Then an extremely large sum of money can be spent as stimulus and strictly on rail, a new Eisenhower system, except for rail.

    I know I’m dreaming out loud, but you never know, it could happen.

  2. Rafael
    Feb 27th, 2009 at 09:29
    #2

    - since 1974, budget bills have been subject to an alternate legislative procedure called reconciliation that skirts the filibuster threshold in most cases (enumerated in the Byrd rule).

    - the administration must know that $1 billion/yr for HSR won’t fund more than EIR/EIS studies. Either it’s a bargaining chip to let Blue Dog Democrats lay claim to fiscal rectitude (while approving health care reform) or, it’s bait for liberals who will expend some of their political capital on bumping up the number. Either way, it’s a clever ploy. I just hope it’s not too clever by half.

    In 2009, I’d welcome a bill that changes FRA’s charter and organization to facilitate HSR by creating a regulatory path toward rapid rail (i.e. FRA-compliant/non-compliant equipment sharing track with active safety measures). This will entail the definition of feature and interoperability standards for positive train control (PTC) equipment and other measures. For true bullet trains, FRA will need funds to acquire safety-related expertise in Europe and Asia.

    Some other agency within the DOT will be responsible for awarding HSR grants. That process, too, needs to be defined such that it is both transparent and fair. Once this bureuacratic foundation has been laid, it will be much easier for Congress to appropriate money for HSR in 2011 and beyond when California is set to break ground.

    - a ramp-up in the gas tax, combined with cuts in sales and payroll taxes, would create consumer demand for fuel-efficient cars and trucks, which usually cost more to develop and manufacture. A one-time $0.10 hike isn’t ever going to get GM and Chrysler off life support.

    Something like $0.02 hike each and every month for a full decade might be more appropriate, provided that the charter of the highway fund is expanded to include construction and operations subsidies for alternatives to building more lane-miles (e.g. HSR, commuter rail, light rail, BRT).

    A clever approach would give individual states incentives to implement this lateral shift in their tax base.

    - taxation based on vehicle miles traveled sounds good in theory, but is difficult to implement in practice. Any competent mechanic can set a mechanical odometer to any desired setting, though it is illegal to falsify the number. Rather, the idea is to set a replacement odometer to the last recorded mileage when a faulty one has to be replaced.

    Tracking where vehicles are at any given point in time via GPS and mobile data telephony is expensive and raises serious privacy concerns, especially for personal cars and trucks. Germany has introduced such a system, but only for heavy duty commercial vehicles. The in-vehicle component costs EUR 300 and takes half a day to install. The justification was that HDVs cause most of the wear and tear of road surfaces, since that is proportional to the fourth power of axle load.

    Italy and Austria use a less precise but much simpler system for HDVs. It is based on cheap RFID boxes that are interrogated by beacons installed at intervals of several miles along freeways. A passing truck is identified and recorded. At the end of each month, the trucking company is sent an invoice for the aggregate tolls accrued by its fleet.

  3. BruceMcF
    Feb 27th, 2009 at 09:36
    #3

    That may not be enough to establish complete Rapid Rail networks, but combined with a minority share from the $8b in the Stimulus bill, it would certainly be more than enough to get several Rapid Rail services up and running.

    Bear in mind that, for example, either Pittsburgh / Cleveland / Toledo / Ft. Wayne / Chicago or Cleveland / Columbus / Dayton / Cincinnati could be completed, trains and all, for $2.5b or less. I haven’t seen the MWRRS project planning for Chicago to St. Louis, but would be surprised if it was not in the same ballpark.

    So in a total HSR pot of $13b, if $7b is allocated to bullet trains and $6b to three Rapid Rail corridors, that would be three Rapid Rail corridors up and running, $2b for some HSR-specific improvement in the NEC (like upgrading to constant tension wiring between DC and NYC), and $5b goes to the CAHSR, there’s the “five HSR systems” being discussion. Of course, $5b is just a partial down payment, but OTOH, its 5 years, and the CAHSR is much more than a five year project … the best guarantee of the federal funding that it requires is successful “HSR” corridors in some states and other states pushing to get theirs.

    Of course, in official US parlance, both Rapid Rail and bullet trains are HSR (both are, obviously, categorical improvements on what is currently available in the US, though the Acela almost comes close to a Rapid Rail standard in terms of effective trip speeds, and in time could in fact deliver faster than Rapid Rail trips speeds for some trips).

  4. Matt
    Feb 27th, 2009 at 16:36
    #4

    The miles traveled tax seems absurd. Why not reward people who help American energy independence by buying cars which get better mileage and stick to increasing the gas tax?

  5. Spokker
    Feb 27th, 2009 at 16:39
    #5

    “Why not reward people who help American energy independence by buying cars which get better mileage and stick to increasing the gas tax?”

    Because once everybody is driving electric cars the gas tax will be obsolete.

    Taxing bad behavior can subsidize good behavior. But once everybody is behaving, how do you raise tax revenue?

  6. Aaron
    Feb 27th, 2009 at 17:47
    #6

    Unfortunately, I don’t have any kind of confidence that widespread adoption of either electric cars or even hybrids is nearby, or even over the next hill ;p.

    Europe has much higher gas prices, and they haven’t all switched to electric cars – they do, however, use more fuel efficient cars and use them more sparingly compared to other transportation options. That’s our next stop here, and I don’t think that a miles traveled tax is going to make sense within the next 20 years. Soon gas prices will rise again, and they eventually won’t go down due to supply issues, but it will be awhile before we see widespread electric/etc. car usage. The gas tax is still the best option out there, and I also have issues in terms of the civil liberties idea of a mileage tax. Too difficult to enforce, too easy for well-meaning people to mis-calculate, whereas a gas tax is simply unavoidable, short of outright fraud, just like sales tax is also all but unavoidable (avoiding the fringes such as art shows etc. where people look the other way). Of course, gas stations are rightly more closely audited than art shows.

  7. Aaron
    Feb 27th, 2009 at 17:49
    #7

    And by the way, electric cars are more efficient, but they still vary in efficiency, and given the concerns about power generation, people who drive more will still be taxed more because they have to recharge their cars/batteries somewhere (probably at home most of the time) and will pay a higher power bill the more they have to recharge. Not only that, they may get hit pretty hard depending on how things develop, since many utilities charge increasingly higher rates the more kWh you use.

    *obliterates soapbox with a hammer*

  8. Bruce.McFarling
    Feb 27th, 2009 at 20:27
    #8

    However, Aaron, that does not solve the pending (though certainly not immediate) institutional problem that we rely on a federal gas tax to cross-subsidize construction and to a lesser extent maintenance of Interstate Highways and Rural and Outer Suburban “Highways”, and many states rely on state gas taxes to pay for the smaller state share of construction and larger state share of maintenance … and not consuming gasoline to drive would create wear and tear on roads that would have to be paid for out of general tax revenues, like urban streets.

    And allowing Interstate Highways and State Highways and County Highways and Township Highways become like City Streets … that’s just something not to be contemplated.

  9. Alon Levy
    Feb 27th, 2009 at 21:14
    #9

    Because once everybody is driving electric cars the gas tax will be obsolete.

    Okay, so in 2150 we’ll switch to a VMT tax.

  10. Aaron
    Feb 27th, 2009 at 21:49
    #10

    However, Aaron, that does not solve the pending (though certainly not immediate) institutional problem that we rely on a federal gas tax to cross-subsidize construction and to a lesser extent maintenance of Interstate Highways and Rural and Outer Suburban “Highways”, and many states rely on state gas taxes to pay for the smaller state share of construction and larger state share of maintenance … and not consuming gasoline to drive would create wear and tear on roads that would have to be paid for out of general tax revenues, like urban streets.

    I don’t think this is a serious immediate risk, which was my point ;p.

    I’m not as pessimistic as 2150, but probably more like 2040 or so ;p. We can talk about updating the tax code in another generation or so ;p.

  11. Matt
    Feb 27th, 2009 at 22:55
    #11

    @Spokker

    I don’t mean to be beating a dead horse since it has been said, but since you were replying to me my response is:

    Lets cross that bridge when we get to it. Go to many parts of the country and you will see we are very far from having the vehicles on the road optimized for mileage.

  12. The Intellectual Redneck
    Feb 28th, 2009 at 04:37
    #12

    Taxing the rich at 100% won’t pay for Obama’s budget. The Wall Street Journal has reported that taxing the rich at 100% won’t pay for Obama’s budget. Barack Obama promised not to raise taxes on anyone making under $250,000 per year. Where is he going to get the money? The numbers indicate Obama will need to take 100% of the income of everyone making over $75,000.

  13. Rafael
    Feb 28th, 2009 at 04:50
    #13

    @ the intellectual redneck -

    this is a blog about California high speed rail and HSR-related transportation issues.

    High speed rail construction is a one-off investment. It is therefore appropriate to fund it using bonds – both at the state and at the federal level – because a net tax hike on the middle class would be detrimental to economic recovery right now.

  14. BruceMcF
    Feb 28th, 2009 at 06:29
    #14

    I concur with Matt … VMT is intended to be a replacement for the gasoline tax as a base for a road construction/maintenance tax (where I would rather the weight was shifted toward maintenance, but that’s another story).

    In order to address the volatility of gas taxes as a funding source in the coming era of repeated oil price shocks and oil price shock recessions, we need to broaden the base, but that requires taxes that supplement the gas tax … we still need to tax gasoline as the source of external costs (and indeed should be taxing it at a higher rate).

    One such supplementary tax is a weight-based registration tax. Another such supplementary tax is congestion pricing on Federal Highway Trust Fund supported roads facing congestion. An advantage of the first is that it encourages lighter weight vehicles, and an advantage of the latter is that it reduces the “need” for new roadworks, to the extent that they are created by giving away a scarce resource for free.

  15. Rafael
    Feb 28th, 2009 at 11:18
    #15

    @ BruceMcF -

    there’s no need to worry about the volatility of oil prices because gas taxes are charged as a fixed amount per gallon of on-road fuel, not as a percentage of the point-of-sale price. That distinguishes them from general sales tax.

    Europe is a good example of how high fixed fuel tax rates actually dampen the impact of oil price volatility for consumers. Yes, retail fuel prices are sky-high by US standards, but a doubling of the oil prices only causes gasoline prices to rise by 40% or so (and vice versa).

    That means European consumers can estimate more accurately how much they need to set aside for fuel in future months and years. That gives them more confidence when paying extra for a car with high fuel economy (e.g. a diesel) and, it keeps them from taking on e.g. mortgages for McMansions in the boonies that they can only service as long as fuel remains cheap.

    Also note that European countries put fuel tax revenue into the general funds and, pay for all infrastructure construction and maintenance – roads, rail, transit, you name it – out of the general fund. No single form of taxation is ever tied to any specific type of spending, because that’s basically a lousy idea.

    The only reason it is done at all in the US is because the whole electoral/campaign finance system is broken so badly that politicians no longer perceive plain Jane infrastructure as one of their core competencies.

    Ultimately, that is why the US didn’t invest in e.g. bullet trains and transit-oriented development after the 1973 oil crisis. Now, taxpayers will have to pay through the nose to make up for lost time.

  16. BruceMcF
    Feb 28th, 2009 at 12:15
    #16

    Rafeal, you seem to be assuming (1) that there is no connection between crude oil prices and producer prices and (2) that there is no connection between gasoline prices and gasoline consumption and (3) there is no connection between crude oil price shocks and economic activity, and then between economic activity and gasoline consumption.

    The volatility of gas tax receipts is not something to be argued from first principles … its an observed fact to be explained. The explanation “the observed fact can not in fact happen” is not one of the eligible explanations.

  17. Dennis Lytton
    Feb 28th, 2009 at 21:18
    #17

    Ture one billion a year won’t build true HSR, but it can upgrade convention rail systems to “normal” European speeds. Like 110 to 120 mph with positive train control.

    We’ll see how Obama’s budget finaly forms up in the coming months and what Congress may do to it.

    We may be pleasently surprised as we were by the end of the stimulus process.

    Dennis

  18. Rafael
    Mar 2nd, 2009 at 04:25
    #18

    @ BruceMcF -

    we appear to be at cross purposes on this one. Over time, high gas taxes do result in reduced average annual mileage and a shift to more efficient technology.

    That’s perfectly fine, force people to earn their tax cuts instead of handing them out like candy.

    The fact that reduced gas tax revenue is causing state DOTs (e.g. Oregon) to ring the alarm bells is the direct result of linking that one source of revenue to that one avenue of spending. If everything goes through the general fund, politicians can compensate for structural demand destruction for motor fuels by cutting other spending or raising other taxes, or both.

  19. Imee
    Mar 4th, 2009 at 22:48
    #19

    I think the VMT tax idea isn’t all that bad. Sure, I’m one a supporter of Obama. Sure, LaHood is is Republican. But that didn’t stop me from seeing the positive parts of that idea… It may be a little impractical for now though, but I think LaHood was on the right track since gas guzzlers are practically disappearing off the planet anyway.

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