The Stimulus Is Done – Now What?
With the $8 billion in stimulus funds awarded, the obvious follow-up question is starting to be asked: What’s next from the federal government in terms of HSR funding? Already the usual suspects are claiming HSR won’t get funded or is a waste – Wendell Cox has an op-ed in the Wall Street Journal and Randall O’Toole got himself into an AP article on HSR.
Unfortunately, these oil-company funded hacks have a new weapon: Obama’s budget. President Obama made a high-profile (and politically stupid) call for a “spending freeze” at the State of the Union. Except his FY 2011 budget doesn’t actually freeze spending. It increases it over FY 2010, and then would freeze the FY 2011 level until FY 2013, except for Defense, Homeland Security, the VA, State Department, and specific initiatives on job creation, health care, and education.
In other words, it’s not really a spending freeze, so Obama was stupid to frame it that way. What is being “frozen” is discretionary spending, instead of an across-the-board freeze that would destroy what fragile economic stability we’ve been able to find since the economic meltdown began in 2007.
Unfortunately, by announcing a “freeze” Obama played into the right-wing’s hands, as those who call for cuts in federal spending now claim they have the president on their side. People like Wendell Cox and Randall O’Toole can sow fear, uncertainty and doubt about whether future federal funding will come along to continue the investments begun last week by pointing to the White House and saying “see! even Obama is calling for a spending freeze! where’s yer HSR money now?!”
Except that’s not actually what’s going on. PAYGO (Pay As You GO) rules still apply. New spending is fine if there’s an identified source for it, so as to not add to the deficit – or if it’s designed to grow the economy. The Obama Administration is proceeding on both points with new initiatives that directly impact high speed rail.
First is the upcoming jobs bill. Advocates argue for including funding for mass transit and passenger rail in that bill, and point to the huge demand for the HSR stimulus as a sign of the widespread political support for further HSR funding. Right now would seem like a pretty damn good time to include more HSR funding in a jobs bill – it’d go over well the with public and in many states that wanted HSR funds. Even most states that got HSR stimulus funds last week only received a portion of what they requested.
Second is the concept of an infrastructure bank. Obama’s budget includes $4 billion to capitalize that bank, which can be used to fund projects including HSR. Obama also is offering $1 billion per year for HSR, as he did in the FY 2010 budget. In December 2009, Congress agreed to up that amount to $2.5 billion. The coalition behind the 2009 call for $4 billion in the budget for HSR has reconvened to make the same ask for 2010, and their action alert can be found at FourBillion.com.
Third, there’s still the question of the transportation bill. Ray LaHood today repeated the White House’s call to postpone the bill to 2011, which strikes me as an extremely bad idea given the uncertainty around the November election. While more and more Republicans are coming around to supporting high speed rail, I would prefer to not waste the opportunity presented by large Democratic majorities to push through a stable, long-term funding source for HSR. The fact that the White House has proven completely unable to confront and defang right-wing messaging certainly doesn’t help matters.
In short, there’s still plenty of reasons to believe that the HSR stimulus grants offered last week really are downpayments on future funding. And let’s not forget that Wendell Cox and Randall O’Toole are far from disinterested observers, but are actively promoting the idea that HSR isn’t worth funding. So far I see no evidence to suggest their ridiculous claims are getting much traction on Capitol Hill. But it’s going to take an organizing effort to ensure that the feds do come through with the money we expect.
I would like to see advocates push for 10B/yr. Advocating for 4B just gets you 2.5B. Coalition must be playing it safe and assuming the re-authorization of the transportation bill is dead for the year.
If the administration is serious about starting a National Infrastructure bank to fund projects like HSR or even local projects like light rail or BRT, the best source of funds would be the profits from the TARP program. The reason why I recommend this approach is that many banks are quickly turning profits and paying off TARP money as fast as they can so as to reduce their long-term debt to the FEDS. At the same time, because of the massive federal investment (notice that I said investment, not bailout), the interest alone will provide significant sums. In turn, the original loan can be repaid to the Feds, while the excess would be ideal for funding worthwhile projects. Ironically, it should be case that the massive investment in Wall St. might actually turn into a windfall investment for Main St. and national infrastructure.
The logic of a financial transactions tax is simple. It would impose a modest fee on trades of stocks, futures, credit default swaps and other financial instruments. For example, the UK puts a 0.25% tax on the sale or purchase of shares of stock. This has very little impact on people who buy stock with the intent of holding it for a long period of time.
…
We can raise more than $140bn a year taxing financial transactions, an amount equal to 1% of GDP.
I heard them talking on kgo about this idea, where, the tiniest of a percentage of a penny, tax, on each stock sold, would, because of shear volume, raise billions .. ???
TomW Reply:
February 2nd, 2010 at 6:58 am
I would say “why not just raise income tax on higher earners”, but yoru sugegstion would politically easier (Particularly with a pension fund exemption) and have a similar effect.
Andrew Reply:
February 2nd, 2010 at 7:11 am
Agreed. With a pension fund exemption a small tax on the sale of stock, derivatives or other financial tools could provide a steady stream of income. It just has to be sold correctly to the public to avoid fearmongering. At least 10 billion a year is a good start and with that kind of funding a national ‘moonshot’ plan can be developed such as ‘coast to coast in 12 hours’.
BruceMcF Reply:
February 2nd, 2010 at 1:39 pm
Pension funds do not tend to be the high turnover traders that would be hit hard by the tax in any event … the reason for the “pension fund exemption” is not to actually save pension funds grief, but because the impact on total proceeds is modest and it saves grief in terms of fighting the lies that will be told about it.
While “there’s still plenty of reasons to believe”, I will be much happier when the funding is actualized.
The Reason Foundation is totally lacking credibility. Not a day goes by that they don’t criticize funding for transit or high speed rail but Robert Poole (i.e. ‘Poole the Fool’) is fine with subsidizing owners of private aircraft with up to $5K each to purchase new avionics: http://reason.org/news/show/1003189.html . Similarly, Robert Poole and Wendell Cox often conveniently ignore that it was their darling, the San Joaquin Hills Toll Road in Orange County that needed the $1B bailout from the federal government to keep that highway solvent. Read Alex Marshall’s “King of the Road,” in the Apr. 2008 issue of Governing for more examples of Reason’s outright hypocrisy: http://www.governing.com/column/king-road .
The oil-funded hacks at the Reason Foundation such as Wendell Cox and Robert Poole have zero credibility. According to them subsidies for toll roads are fine but subsidies for high speed rail is wasteful government spending.
http://www.calinst.org/pubs/Budget2011.shtml#TOC1_3
“Orange County (CA) Toll Road Demonstration Project Program Account
As required by the Federal Credit Reform Act of 1990, this account records for this program the subsidy costs associated with the direct loans obligated in 1992 and later years as well as administrative expenses of this program. The Department provided these lines of credit for two toll road projects in Orange County, California. Each year, $24 million of these lines of credit expire if not used. No budget authority is granted to the program in FY 2010.”
Brandon from San Diego Reply:
February 2nd, 2010 at 8:56 pm
well, there are at least 3 now… posting on here… and on skyscrapper page.com
Ben Reply:
February 3rd, 2010 at 4:06 am
Brandon– are you bmfarley on Skyscraperpage? Who are the Reason hacks on that site? I think we need a public shaming.
The letter from the Feds about the stimulus money is now up: http://www.cahighspeedrail.ca.gov/images/chsr/20100201112226_Agenda_Item_6_ARRA_Letter.pdf
Robert Cruickshank Reply:
February 2nd, 2010 at 8:08 am
Thanks for the link. Unfortunately the letter doesn’t answer any of the key questions many people have about how the funding is to be handled, whether the $400 million for the Transbay train box comes out of the $2.25 billion or is funded separately. Hopefully this week’s board meeting will reveal more.
Matthew F. Reply:
February 2nd, 2010 at 11:19 am
I’m more confused than anything else: The 5 segments listed on that link under “Applications Selected” total $4,762 billion in federal funding, $9,524 combined – almost the full application.
AndyDuncan Reply:
February 2nd, 2010 at 11:34 am
That looks like a letter specifically to the CAHSR talking about the CHSRA track 2 programs that were funded, the TTC funding was applied for under Track 1 by the TJPA.
I would guess that the TJPA would have gotten a similar letter telling them their project was or was not funded.
AndyDuncan Reply:
February 2nd, 2010 at 11:39 am
The Chronicle article pasted on the TJPA site states that the $400m comes out of the $2.25.
I’m wondering how the language is worded, however. Is the money reserved for the train box in its current design or can it be used for a set of platforms across the street? The state Attorney General has already gone on record stating that the definition of the transbay terminal is more fluid than the TJPA would like to assert.
BruceMcF Reply:
February 2nd, 2010 at 1:43 pm
If the letter to the TJPA is the same as the letter to the CAHSRA, they will be in further contact to establish the milestones and benchmarks for the final agreement between the granting agency and the successful applicant.
They may not have credibility but they are always in the media..why? Or are they just the default for the negitave view on HSR? More reasons why we need to support CaForHSR
Donk Reply:
February 2nd, 2010 at 9:34 am
Can somebody clear up why they claim that HSR is not profitable anywhere in the world? Is this because they factor in capital costs?
BruceMcF Reply:
February 2nd, 2010 at 1:48 pm
Its because there are few profitable HSR corridors, and every country that had such runaway success that they actually refunded the capital subsidy out of the operating surplus were so pleased with the results that they went on ahead to build more.
Profitability always includes capital costs – none of the transport systems that Cox and cronies advocate generate either a profit or an operating surplus, so constantly focusing on profitability is a way to confuse the fact that HSR generates operating surpluses while road does not (nor air – the FAA budget regularly includes a subsidy out of the general fund to cover the portion of the operating budget that the ticket-tax trust fund can not cover).
More fun stuff:
http://www.gilroydispatch.com/news/262861-rural-residents-oppose-highway-101-alignment-for-high-speed-train
Watch the meeting: http://gilroy.granicus.com/MediaPlayer.php?view_id=16&clip_id=797
Developing countries like China have low wage scales. Low wages = low fares = high passenger counts = profitability.
Labor costs were a big factor in the end of privately owned transit in the US. They went from 2-man operation to one man operation. If they could go to driverless operation that could bring back profitability.
In the case of the CHSRA if the typical political machine-union symbiotic mutual admiration society is institutionalized ala BART and Muni the bodacious compensation packages will doom profitability and ensure the need for taxpayer subsidies. I’m also surprized the Reasonites have not picked up on the gerrymandered routing.
Joey Reply:
February 2nd, 2010 at 11:17 am
Tell that to the Acela. Or Japan, for that matter, which has some of the highest wage standards in the world. And yet, they manage to generate a profit. You have yet to provide an example of a high speed rail system that does not generate a profit, regardless of conditions, which do vary considerably throughout the world. California really isn’t that unique.
synonymouse Reply:
February 2nd, 2010 at 12:19 pm
In that instance BART should be generating a profit.
jimsf Reply:
February 2nd, 2010 at 12:40 pm
But Bart does generate a profit. Its just that that profit is hidden and reinvested in into the local economy in the form of improved conditions and other savings.
If you raised bart fares high enough to show a profit on paper, you would lose ridership. The benefits of high ridership are that it keeps the need (costs) of providing for those 350,oooo folks a day who use bart, from being spent to otherwise provide for them. Be it cost to the individual for additional car ownership, costs of operating the vehicle, costs to provide highway lanes, wear and tear on other infrastructure, lost productivity, and the provision for businesses to be able to tap into a larger more affordable labor market, which keeps other costs down for local consumers. Prices are set to encourage the greatest overall benefit, not to show a quarterly profit on paper. But the profit is there.
If only the state’s freeway system did as much to collect fares to offset its expense and show such a “profit”
Peninsula Rail 2010 Reply:
February 2nd, 2010 at 1:19 pm
BART fares are high enough, thank you very much. The system is also aging, and the number of equipment failures and the resulting delays have been increasing recently. It costs $6.90 to travel one stop from San Bruno to SFO.
jimsf Reply:
February 2nd, 2010 at 1:35 pm
Thats a lot cheaper than parking or taking a cab though. No one wants to pay for anything, and everyone wants everything to be free for themselves. Unfortunately, everything costs money. You can drive, take a cab, take a bus, or take bart, or dont go. take your pick.
by the way, bart is going to buy an entire new fleet in a few years. thank god.
–”Replacement of the 669 vehicles in the fleet presents BART with the exciting opportunity to procure a next generation of BART vehicles designed to handle the challenges of the next 30 years of service – through 2040 and beyond. In addition to replacing the existing fleet, BART will require additional vehicles to meet future increased demand resulting from service expansions from the Oakland Airport Connector, eBart, Warm Springs and Silicon Valley/San Jose Extension projects in the next 30 years. BART expects that the total fleet requirement will be 1,000 vehicles.”
Project Milestones
2009 – Request for Proposals release
2010 – Vehicle Supplier Bid and Selection
2011 – Vehicle Design and Public Design Input
2012 – Full Scale Vehicle Mock-ups Available
2014 – First 10 Vehicles Arrive for Testing
2016 – First Production Vehicles
Peninsula Rail 2010 Reply:
February 2nd, 2010 at 6:53 pm
At great public expense, BART has provided $1/day (recently free) parking for SFO at the Millbrae station. If you are headed to the airport, park at Millbrae for $1 a day and take either the reverse direction transfer at San Bruno to SFO during weekdays before 7pm or take the recently-defunct-but-now-revived Millbrae-SFO direct connection after 7pm or on weekends for $4. Heavy taxpayer subsidies have made BART parking much cheaper than market-priced airport parking. BART: making driving to the airport easier!
BruceMcF Reply:
February 2nd, 2010 at 1:56 pm
That’s not a profit. That’s something more important – a net public benefit. Profit is just somebody owning something that brings in more revenue than outlays required by the process – the profit can just as readily be as a result of squeezing the life out of widder’s and orphans as out of producing a good or product of some public benefit.
Peter Reply:
February 2nd, 2010 at 12:56 pm
BART does not equal high speed rail. High speed rail does not equal BART. Your record, as usual, is broken.
Joey Reply:
February 2nd, 2010 at 3:45 pm
Synon, there are very few commuter rail or metro systems (outside of Japan) that don’t require operating subsidies. BART is not valid in this comparison.
BruceMcF Reply:
February 2nd, 2010 at 1:52 pm
Quite, and France is renowned for its low labor costs and compliant labor unions, as if Germany, Italy, and Spain? ??
Its an obvious and blatantly dishonest red herring to raise wage costs in China when systems all across Europe generate operating surpluses “despite”, in the ideology of the denialists, being run by national passenger rail authorities with stronger unions, and in many cases higher real wages for the majority of the population.
Bianca Reply:
February 2nd, 2010 at 4:16 pm
“compliant labor unions”hee hee.
I’m still digesting the last paragraph in synonymouse’s comment above. It sounds a lot like some automatic anti-HSR comment generator. What’s a “bodacious” compensation package supposed to look like anyway?
Peter Reply:
February 2nd, 2010 at 4:33 pm
Heh, we’ve already floated the comment generator theory on his comments. He’s just added a few “bigger” words into his database.
synonymouse Reply:
February 3rd, 2010 at 10:06 am
Muni’s automatic raise contract is an example of a “bodacious” compensation package. It is so egregious that there may be an overturn measure on November’s ballot in SF.
jimsf Reply:
February 3rd, 2010 at 11:14 am
The reason muni employees have that condition built in is because san francisco is the most or second most, expensive city to live and and work in. The supervisors put that in not the union, and its not a “bonus” but a wage adjustment to help ensure equitable compensation. A bonus i something you get thats extra. The media just uses the word bonus to stir up you know what. AND, in return, the employees agreed not to strike. and there has never been a strike as a result. Its a much easier way to keep things going with easier negotiations and no threat of strike.
synonymouse Reply:
February 3rd, 2010 at 1:33 pm
Let the unions go out on strike and stay out on strike. It took a 6 month strike by Golden Gate Transit unions in 1976 to bring the union back to reality. They ended up with pretty much the same contract management offered intiially.
jimsf Reply:
February 3rd, 2010 at 1:51 pm
San franciscans can not and will not do without muni service for one day, let alone 6 months. You don’t live in sf, so how bout you stay out of it.
synonymouse Reply:
February 3rd, 2010 at 2:00 pm
Watch that ballot measure pass. The wages of gentrification.
jimsf Reply:
February 5th, 2010 at 12:32 pm
ha, no gentrification here now, all those folks lost their silly “I get paid to shuffle money and worthless paper” jobs and left town.
jimsf Reply:
February 3rd, 2010 at 1:58 pm
muni bus drivers starting pay is around 16-17 dollars per hour, and you stay on the worst routes with no seniority for years. raise your hand if you would drive the 14 mission, on call, at all hours for 5 years for that pay.
Matthew F. Reply:
February 3rd, 2010 at 10:03 pm
Be careful, that sounds like a lot to people who have never lived in California…
It doesn’t look like that bad a route (except for the 24-hour bit). We used to have a route in San Diego with 28 turns, 3 alternative sidings (where the pattern of sidings was different on weekends from weekdays), taking up to 2 hours to cross 28 miles of city, no freeways, mostly heavily urban or dense suburban, from one end to the other. More than once I ended up giving the bus driver directions.
http://web.archive.org/web/20060522231840/www.sdcommute.com/Rider_Information/routes/PDFs/Routes/5.pdf
Anyhow, I don’t think I’d mind driving a bus – even on-call 24/7 (though there’s no risk of THAT in San Diego…)
jimsf Reply:
February 5th, 2010 at 12:30 pm
Uh I hate to tell you but its not about the route…. its about the passengers. its the ultimate thug/ghetto/crime/murder/stab you in the face route. You wanna risk your life for that pay?
jimsf Reply:
February 5th, 2010 at 12:30 pm
San diego is a cakewalk. Its such a white bread city.
jimsf Reply:
February 5th, 2010 at 12:35 pm
well for anyone reading from out of state, $17 an hour won’t get you a studio in the ghetto in san francisco. In fact most drivers don’t live here they commute from as far away as sacramento. Yes they commute from sacramento- 2 hours, then drive a bus all day, get spit on, yelled at, assaulted, threatened, and then commute home. Not many people have what it takes to do the job, for any amount of money. Theres a reason they hire a lot of ex cons.
wu ming Reply:
February 2nd, 2010 at 5:35 pm
you really are determined to talk about things you know nothing about. chinese HSR is, if anything, priced high relative to your average low wage chinese worker’s purchasing power. in china, if not in taiwan or france, it’s priced for the yuppies, of which there are tens if not hundreds of millions. it’s meant to draw off those who would otherwise fly, as well as those who pay the premiums for the soon-to-be-obselete “soft sleeper” deluxe train cars. people often forget that there are a ton of people in china and other developing countries who have incomes on par with well to do americans, even when they’re decidedly not the majority of the population.
the folks who built china’s HSR will be riding the slow trains, at least for the time being. if we’re comparing apples and apples, japan, taiwan or europe is a better analogue for CA. as pointed out upthread, those systems all turn a profit even (because of!) with unions, high wages, and fares priced competitively with airfare.
BruceMcF Reply:
February 2nd, 2010 at 6:58 pm
Given that the Wendell Cox’s and O’Toole’s of the world are deliberately trying to spread, be careful to address it with precision: HSR services the world around, including in the US, generate operating surpluses.
Whether or not to provide the capital subsidy that they often require is, as with any subsidy, a decision of cost versus benefit. Since the California HSR can deliver intercity transport capacity in a state with a growing population and an ongoing, seemingly neverending financial crisis more cheaply than the alternatives, the answer on capital subsidy is a no-brainer: until California gets its financial act together, it simply cannot afford the luxury if higher cost road and air infrastructure to provide the needed expansion of intercity transport capacity.
The reason foundation and similar, exist for one purpose and that is to produce “information” to put out in the media, under the guise of legitimacy, to try to add “credibility” to political arguments which help the right win elections. And speaking of political machines, synonamouse, the right does exactly the same thing for its constituency as the left. The difference is one is for the wealthy and their monied interests , and one is for the rest of americans, the peolpe who work for a living, actually work, as in commute, clock in, pay bill the pg&e bill, these aren’t people who have jets and yachts, belong to country clubs, etc. like the reason foundation crowd. If you follow them, are one of their little sheep, and you aren’t filthy rich, you are just one of their patsies.
Dan S. Reply:
February 2nd, 2010 at 7:01 pm
I like to say that the Republicans are actually pro-welfare, even though they deny it.
To be specific, Republicans support corporate welfare, while Democrats support social welfare.
I respect the position of fiscal responsibility, but if you’re a fiscal hawk, then you are a fool to be voting for the Republican party for the last couple decades. Their track record speaks for itself.
wu ming Reply:
February 2nd, 2010 at 7:55 pm
the reason Reason (and other think tanks like it) exists is because conservative corporate mouthpieces can’t hack it in academia, so they created a puppet institution to look enough like academia that it functions as an “objective source.”
This is from Streetsblog (http://la.streetsblog.org/2010/02/01/lahood-talks-budget-%E2%80%9Cvery-bright%E2%80%9D-future-for-infrastructure-fund/)
First, Sec. LaHood said the Administration is going to work and cooperate with Congress on this. The Senate proposal from Chris Dodd proposes an infrastructure bank with an initial capitalization of $10B.
Second, the Reason Foundation, Inc. is fine with subsidies (as noted above for general aviation) and highways, just not transit. That is impressive intellectual consistency, Mr. Cox and Mr. Poole.
“One topic of particular interest was the White House’s continued assumption of transfers from the general Treasury to the highway trust fund (HTF) pending enactment of a new long-term federal transportation bill. As the federal gas tax, last raised in 1993, remains static and lawmakers decline to discuss an alternative funding source, the presidential budget document projects that the HTF would need more than $11 billion to make it through the current fiscal year. “
Dan S. Reply:
February 2nd, 2010 at 7:11 pm
For the love of Pete you gutless spineless irresponsible politicians at least index the gas tax to inflation you pandering jackasses.
BTW, haven’t seen any notice of Dodd’s proposal of $10B. AFAIK, nothing is on the table beyond Obama’s $4B proposal in the budget? Seems like Dodd’s been advocating the infrastructure bank idea for years, though, not surprised he’s behind the idea. Dunno if he can get it done though.
Ben Reply:
February 3rd, 2010 at 4:10 am
Dan-
The infrastructure bank is a very good idea by itself. It makes greater use of cost/benefit analysis instead of earmarking. An infrastructure bank also allows you to leverage the initial capitalization into a much larger amount of funding. I agree with you, though, that the gas tax really needs to be increased.
The article continues:
LaHood told reporters that while “we’ve gone along with the short-term extensions” of the 2005 federal transport law, the most recent of which expires at the end of this month, the White House has always sought to postpone the next bill until 2011.
The federal transportation reauthorization bill is not happening this year.
jimsf Reply:
February 3rd, 2010 at 11:16 am
speaking of Lahood, boy he’s mr cranky guy. the reproters are really gettin on his nerve cuz they keep askig the same questions about toyota over and over. ( I would too,)
I guess we can rule out japanese trains though, as we wouldn’t want an accelerator to stick at 220mph