Billions and Billions to Be Wasted
Article by Randal O'Toole for CATO Institute
Billions and Billions to Be Wasted
The only good thing about the infrastructure bill that Congress just passed is that it doesn’t include any money for high‐speed rail. Unfortunately, it did include far too much money for things like Amtrak, urban transit, and rural broadband.
The infrastructure bill is really two bills in one: first, a reauthorization of existing federal spending on highways and transit; and second, brand‐new spending on highways, transit, Amtrak, electric vehicles, airports, ports, clean water, clean energy, and broadband. This entirely new spending is almost entirely unnecessary as the infrastructure crisis was mostly fabricated in order to get Congress do what it always does, which is throw money at problems that are perceived to exist, whether they are real or not.
About half of the transportation dollars in the bill are dedicated to Amtrak and urban transit, modes of transportation that carry less than 1 percent of passenger travel and no freight. While the other half appears to be dedicated to highways, much of that will be spent on projects that will reduce, not maintain or increase, roadway capacities.
All of this is based on a presumption that automobiles are evil and the primary goal of government should be to wean Americans off the automobile and get them into various forms of government‐owned mass transportation. Even if you believe that automobiles are a major contributor to global climate change, many states and cities have made enormous efforts to get people to reduce their driving since 1970, and all of them have failed.
States are already lining up to get some of the $66 billion that the bill included for Amtrak. But even if the bill had spent twice that on Amtrak, it wouldn’t have significantly increase passenger train ridership. In most of the markets where Amtrak wants to expand service, airlines and/or bus companies already provide excellent service at fares that Amtrak won’t be able to match even with all of its subsidies.
Senate Republicans managed to get the new funding for urban transit reduced from Biden’s proposed $80 billion to about half that. But it is still way too much, especially considering that the reauthorization half of the bill includes more than $70 billion for transit.
The reality is that transit and intercity passenger trains are obsolete technologies that only survive because of giant taxpayer subsidies. I personally love passenger trains, but I don’t think they should be subsidized any more than Tom Hanks, who collects manual typewriters, thinks taxpayers should subsidize a manual typewriter industry. If we end the subsidies, transit will survive in New York City and a few passenger trains might survive on especially scenic routes, but elsewhere no one would particularly notice their absence.
The bill also includes $65 billion for rural broadband based on overestimates of how many people lacked access to high‐speed internet. According to the White House, which originally proposed this spending, “more than 30 million Americans live in areas where there is no broadband infrastructure.” But according to the Federal Communications Commission, only 21 million Americans “lacked access to fixed terrestrial” broadband in 2019, and all of those Americans had access to satellite broadband if they wanted it. The main beneficiaries of this $65 billion will be broadband companies and high‐income exurbanites.
All of this spending is on top of the three coronavirus relief bills passed by Congress in April and December, 2020, and March 2021, which included more than $116 billion for transportation. Some 59 percent of the transportation dollars in those bills, or $69 billion, was dedicated to transit systems that had lost more than half of their riders due to the pandemic. In retrospect, considering the supply‐chain problems we are experiencing today, that money should have been spent on freight transportation instead.
The infrastructure bill does include $17 billion for ports, but most of this will be too little, too late to solve today’s supply‐chain problems. The real lesson of this bill is that the government shouldn’t be involved in funding marketable services, like transportation and broadband, as it is too likely to get captured by entrenched interests while it ignores real problems.
There are still those who believe Congress should fund a high‐speed rail network, but recent news about China’s high‐speed rail systems provide another lesson about government failure. China has twice as many miles of high‐speed rail lines as the rest of the world combined. To build those lines, China State Railways and provincial governments have gone trillions of dollars in debt. Some of China’s high‐speed rail lines earn less in ticket revenues than the cost of the electricity used to power those lines, and the system as a whole is losing $44 million per day.
To help pay for the lines, China State Railways has increased freight rates 11 times so that it now costs twice as much to ship freight by rail as by truck (compared with less than one‐fourth as much in the United States). As a result, the share of freight moved by rail has declined from 50 percent in 2005, when China began building high‐speed rail, to 17 percent in 2016, and probably less today.
Some experts, including Beijing Jiaotong University Professor Zhao Jian, believe that China’s high‐speed rail program will lead to a debt crisis far worse than the Evergrande crisis (which was manufactured by the government to punish wealthy housing developers). Americans can count ourselves fortunate that we at least dodged this bullet train.
https://www.cato.org/blog/billions-billions-be-wasted
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