High-Speed Rail Infrastructure Investing

THIS is Killing our Economy!

By
Friday, February 8th, 2013

It's not often I agree with the folks in Washington... but in the case of a recent comment made by soon-to-be former Secretary of Transportation Ray LaHood, I will make an exception.

In a recent interview, LaHood told a reporter, “For the first time since people have been looking at infrastructure, America is behind. We are behind other countries because other countries are making the investments that we used to make.”

Although I often rail against excessive taxation and an overbearing government, I do agree that some basic necessities must be collectively paid for — such as the military, road construction, and basic infrastructure needs.

Unfortunately, due to mountains of waste and mismanagement, when it comes time to pony up for these basic necessities, the government starts frantically looking under couch cushions and digging in our pockets for spare change.

That's not to say the bureaucrats haven't screwed us on the necessities, either; from wasteful spending at the Pentagon to bridges to nowhere in Alaska, cash-filled coffers intended to support our basic needs are often pilfered by less-than-ethical lawmakers who are no less criminally-minded than your average pickpocket or convenience store thief.

And that leaves you, dear taxpayer, wondering where are all your money went.

But despite all of this, there is still truth to what Secretary LaHood said. And as we continue to fumble the ball on our most basic infrastructure needs, we continue to expedite the rapid disintegration of our economy.

An Expensive Proposition for Taxpayers

One element of this nation's infrastructure that is severely lagging is the availability of high-speed rail.

Although some find it convenient to target high-speed rail as a waste of taxpayer dollars, if you dive into the numbers, you'll find that the absence of high-speed rail in this country actually inhibits economic growth...

siemenshsr
Siemens' (NYSE: SI) Velaro trains reach speeds of 250 mph.

Recent studies conducted by the Government Accountability Office, the European Union, and the American Association of State Highway and Transportation Officials found that the actual cost of building and/or improving rail lines is significantly less than the cost per mile of alternatives.

In the area of high-speed rail, it was found that not building high-speed rail in California would cost the state $8.2 billion in foregone benefits over 40 years...

In the Midwest: $11.7 billion over 40 years; the Northeast Corridor: $5.5 billion over 40 years; and in the Pacific Northwest: $1.1 billion over 40 years.

Interestingly — and certainly not in line with what detractors argue — we are finding more and more evidence that maintaining the status quo and not investing appropriately in rail and high-speed rail infrastructure will actually be an increasingly expensive proposition for taxpayers.

Outdated and Overwhelmed

There's no doubt that building an extensive high-speed rail system in the United States is a very expensive endeavor. Estimates range from $600 billion to nearly $1 trillion.

But before we binge and purge at the sight of such a capital intensive investment, let's consider some of the economic burdens that we face year after year by relying solely on an outdated and overwhelmed transportation infrastructure.

In traffic costs alone, we easily surpass a trillion bucks every four years. Aside from the psychological toll sitting in traffic can take on folks, the most recent Treasury Department data from 2012 shows congested roads cost U.S. drivers about $100 billion a year in wasted fuel and lost time. Add that to a 2008 report issued by the American Automobile Association that found traffic accidents cost American motorists more than $160 billion a year.

And don't forget air travel congestion... According to a 2010 impact study that assessed the costs and impacts of flight delays in the U.S., the total cost of all U.S. air transportation delays reach as high as $32.9 billion a year.

Although some don't realize it, high-speed rail has already proven itself as a more efficient and economical replacement for air travel for distances under 500 miles. This is especially important to understand because this efficiency advantage only becomes stronger as the cost of fuel continues to rise.

As energy analyst Chris Nelder pointed out a few years ago in these very pages, no part of our transportation system is as vulnerable to volatile fuel prices as the airline industry:

It was built on the expectation that oil would rarely cost more than $40 a barrel, and it is completely dead if oil stays over $100 a barrel. Last year's oil price spikes put many smaller carriers out of business and cost the major carriers billions. Then the operators who had the largest hedges against rising prices last year got whacked again as prices plummeted.

For my money, the airline industry may as well be dead. Not just because of the damage that oil price volatility has done and will continue to do — and not just because the experience of air travel has become a painful routine of delays and personal insults — but because it's so inferior in every way to high speed rail travel for distances under 500 miles. The TGV line from Paris and Lyons virtually eliminated air travel between those cities, and the high speed line from Madrid to Barcelona cut air travel in half in the first year of its operation.

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The Bottom Line

Of course, I'm not so naïve to think those in Washington who are charged with investing responsibly in our nation's infrastructure will actually do the right thing. The days of interstate highway systems and intercontinental railroads are long gone. We simply don't have the stones to think beyond election cycles anymore.

And that's why it's nearly impossible to get any of these infrastructure projects off the ground within a reasonable amount of time.

However, even with the army of liars and deniers waving the boondoggle flag at every mention of high-speed rail, at a snail's pace, the groundwork is being laid... About four months ago, Amtrak began testing a 165 mpg run in four stretches of rail between Maryland and Massachusetts. Last summer, the first leg of construction for a high-speed rail line between Los Angeles and San Francisco was authorized.

Now, I realize there will be plenty of folks who read this and immediately revert to the talking points they've heard from anti-rail enthusiasts in the mainstream media who never really do any kind of sound or honest economic analysis. (Like that recent hack piece Anderson Cooper did over at CNN a couple of weeks ago. What a pathetic excuse for journalism that was.)

In any event, here's the bottom line: Without a solid, advanced, and efficient transportation infrastructure in place — including safe roads and bridges, a strong network of advanced freight and passenger rail lines, and a well-diversified mix of fueling station options that include traditional fossil fuels, electric car charging stations, and natural gas pumps — this nation falls deeper into the economic abyss of a post-Peak world.

No amount of spin in Washington can change that.

I don't care which side of the aisle you call home, if we truly expect this nation to continue as a vibrant economic force, we must support rational and aggressive transportation infrastructure investments that include a well-run high-speed rail system.

To a new way of life and a new generation of wealth...

Jeff Siegel Signature

Jeff Siegel

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Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets.  He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.


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