Feb. 18, 2019—The need for a National Infrastructure Bank (NIB), built along Hamiltonian principles, has come sharply to the fore in the current debate/uproar over the fate of California’s plans for a high-speed rail connection between Los Angeles and San Francisco. Establish a national bank with long-term, low-interest credit, capitalized with already existing government bonds, and this premier project can be on its way.
The current uproar began with California Governor Gavin Newsom’s declaration in his Feb. 12 State of the State message. Newsom called for a slowdown and limitation of the project, largely due to the lack of assured funding. Add to that the fact that the project (which has been on the drawing boards since 1996) has been bedeviled by cost overruns fed by environmental harassment suits and political combat over routes, and it’s clear that this premier infrastructure upgrade is hanging by a thread.
True, the construction of the 800-mile high-speed rail corridor connecting L.A. and San Francisco through the Central Valley does not represent the kind of life-or-death infrastructure issue that the New York-New Jersey Gateway project does. But there are good reasons why the project for train service that would cut travel time from L.A. to San Francisco from 7-8 hours to 2 hours 40 minutes, and connect the major cities of California’s agricultural heartland to the coastal metropolises, ranks number three on the U.S. Treasury’s list of Transportation Projects of “major economic significance.” The Treasury study estimates that the benefit to cost ratio would range from 4 to 7! That means that its costs would pay back four to seven times the amount on benefits.
You certainly wouldn’t know that if you listened to the commentaries on the California project. California voters approved the high-speed rail link in a referendum in 2008, with a price tag (down-payment) of almost $10 billion, and the Federal government has already allocated upwards of $6 billion. But not only is the prospect of future funding uncertain (while estimates of costs are now upwards of $77 billion), but the state referendum included an insane clause that the rail-lines had to be “financially self-sustaining!” In today’s parlance, that prescription is defined narrowly by how much revenue will be gained in fares. In reality, the payback will come much more broadly in the increased productivity of California’s economy as a whole. Indeed, thousands of jobs have already been created in the Fresno area as a result of the initial stages of the project.
Construction of the rail line, which would operate on dedicated lines at up to 220 miles per hours, has already begun in the Central Valley, where the geography does not pose the great challenges which the connections to San Francisco and Los Angeles will. Gov. Newsom is currently saying that he might confine the project to the 141-mile stretch between Bakersfield and Merced, pending some solution to the lack of financing.
In reality, this California line represents only a small percentage of the tens of thousands of miles of electrified high-speed rail which should be being built across the United States. We don’t have the money? It’s actually at our fingertips, if we return to the Hamiltonian system that Lincoln and FDR used to transform our nation into the economic envy of the world.
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Tags: California, Gavin Newsom, high speed rail, National Infrastructure Bank