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benveniste

July 2017

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[personal profile] benveniste

I guess it's that time again.  Everyone seems to be asking, "Why can't we build a high speed rail network?"  In at least three different venues, I've seen people either asking that question or linking to articles such as the one from Brookings claiming it's due to a lack of political will.

That, of course, is just a more polite way of saying "those nasty politicians won't do what I want them to do."  The United States Government has sufficient taxation, eminent domain, and money creation powers to take on virtually "public works" project Congress can dream up. Lots of people are in favor of the idea of high-speed rail, but in reality that train left the station a long time ago.  Here is a decade-by-decade breakdown of the factors which brought us to the sad state of American Railroads today.

1920's -- Believe it or not, passenger rail traffic in the United States reached a peak in 1921. The decline started in part with the automobile.  The declines were only modest, though, and freight traffic was only beginning to face increased competition from trucks and water transport.  Railroad regulation by the ICC became extensive, but the fixed rates set by that agency are generous enough that the railroads are earning a comfortable profit.  While new innovations such as the diesel locomotive and air brakes were coming on line, there isn't a big incentive to invest in railroads while more exciting and lucrative opportunities beckoned.

1930's -- With the Great Depression, both passenger and freight traffic plummet.  In 1931, the railroads lobby for and are granted a hike in freight tariffs.  As with any price hike designed to compensate for falling demand it fails spectacularly.  Instead, railroad customers switch to trucks for short- and medium-hauls.  While the New Deal funds construction of roads and highway bridges, infrastructure subsidies to the railroads are at best minor, and the railroads themselves cut investment and maintenance to the bare minimum.  30% of the railroads go bankrupt during this era.


The crash also brings to light the dire state of rail workers' pension funds.  While in theory about 80% of the workers had pensions, even for the surviving lines the plans were unregulated and grossly underfunded even before the crash wiped out of most of their value.  In 1937, FDR pushes for, and eventually gets a railroad retirement plan which survives judicial review, but imposes a new tax on the railroads.  The one bright spot was ... wait for it ... high speed, luxury rail in the form of "Streamliners."  Perhaps the most famous were the Super Chief and 21st Century Limited.  But the relatively few people who could afford to ride a streamliner could not make up for the mass market declines. While the railroads return to overall profitability in 1937, passenger service does not.  That has to wait until World War II.

1940's -- World War II brought a short-term boon to the railroad business, but at a cost.  From 1940 to 1945, passenger rail traffic more than doubled, and almost all of it was directly related to the war effort.  Freight came close to doubling as well, not only of Materiel but of other goods formerly transported by ship.  The railroads reap huge profits during this era, but since the military has priority on almost all construction resources, the war also kills any modernization efforts.  Despite the now proven superiority of diesel engines, the railroads had no choice but to bring new steam engines on line.  Those engines prove to be a dead money once the war ends.

At the end of the war, unlike railways in Europe, Japan, and elsewhere, the U.S. rail network is intact.  As with steel mills, the U.S. keeps its pre-war infrastructure while other countries replace their destroyed infrastructure with more modern tech.  The Army retains first call on all Pullman cars well into 1946. This delays the resumption of normal passenger service, and U.S. passenger rail will never be profitable again.  The railroads, flush with their war profits, finally started reinvesting in diesel locomotives, upgrading lines and signals, and upgraded passenger service including domed "observation cars." Unfortuately, it takes most of the decade for those innovations to come online, and when it does they run over the same rights-of-way.

1950's -- To the dismay of the railroads, passenger traffic never really recovers.  There are several reasons.  During the war, the Federal Government imposed a 15% excise tax on passenger rail travel, and unlike many other emergency measures, that tax wasn't repealed until 1962.  For all too many people, intercity-train travel brought back unpleasant memories of troop trains.  With peace came a resumption of America's interrupted romance with the automobile, and airline travel, while still a luxury, came within the reach of more people.

Then in 1956, Eisenhower signed the Federal Aid Highway Act of 1956, establishing the Interstate Highway system.  Two years later, the Boeing 707 makes its first passenger flight, and the buildout of public airports begins in earnest.  These two events provided massive subsidies to railroads' main competitors.  For the next 15 years, intercity passenger rail became an afterthought.  Things got so bad that in 1958 the ICC was given the power to prevent railroads from discontinuing passenger train routes.

1960's -- Passenger rail continues it's long slide, but new threats to high-speed rail emerges even as it's just becoming a reality overseas.  In major and even mid-sized cities, the plans for the Interstate System envision the building of multiple bypasses and ring roads.  These will require taking of large sections of the city by eminent domain, and a public backlash begins to arise.  Roads such as Chicago's Cross-town expressway, and Boston's Inner Belt Expressway go unbuilt as a result.  In addition, both litigation and regulatory barriers increase.  Not only does eminent domain litigation become longer and more expensive, but the awards go up as well.  The latter part of the decade sees a rise in environmentalism, which adds additional barriers to such large scale projects.

1971 -- Amtrak is founded.  With a sigh of relief, the remaining railroads dump their aging equipment and depots on the government and do the bare minimum to meet their support obligations to Amtrak.  Among the strongest proponents for Amtrak were labor unions and passenger rail advocacy groups.  While the public press releases were glowing in the vision of the future, Amtrak was not expected to survive.  Those are not my words, BTW, you can find them in Amtrak's FY2015 Budget Request. What actually happened is that the Amtrak route map became yet another area where decisions were made by political expediency rather than the economics of railroading.  The history of Amtrak is well-documented; I see no reason to recount it here.

All of this history is very nice, but what does it mean for the chances of High-Speed Rail today?  Remember that elected officials invoke the wrath of NIMBY at their own peril. The first requirement of high-speed rail is a dedicated right of way and I can't think of a major city significant city where the current right-of-ways are up to the task.  To acquire a new line would require eminent domain power.  In all likelihood, the government would not only end up paying top dollar for the land needed for each rail line, but would also have to pay compensation to the abutters. The case of Kelo v. New London a decade ago shows that the government can use that power even for private development, but the public backslash from that case also shows how politically dangerous it would be to try it. The environmental lawsuits would also consume decades and add to the overall cost of any project.  And while Philip K. Howard's The Rule of Nobody is a somewhat extreme view, elected officials in multiple roles at every level of government would be clamoring for their say and their piece of the pie.

Had Eisenhower and we as a country elected to create a transportation "triad" in the 1950's, rail lines could have evolved and improved in the same way that road and air travel did.  But today?  Call it lack of political will if you must, but when you start with the financial costs and political costs and add in the loss-making history of Amtrak, high-speed rail becomes a very hard sell for at best a risky payback.

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