All Aboard!

Not since the early 20th century have so many Americans had train on the brain.

In 1922, General Motors President Alfred P. Sloan took the initiative to get more Americans into passenger cars by enlisting the help of Standard Oil (now Exxon), Phillips Petroleum, glass and rubber manufacturers and politicians to build a convincing argument against mass transit. America's love affair with the automobile has blossomed ever since...although the love affair with GM recently soured....



Economics has a special love for transportation issues too. There is lots of opportunity for creating more efficient, more economical modes of transportation. And, during economic downturns, more people tend to choose public transportation over incurring private transportation costs such as gas and maintenance. For an example as to how well public transportation can work, look at Spain.

Case Study: Spain by Train

After the success of Japan's Shinkansen Trains and France's TGV, Spain opened its first Alta Velocidad Espanola (AVE, for "high-speed Spanish train") in 1992. It ran between Madrid and Seville. Since then, the network has grown to include more stations in the south and eastern regions. In terms of efficiency and economy, the route handles about 89 percent of railway and air traffic. The number of tourists to smaller town has increased, demand for business conventions is up and less competitive-areas now have the option to attract companies to their local economies. Here's an interesting video on the efficiency and overall satisfaction with the AVE.



Trains have numerous economic benefits as a preferred mode of regional transportation. The International Union of Railways (IUR) says a high-speed train (which, by definition travels 90 m.p.h. or faster) can carry eight times as many passengers as an airplane over a given distance, using the same amount of energy and emitting a quarter of the carbon dioxide for each passenger. The AVE reaches up to 300 m.p.h. during the morning rush hours between Barcelona and Madrid.

With clogged highways and overburdened airports here in the States, economic growth is suffering. President Barack Obama has set aside $13 billion for high-speed rail infrastructure in his landmark 2009 Stimulus Package. That's an initial $8 billion, then $1 billion annually for five years. The Transportation Department is to begin awarding monies by the end of summer. As of today, only one high-speed rail line is operative in America; it's the Washington D.C. - Boston line in the Northeast Corridor. The Federal Government has identified 10 corridors nationwide with great promise for high-speed development.

President Obama has this to say on high-speed rail systems in the U.S.:

"What we need, then, is a smart transportation system equal to the needs of the 21st century. A system that reduces travel times and increases mobility, a system that reduces congestion and boosts productivitym a system that reduces destructive emissions and creates jobs."

So now that we understand the benefits, what are the costs? The director of high-speed rail at the IUR says that high-velocity trains are not profitable. Despite hugh time and environmental savings system-wide, budget airlines still offer the cheapest prices between Barcelona and Madrid and the IUR director goes on to say that the systems in Japan and France are likely the only two to have broken even in terms of profit. There are major concerns in terms of safety, and reliabilty which can be very costly to maintain. CATO Institute economist Randal O'Toole found that aside from businesspeople and tourist, average Europeans still prefer driving to rail transit. In an article that appeared in USA Today on May 20th, he confirmed that taxes would rise for all Americans and that ticket fares would cover only some of the operating costs and none of the capital costs. O'Toole calculates that the cost of implementing a high-speed rail system in the U.S. would cost an eye-popping $500 billion, in stark contrast to the $13 billion the President has set aside through 2015. American highway infrastructure paid for itself in a matter of years from fuel taxation. What besides rail subsidies would sustain a nationwide system?

One idea is property taxes. Spanish real estate portal Kyero reported in June 2008 that property prices in towns and cities served by AVE stations outperform their provincial averages. As more stations are planned, it will be interesting to see how the introduction of high-speed rail impacts house price. This could in turn become a primary source of payment for train systems worldwide.

What are your thoughts on high-speed rail in the U.S.?