By Jerry Agar

The passenger train was invented in the early 1800s. Politicians have been in love with it ever since; so much so that they will make extravagant statements in defense of their massive spending plans.

The Chicago Tribune reported on Chicago Mayor Daley and 8 Midwest governors announcing a plan to chase federal stimulus dollars by fast-tracking high speed passenger rail.

Governor Granholm of Michigan promised tens of thousands of jobs for the Midwest though the magic multiplying effect of "investing" taxpayer dollars.  When politicians announce giant job creation projects that involve huge sums of tax dollars, it is usually a good idea to do a bit of fact checking. 

For an educated opinion on Granholm's position, and rail travel in general, I turned to Dr. Samuel R. Staley, Director of Urban and Land Use Policy for the Reason Foundation and Co-author of, "Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century," and Randal O'Toole, economist, Senior Fellow at the Cato Institute and author of "The Vanishing Automobile and Other Urban Myths."

IPI:    Gov. Granholm says that high-speed rail will create 59,000 permanent jobs in the Midwest. She is quoting the     U.S. Department of Commerce which claims that, "every dollar spent on investments in our freight railroads — tracks, equipment, locomotives, bridges — yields $3 in economic output. In addition, each $1 billion of rail investment creates 20,000 jobs."  Is she (and the Commerce Department) correct?

RO:      I do not believe so. They are freely adding all sorts of multipliers that are unlikely in the extreme. Besides, an investment in rail freight is not the same as an investment in passenger rail. Rail freight is highly efficient, pays for itself, and saves energy over highway freight. Passenger rail is highly inefficient, requires gargantuan subsidies, and saves no energy over highway travel (in fact, it is far less energy-efficient than intercity buses).

SS:   Virtually all regional economists recognize that freight rail provides important economic benefits because it (in a competitive environment) reduces transportation costs and improves productivity for industry and facilitates commerce.

Passenger rail does not have similar benefits. Passenger rail riders typically spend more time traveling (not less) and travel greater distances than automobile travelers. Moreover, passenger rail is much more highly subsidized than either private freight rail or passenger automobiles. So, the net impact of public subsidies is to take money out of the productive economy, not add to it.

Passenger rail's benefits are an assumption, not a fact, and the estimates for freight multipliers are not comparable to passenger rail. (Even assuming the freight rail multipliers are valid, which is an arguable point as well.) 

IPI:    Why don't private dollars flow towards the kind of fabulous return Granholm claims?

RO:   Because the returns are entirely imaginary.

SS:    Passenger rail customers are not willing to pay the full cost of providing the service, unlike automobile users who completely underwrite the full capital costs of vehicle ownership, pay for the vast majority of road facilities through gas taxes and property taxes, and subsidize transit through diversions from the federal Highway Trust Fund (funded by the national gas tax).

IPI:   Does high speed rail (HSR) not make sense at all for America?

SS:   I believe there are corridors where it probably makes sense. I've looked at the corridor linking Cleveland-Columbus-Cincinnati, and there may well be strong enough demand to make it work. The northeast corridor linking Boston-New York-Philly-Washington, DC covers operating costs which is pretty good by U.S. standards. The key is putting HSR in corridors linking large urban employment centers that are between 200 and 500 miles apart as a rule of thumb. Air serves urban cores further apart, and automobile or express bus is much more efficient for places closer together.

But the national HSR rail plan is over promising what these corridors can do for transportation and mobility and is way under estimating the potential costs.

IPI:   What about the opportunity cost of those dollars?

RO:    Good question. Spending money on congestion relief would do far more to speed up travel, clean the air, and help more people than high-speed rail, which will only serve a tiny elite. (And, in case you weren't sure, high-speed rail will not relieve highway congestion in any way.)

IPI:   Gov. Granholm is proposing to cut Amtrak funding.  Amtrak bleeds tax dollars.  Why do they need more money when ridership is up? And why have they never made money?

SS:     The transit business model is fundamentally broken. This is self-evident if we look at transit operations objectively. No business can operate when every new customer represents a net loss to the operation. This is where transit ridership is. Since only 20-30% of costs are covered by fares, every new passenger represents costs 3-4 times greater than the revenue she/he generates. That's why transit agencies are even in worse trouble now. They don't have a business model that makes the customer valuable. Their success is based on chasing federal (and state) grant money, and spending dedicated local options sales taxes on capital projects (or expanded routes) that add little to the overall value of the transit systems or productivity of the agency.

This is unsustainable. Rather than focusing on getting more money from Washington, DC, we should be using these events to broker a new discussion on the role of transit in our cities, and how we can fundamentally reform transit planning, operations, and management to make it a viable option again.

This means moving toward a more traditional business model that puts the transit user at the center of the business model.

IPI CEO John Tillman told the Chicago Tribune and other papers that the governor's are vague on the cost since, "They don't want the price tag out there when everyone's talking fiscal restraint."

An example of the unsubstantiated hyperbole issuing forth from people grabbing for tax dollars is a statement from Jolene Molitoris, Ohio's Director of the Department of Transportation.  She said, "We are hoping to send 6 million or more Ohioans on high-speed trains to the Olympics in Chicago (in 2016)."

The recent games in China sold a record 6.8 million tickets.  Total.  So is Chicago planning to put on an event just to entertain Ohio, or are those people who are merrily spending our money at a furious pace operating totally fact and responsibility free?

If the job creation aspect is questionable at best and if passenger rail is a consistent money loser, why are the governors and the mayor of Chicago so eager to spend an estimated $13 billion?  (Keep in mind that governments almost always under estimate and over spend.)  The answer may simply be that they have a pile of your money and they are going to spend it, no matter what. That way they seem to be doing something important.

Is that any way to run a railroad?

For more from the Illinois Policy Institute, click here.

Jerry Agar

If Billy Mays, the legendary, loud talking TV pitchman, had not recently died, perhaps President Obama would have him selling the health care bill. "Buy now!"

Chicago comedian Ken Sevara shows us how that might sound.

The less likely a product is to prove ultimately useful, the more hype is used to sell it - and sell it NOW. If the product is good and true and useful, the market for it already exists, NO hype necessary.

Yes we have a market for improvement in health insurance. But do we have a market for this particular bill? Is it a cooling salve for the nation, or a bottle of snake oil?

Have you read America's Affordable Health Choices Act of 2009? No? Neither have your elected representatives. They were too busy not reading the Cap and Trade bill.

You can take a look at all 1,018 pages of the Health Choices Act here. Once you have read it you can help Sun-Times columnist Steve Huntley (and Congress) figure out what this means:

SEC. 1231. EXTENSION OF THERAPY CAPS EXTENSION PROCESS

Sec. 1833 (g)(5) of the Social Security Act (42 U.S.C. 1395l(g)(5) as amended by section 141 of the Medicare Improvement for Medicare Patients and Providers Act of 2008 (Public Law 110-275), is amended by striking "December 31, 2009" and inserting "December 31, 20011."

What of the fear that government will take away choice? The President says, "Under the plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year." Is he telling the truth?

Take a look at page 16 of the bill. Section 102 - "Protecting the Choice to Keep Current Coverage" grandfathers in anyone who has health insurance prior to the bill's date of enactment. That date is referred to in the bill as Y-1.

Dr. Roger Stark tells the Seattle Times that there is precedence for believing that the government will force private providers out of business. "This is exactly what happened with Medicare. In 1964, senior citizens had access to a wide selection of private health-insurance policies. Medicare was passed in 1965, and by 1970, no private market existed, except for co-pays and deductibles, for the elderly in the United States."

Section 102 mandates that grandfathering is permitted so long as the policy, "issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y-1." What if the policy holder feels the change is to their benefit? How long can an insurance company compete in the new marketplace (if we can call it that) without having to make some sort of change? Would a company have to make changes to react to the "$2,500 a year" savings the government offers? Does your insurance policy look exactly the same as the one that was offered by the company when it was founded in 1852?

Do the answers to these questions matter, or should Congress pass the bill as quickly as Obama wants them to?

The former lieutenant governor of the state of New York, Betsy McCaughey, tells us that in her opinion the bill calls for the counseling of old people towards suicide in order to keep costs down.

On my radio show on WGN AM 720 in Chicago a caller said that elderly people need to be counseled on palliative care, hospice and end-of-life issues, and that there is nothing sinister about it. Who is right? Is there in fact a third answer that is closer to what will happen if the bill is enacted? Do the answers to these questions matter, or should Congress pass the bill as quickly as Obama wants them to?

What about the claim that if we get socialized medicine we will be standing in line for health care like Soviet Russians waiting for beets? USA Today reported recently that the city with the longest wait times to see a doctor is Boston. Massachusettes has a state-run "everybody into the pool" insurance system. You decide.

Speedy law is often bad law. For a local example we have only to look at the debacle created by Chicago Mayor Daley's ramming through of a parking meter sale. The aldermen did for Daley what Obama wants Congress to do for him. "Just sign here."

Privatizing is a good idea, but the parking meter deal was done quickly, for perhaps half of what it was worth and Chicagoans are angry. Now the aldermen are crying that they didn't know the details of the sale. Can your senator and congressman answer reasonable questions about the health insurance bill? Or should Congress just pass the bill quickly, as Obama wants them to?

At least the products Billy Mays advertised came with a money-back guarantee. Do we have that for the government's failures in education (50% graduation rates in large cities,) social security (going bankrupt,) Amtrak (has never made money,) and, of course, Medicare and Medicaid, which everyone knows are full of fraud, waste and general ineptness.

Perhaps this administration should show us their skill by fixing Medicare and Medicaid and then offering up that experience and expertise, rather than pushing us to trust them to DO IT ALL NOW!

Broken leg? How about an Obama Shin-Wow? It really works! Get in line NOW!