All of the comments so far have missed the central point in the high-speed rail (HSR) debate: that it is not the merits of high speed rail that are the issue but the Obama Administration’s handling of its HSR initiative. It’s the flaws in the Administration’s approach and its misleading rhetoric, rather than the appropriateness of HSR technology, that are the key reason why the press and public opinion have turned skeptical and why Congress, on a bipartisan basis, has refused to fund the program two years in a row. The Administration’s inept handling of the program was the focus of a December 6 hearing of the House Transportation and Infrastructure Committee. I thought our exchange on high-speed rail could benefit from taking a fresh look at the Committee’s conclusions.

Hearing Highlights Missteps in Administration's High-Speed Rail Program

December 6, 2011

Washington, DC – Transportation and Infrastructure Committee Members and
witnesses outlined growing concerns with the Obama Administration’s high-speed
rail program. Although sold by the Administration as a high-speed rail program,
over $10 billion in funding has been scattered to projects across the country
under the program, with the very real possibility that no high-speed rail
service will result.

“Since the passage of the Stimulus, the President’s high-speed rail program has
gone completely in the wrong direction,” said Committee Chairman John L. Mica
(R-FL). “Before the Stimulus, I worked to include language to create a blueprint
for the development of U.S. high-speed rail in the 2008 Passenger Rail
Investment and Improvement Act. And I was optimistic when the President made
developing high-speed rail a priority and included $8 billion in funding in the
Stimulus.

“Unfortunately, the vast majority of the projects selected by the Administration
are not high-speed at all. This bait-and switch gives high-speed rail in the
U.S. a bad name,” Mica continued. “In March 2011/2010, GAO reported the
Administration’s project selection process lacked transparency, and we don’t
fully understand why projects were chosen. We’re funding slow-speed projects all
over the country, most of them for Amtrak, that will not result in high-speed
service. $3.6 billion – more than one-third of the $10.1 billion that has gone
to projects – was turned back by states. The one project funded that offered the
most hope for achieving high-speed, the California project, appears to be in
disarray. In fact, the Committee will hold a hearing specifically to review this
project next week.

“We need one high-speed rail success, and our country’s best opportunity to
achieve high-speed rail is in the Northeast Corridor,” Mica concluded. “Now that
federal funding for this program has been stopped, we have an opportunity to
learn from those mistakes and make the needed changes to develop at least one
truly successful high-speed rail corridor in this country.”

“I support high-speed rail where it makes sense, but the President’s vision of
providing 80% of Americans with access to high-speed rail service is unnecessary
and isn’t going to happen,” said Railroads, Pipelines and Hazardous Materials
Subcommittee Chairman Bill Shuster (R-PA).

“Instead of finding one place to do high-speed rail, and do it right, the
Administration has spread the money too thinly all over the country. Because of
this misguided approach, we’re not getting any high-speed rail. The only result
will be a wasted opportunity.

“I urge this Administration to reevaluate what it’s doing with this program, and
to move its high-speed rail efforts in a new direction,” Shuster added. “We can
develop high-speed rail in this country, but only where it makes sense. And
nowhere makes more sense than the Northeast Corridor.”

Witnesses testifying at today’s hearing included Ken Orski, a former federal
transportation official and transportation policy consultant. Orski highlighted
the Administration’s missteps in implementing its purported plan to develop
high-speed rail in the United States.

“The Administration’s first misstep, in my judgment, has been to falsely
represent its program as ‘high-speed rail,’ thus, conjuring up an image of
bullet trains cruising at 200 mph, just as they do in Western Europe and the Far
East,” Orski stated in prepared testimony. “It further raised false expectations
by claiming that ‘within 25 years 80 percent of Americans will have access to
high-speed rail.’ In reality the Administration’s high-speed rail program will
do no such thing. A close examination of the grant announcements shows that,
with one exception, the program consists of a collection of planning,
engineering and construction grants that seek incremental improvements in
existing facilities of Class One freight railroads in selected corridors used by
Amtrak trains.”

Orski continued, “The Administration’s second mistake, in my opinion, has been
to fail to pursue its objective in a focused manner. Instead of identifying a
corridor that would offer the best chance of successfully demonstrating the
technology of high-speed rail, and concentrating resources on that project, the
Administration has scattered its nine billion dollars on 145 projects in 32
states, and in all regions of the country.

“Ironically, the Northeast corridor, where high-speed rail has the best chance
of succeeding, has received scant attention. And yet, this corridor is probably
the only one in the nation that has all the attributes necessary for effective
and economical high-speed rail service,” Orski stated. ...

It's hard to take this as a serious policy proposal from the Republican Leadership. First, because it is a drop in the bucket vis-a-vis what a number of studies say is needed to reduce our deferred maintenance backlog, to expand linkages between our metro areas, and to enhance capacity within them in order to remain competitive in a ruthless global economy. One estimate I heard recently is that this might generate a few billion dollars in revenue over the next decade. And that assumes that revenue-sharing with states can be negotiated to federal advantage.

Second, because this flies in the face of the "user fee" principle that members of both Parties have stuck with for decades, something that President Reagan spoke about in his ultimately successful effort to secure a five-cent-per-gallon gas tax increase in the early 1980s. The gas tax may not be a perfect instrument, and road-user charges are spreading as a complementary (and perhaps one day substitute) tool, but it has done yeoman's work to-date. Disconnecting funding from use entirely would remove an incentive to use the system efficiently. The transportation program already suffers from a reputation of wasteful spending; this would exacerbate that problem.

Third, because as Fawn rightly implies this smacks of election-year politics. Drilling + infrastructure investment seems like a notion cooked up by pols who know precious little about the transportation program. We are a year out from the 2012 election, and yet already this snake oil is what passes for a revenue proposal in the House. I shudder to think what else might come out of the woodwork (can you say "gas tax holiday"?) that would do more damage than good to the transportation program.

And that's the biggest, most sobering takeaway of all for me -- Election year politics are already poisoning the transportation policy debate. I hope serious policymakers can beat back the dumb ideas like this one and put forward serious ones instead.

While we applaud the willingness of the House Republican Leadership to fund a six-year transportation bill at current spending levels, it seems we’re still dabbling at the margins in terms of how to fund transportation going forward. Is revenue from expanded domestic oil and gas drilling the best way to fund transportation in the future? No. Will it become a politically viable way to ensure additional revenues into the Highway Trust Fund down the road? Possibly.

In reality, there is no easy solution besides the federal gas tax that can check all the boxes of being user-connected, easily administered, capable of being implemented tomorrow and understood by the public. It has been the long held position of AAA that a strong linkage needs to exist between revenues paid by motorists and the benefits received from the government in terms of safer and better roads and bridges. This link is vitally important to the future of our nation’s transportation network and to regain the trust motorists have in the government to spend their tax dollars in an accountable, appropriate manner. As we go forward it is important that we look back; it has always been in the best interests of the transportation system and its users that the system be funded on a self-sustaining basis, be deficit neutral, and meet the definition of ‘pay-as-you-go.’

Sadly, in just over two years, the only action Congress has been able to take is to pass (thankfully) the eighth extension of the federal transportation program. What was once an example of regular bipartisan success has now been reduced to the status of a pawn in a political chess match. I would submit that we are not likely to find a silver bullet to solve our funding dilemma this late in the game by snatching offsets from entitlement programs, raiding the general fund, or at the bottom of an oil drum.

The indications that the House Republican Leadership is willing to support funding for a six-year surface transportation authorization bill at something approximating current program levels, as suggested by the Chairman of the House Transportation and Infrastructure Committee, Congressman John Mica, should be viewed, as a recognition by Speaker Boehner and his colleagues that funding for these programs remains popular and that this bill might be viewed, as a powerful contributor to reducing exceptionally high unemployment levels, particularly, in the construction and construction-related sectors. In that sense, the Speaker's initiative, while a departure from the strict rules of the House-passed Ryan budget resolution that would have limited the funding available for these programs to transportation-related revenues (principally, federal motor fuels taxes) at current rates, is understandable, in terms of both economic and political realities.

But from where is this "new" money to come? It is not inappropriate to connect revenues from the oil and gas industry to transportation investment, but, if the Speaker has in mind only revenues from the current royalty regime, applied to new domestic (largely, off-shore) drilling, the resulting revenues will be insufficient to fund the federal surface transportation programs at current levels, and the funds would not become available for several years (barring an effort to bond currently against the speculative promise of future revenues, hardly consistent with the Republican leaders' fiscal principles). Moreover, using these revenues, as a source of public investment capital for the nation's transportation infrastructure, would break the "user-pays" principle that has characterized these programs.

It is difficult to know how seriously to take the Republican Leadership's proposal to fund transportation programs with oil and gas revenues: there are many hurdles to new domestic oil and gas exploration, and there will be many claims on these funds (not excluding the need to address the huge annual deficits in the federal general fund). But, if the Speaker means to suggest that we should look to the oil and gas industry, not only for royalties under the existing regime from new sources, but also for new taxes or fees and/or revenues, resulting from a reversal of the substantial "tax expenditures" (various credits, deductions, and other tax benefits), enjoyed by this industry, than it is possible that we could have uncovered a promising source of new investment capital for transportation infrastructure.

But, even augmented in this manner, we are not going to have enough funding to do everything. As a nation, we face a long period -- perhaps, a generation -- of constrained resources. That means that we need substantial and fundamental reform in the nation's transportation programs. We need to make better and more informed planning and programming decisions, shaped by comprehensive and strategic investment and operational programs at the state and metropolitan levels and based on the values of goals, outcomes, performance, and accountability. It is as important that these principles and values be contained in a new authorization bill, as it is that such a bill have adequate funding..

It's vital to get the funding for a robust federal program to revive our decaying infrastructure. When Audi launches a major advertising blitz for its A6 around the theme that America's roads and bridges are so bad that only the purchase of a high-tech, $40,000 + car enables you to survive driving them, you know the US is in bad shape.

But there's no reason to tie this funding to allowing the oil industry to turn America's crown-jewels into oil fields. The areas not open to oil today are not open for a reason -- they are more valuable as they are, either economically (the coastlines) or environmentally (the Arctic). And big oil already has access to most of our lands and waters.

Why not get the money from the people who are profiting form the excess price of oil -- foreign oil producers? The President has the authority to limit oil imports if he finds they are a threat to America. That isn't in doubt. Even George Bush said we were suffering from addiction to foreign oil. And if President Obama, either through a tax or through an imports limit with auctioned imports permits, began gradually ramping down oil imports, say 5% a year, four things would happen:

1) The Treasury would have a long-range revenue stream against which it could fund not only the infrastructure status quo, but a massive investment that would both make America competitive with China and Germany and jump-start employment and business.

2) Reduced US demand would mean less ability of oil producers to sustain high prices. The price of gasoline would go down, and in effect foreign oil producers would pay for almost half of these new infrastructure investments. Why not tax foreign oil producers -- they're going to benefit if we have better roads?

3) Investors, seeing a clear pathway Beyond Oil for the US, would rush to take electric vehicles, sustainable biofuels, and efficient trucks and planes to scale -- setting the stage for a new industrial revolution based on ending the petroleum era.

4) Domestic oil and gas producers would benefit -- with less competition from foreign oil they could produce more from the oil fields they have already developed -- without sacrificing wilderness, coastal economies or wildlife to oil industry's thirst for new frontiers.

It's not widely understood, but a large part of the subsidies the US currently provides the oil industry don't actually go to US oil companies -- they go to the treasuries of companies like Saudi Arabia and Venezuela. So a partial step towards a long term commitment to end our dependence on imported oil would be just to eliminate the $10 billion a year in subsidies to oil and gas. That's not enough to pay for our infrastructure deficit, but anyone in Congress who can't vote for that much is saying, in effect, that we are in favor of indefinite foreign aid to the richest countries and the richest companies on earth.

Speaker Boehner’s suggestion is a clever short-term idea but an extraordinarily bad one for the long term.

Of course more oil drilling is desirable. It would create useful employment and reduce US dependency on imported oil. But any new revenues arising from drilling should be spent on priorities that cannot be financed otherwise. Transport infrastructure can be financed out of user charges, e.g. fares, tolls or dedicated fuel taxes.

Topping up the federal Highway Trust Fund (HTF) out of general revenues is likely to destroy the traditional “user pays” principle that has governed US infrastructure financing for many years. A move from “user pays” to “taxpayer pays” would result in expenditures on infrastructure being limited by budget considerations and governed by political preferences rather than by the choices of infrastructure users.

If the federal congress cannot see its way to enabling users to finance its HTF, its proper course is surely to wind it down (as envisaged in the 1956 legislation that set up the HTF) and leave infrastructure financing to the states or to private investors, such as pension funds.

It is refreshing to see that Republicans are finally seeing the desperate need to fully fund the transportation reauthorization and that they realize that investments in government programs are the real path to economic recovery. We cannot cut our way to a robust economy. But do we have to drill in order to do the right thing? Many have hoped that we can find our way to a greener transportation future with hybrid and electric vehicles, more rail and transit and livable neighborhoods. In place of raising transportation revenues by ever greater drilling, that adds to global warming and despoils our environment, I suggest that additional transportation funding be derived from a portion of the revenues raised from a carbon tax.