Obama: Europe and Russia Invest More in Roads and Railways Than We Do

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President Obama made his long-awaited infrastructure push during his State of the Union address – with more information included in an accompanying memo released today (see below). This is what he told Congress:

The third step in winning the future is rebuilding America. To attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods, and information – from high-speed rail to high-speed internet. [Applause]

Our infrastructure used to be the best – but our lead has slipped. South Korean homes now have greater internet access than we do. Countries in Europe and Russia invest more in their roads and railways than we do. China is building faster trains and newer airports. Meanwhile, when our own engineers graded our nation’s infrastructure, they gave us a “D.”

We have to do better. America is the nation that built the transcontinental railroad, brought electricity to rural communities, and constructed the interstate highway system. The jobs created by these projects didn’t just come from laying down tracks or pavement. They came from businesses that opened near a town’s new train station or the new off-ramp.

Over the last two years, we have begun rebuilding for the 21st century, a project that has meant thousands of good jobs for the hard-hit construction industry. Tonight, I’m proposing that we redouble these efforts. [Applause]

We will put more Americans to work repairing crumbling roads and bridges. We will make sure this is fully paid for, attract private investment, and pick projects based on what’s best for the economy, not politicians.

Within 25 years, our goal is to give 80 percent of Americans access to high-speed rail. [Applause] This could allow you go places in half the time it takes to travel by car. For some trips, it will be faster than flying – without the pat-down. [Laughter, applause]. As we speak, routes in California and the Midwest are already underway.

Within the next five years, we will make it possible for business to deploy the next generation of high-speed wireless coverage to 98 percent of all Americans. This isn’t just about a faster internet and fewer dropped calls. It’s about connecting every part of America to the digital age.  It’s about a rural community in Iowa or Alabama where farmers and small business owners will be able to sell their products all over the world. It’s about a firefighter who can download the design of a burning building onto a handheld device; a student who can take classes with a digital textbook; or a patient who can have face-to-face video chats with her doctor.

All these investments – in innovation, education, and infrastructure – will make America a better place to do business and create jobs.

High speed rail proponents will cheer his support for their cause, which has been teetering in the face of serious opposition. But overall, Obama shied away from specifics on infrastructure. He didn’t return to his Labor Day push for a $50 billion “down payment” for infrastructure. He didn’t get behind a six-year reauthorization, though the administration did release a companion to the address, saying that a six-year transportation reauthorization would be rolled into the White House budget proposal. The memo also envisions “transformational investments such as an infrastructure bank.”

In his speech, Obama certainly didn’t advocate for a reform-minded transportation agenda that gets beyond the single-occupancy vehicle. And he didn’t address the people whose letters we featured earlier today, who find their mobility curtailed because of inadequate public transportation.

But were we expecting all that? This is kind of what we were expecting. It’s notable that Obama listed infrastructure third in a series with economic innovation and education, listing the strategies the country needs to use to return to its position as a global superpower. It’ll be up to advocates and supporters of sustainable, efficient transportation to keep pushing the administration – and, more importantly, Congress – for the kind of infrastructure investment and innovative reform the country needs.

  • Clarence Eckerson Jr.

    He knows high-speed rail is in the Republican cross hairs, so he wants to mention it and put as positive possible face on it. Boehner did not seem moved.

  • Clutch J

    Transportation reform doesn’t yet have the cachet of other issues. Sadly, had the Prez made a bigger deal out of transit funding or Safe Routes to School, it would have invoked laughter from the chattering classes.

    Transportation reformers are taking on the car, third after only God and TV in the American pantheon. Even in 2011, it’s unrealistic to expect any POTUS to tackle that head-on in a SOTU. Let’s be grateful for progress at HUD/USDOT and Obama’s strong vision for HSR and then look for some answers in the details of the admin’s forthcoming reauthorization proposal.

  • Meh. The US does spend around the same amount of money on transportation as most of Europe – it just builds a lot more inefficiently.

  • garyg

    Not sure how “Obama’s strong vision for HSR” squares with his call for a 5-year freeze on discretionary spending. But then, his support for HSR has always been more rhetorical than substantive.

  • Brandi

    Obama is definitely trying to make high speed rail part of his legacy. Giving it the amount of time he did in the state of the union is pretty impressive. Despite his missteps, he is definitely shaping up to be one of the biggest proponents of high speed rail and livable communities. I thought the speech was pretty well done. Now he just needs to make sure the money keeps on coming.

  • Clutch J

    @ garyg

    I got $8 billion worth of rhetoric for you right here–
    http://www.npr.org/templates/story/story.php?storyId=101073906

    I know, I know, we could use $100 b. But he’s done more for HSR in two years than all of his predecessors.

  • Larry Littlefield

    I think the President’s speech, by calling for investments in the future, will unite the Congress. Because the future and those who will live in it is the one thing all the leaders of this generation, Republicans and Democrats, have proven to be against.

  • Americans spend much more on transportation than Europeans, if you count personal spending on cars as well as government spending on infrastructure.

    Why are transportation activists backing the idea that spending more is always better? Yes, we should be spending much more on rail, but we should not support statements like:

    “America is the nation that … constructed the interstate highway system.”

    We should be pointing out how much damage the interstates did to American cities.

  • Erik G.

    Europe? Well duh.

    The sad thing is that North Africa and Latin America are fast overtaking the USA on rail spending.

  • J:Lai

    “We should be pointing out how much damage the interstates did to American cities.”

    The interstate highway system added a tremendous amount of value to the US economy.

    It had certain negative consequences, such as destroying the value and livability of some urban areas, as you mentioned. In addition, it had the unintended consequence of encouraging massive suburban sprawl.

    On balance, however, it was a highly successful investment. So successful, in fact, that the country continued to invest in highways to the point of overinvestment.

    I think it is exactly the kind of example that should be used to support transit investment. We need to re-allocate some of our capital from highways and car infrastructure to other types of transportation. We would be fortunate to get the same type of returns on this new investment as we got on the early investment in interstate highways.

  • “it was a highly successful investment. So successful, in fact, that the country continued to invest in highways to the point of overinvestment.”

    J:Lai: if you agree with me that we have already overinvested in roads, then you should be criticizing the headline of this post:

    “Obama: Europe and Russia Invest More in Roads and Railways Than We Do”

    which implies that we should be investing even more in roads.

    I disagree with you about the Interstates. Western Europe became prosperous without such massive investment in roads; they have some freeways, but not nearly as much mileage per capita as we do. In addition, when you say it was a successful investment, you are ignoring the environmental costs: I don’t think it would look successful if we subtracted the cost of global warming and other environmental problems caused by all the traffic it generated.

    But even if you and I disagree about the Interstates, we should both agree that transportation advocates should not be promoting even more road building now that we are already overbuilt, with the headline “Obama: Europe and Russia Invest More in Roads and Railways Than We Do.”

  • This high-speed rail is a fantasy. It’s disappointing that an otherwise intelligent guy like Obama doesn’t understand that. He’s getting bad advice from people like Ray LaHood.

    The 2009 CHSRA Business Plan specified four sources of capital to get the system built before the start of operations in 2020.

    Federal Grants: $17-19 billion
    State Grants (Prop. 1A bonds): $9.95 billion
    Local Grants: $4-5 billion
    Private Debt or Equity Funding: $10-12 billion

    The Feds may throw some more money down the CHSR rathole, but even that’s going to be a lot less than $19 billion. The bonds authorized by state voters in 2008 are unmarketable because investors know the system isn’t going to make money. And California is by law prohibited from providing any subsidy to operate the system if/when it’s built. That’s the main reason state voters voted for it in the first place—no taxpayer subsidy. Not a single private investor has stepped up since 2008 for the same reason—there’s no money to be made and the state by law can’t guarantee investors a profit. And “local” grants for cities and counties, all of which are swimming in red ink? Nope.
    http://cc-hsr.org/assets/pdf/CHSR-Financial_Risks-101210-D.pdf

  • J:Lai

    Charles Siegel,

    Western Europe’s relative prosperity without an equivalent to the interstate highway system is not relevant. First of all, it is not clear that the transportation needs of Europe and the US are similar, given the differences in geography and population distribution, among other factors. Even if you ignore the dissimilarity, however, the relative lack of highways in Europe only shows that it may have been possible to achieve economic growth with some alternative infrastructure besides the interstate system. This does not invalidate the interstate system as a positive investment. At best, it allows you to say that maybe we could have done it differently and achieved a similar result, and even that is somewhat dubious. Keep in mind that post WWII growth rates in western Europe have been significantly slower than the US.

    Regarding the cost of the environmental problems created by the interstates, I don’t think there is any way to estimate these costs within even an order of magnitude. The value of the interstates is so closely related to the activity of nearly every economic sector, that what you are really talking about is the environmental costs of US economic growth over the last 60 years.

    Now maybe it would have been a better trade for the US to have grown at a rate closer to France or Spain over the last half century, in order to have used fewer resources and created less pollution during that time. I’m not sure, and I don’t think anyone is really in a position to evaluate such complex multi-generational tradeoffs.

    While I do agree that transportation advocates should not be promoting new road building for the most part, this is not necessarily what the headline implies. Investment in roads can also mean repairing and improving existing roads. Such repairs are badly needed in many areas. Like it or not, this country depends on cars and trucks for much of its economic activity.

  • J:Lai, Europe actually outgrew the US following WW2. Germany was called an economic miracle, and France had the thirty glorious years. Eurosclerosis set in in the 1980s and 90s – but in the 2000s, US growth dropped as well, to the point that the US had a lower GDP per capita growth rate than liquidity-trapped Japan. Any connection between growth rates and how large the national freeway network is is completely incidental.

  • James Fujita

    this was the State of the UNION address, not the State of the Transit Supporters address.

    the Interstate Highway System was a big, government-built transportation project. many Americans consider this to be a good thing.

    if Americans felt the same way about HSR, the world would be a better place.

  • James:

    You can only maintain your religious faith in high-speed rail by ignoring the facts, like those I posted above. HSR is just a dumb way for the US to spend its limited transit dollars.

    Rob Anderson

  • Rob, the situation for CAHSR is rosier than you think. Private investors are still waiting to see the final amount of federal aid, but some, like Richard Branson, have expressed interest. Foreign governments have proposed even more: Japan is proposing to fund half the cost, leaving California a single-digit number of billions short of Phase 1 – and of this shortfall, more than half could be cut by leaving out the low-performing LA-Anaheim segment.

  • Baloney. Even if the Feds gave them the full $19 billion—which they won’t, especially with the Republicans in control of the House—that wouldn’t be enough to even get the sytem built. Where’s the rest of the construction money going to come from? Where’s the money to operate the system if/when it’s built going to come from? More importantly, where’s the profit for investors going to come from? The only profit projections thus far have been the result of CHSR’s grossly inflated ridership numbers.

  • garyg

    Alon Levy’s claims are incorrect. Japan has not “proposed to fund half the cost.” No foreign or private investor has committed to provide even a fraction of the project’s $30 billion shortfall in funding. There is no serious prospect for obtaining that money from any source.

  • egk

    Garyg and Rob Anderson: Do you two really believe that CAHSR will not make a profit (if they can get the rails built)? That would require such a denial of all available evidence, from decades of ridership studies, to actual real-world lines throughout the world. What is incredible is that the so-called business-friendly Republican party does not believe in being friendly to this kind of business. HSR is a multi-billion dollar industry worldwide. Passenger rail companies, which had been unprofitable and declining for decades are now profitable and expanding. Even in our own country.

    Alon’s statement is correct – proposed (or perhaps suggested) but not yet committed: “The state-owned Japan Bank for International Cooperation is prepared to lend funds for California’s rail project, Transport Minister Seiji Maehara told reporters late yesterday in Tokyo. He declined to comment on the amount of the possible loan.” – Bloomberg
    “Ambassador Fujisaki’s opening remarks to the conference were a forceful call for us to use Japanese know-how and equipment for our high speed rail. Most extraordinarily, the ambassador stated that he believes Japan will pay for up to half of the cost of the California’s HSR” – cahsrblog

  • “All available evidence”? Maybe you could provide some of it for us to ponder. I don’t believe that Japan is going to pay to build HSR for California. It’s more likely that they just want to sell us rail cars and technology.

    From the most thorough analysis of the CHSR project:

    “The Director of High-Speed Rail at the International Union of Railways (IUR) stated that only two segments of two high-speed rail systems in Europe and Japan break even. A 2004 DOT study, then a Congressional Research Service study reconfirmed this. In 2009 Amtrak’s Inspector General documented the on balance sheet and off-balance sheet subsidies European rail operators receive. Recently a World Bank report said the same thing. This reality should have been reflected in the CHSRA’s 2008 promotion of Prop 1A. CHSRA’s negligence of these facts is neither understandable nor excusable.”
    http://cc-hsr.org/assets/pdf/CHSR-Financial_Risks-101210-D.pdf

    I disagreee with the authors; it’s inexcusable but it’s certainly understandable. The supporters of HSR essentially conned the voters of California with exaggerated passenger forecasts and low-balled future fares and operating expenses, including future debt service.
    http://www.voterguide.sos.ca.gov/past/2008/general/argu-rebut/argu-rebutt1a.htm

  • From the report I linked:

    “Projections about high-speed rail’s ability to make a profit
    depend on non-US evidence, since there is no US high-speed rail
    of the type proposed in California. To repeat, in 2009 Iñaki
    Barrón de Angoiti, Director of High-Speed Rail at the
    International Union of Railways (IUR), said, “Only two routes in
    the world — between Tokyo and Osaka, and between Paris and
    Lyon — have broken even.”140

    The CHSRA and California’s high-speed rail supporters claim their
    system will be profitable. But even the subsidized Acela operator
    disagrees with that claim. In April 2008, Amtrak’s Inspector
    General said “When all revenues and expenses for the entire
    passenger train system are taken into consideration, European
    Passenger Train Operations operate at a financial loss and
    consequently require significant Public Subsidies.” 141

    The study of six European nation’s operations showed their annual rail
    subsidies to average $42 billion. This ranged from Germany’s
    high of nearly $23 billion annually to Denmark’s low of $900
    million. And the operators employ off-balance sheet accounting,
    the same financial engineering techniques that helped bring the
    Great Recession. As a whole, each year (1996-2006) $26 billion
    of the $42 billion subsidy was on the operators’ balance sheets,
    but nearly $ 16 billion was off-balance sheet accounting.142

    Then in December 2009 the US Congressional Research Service
    (CRS) reinforced the IUR Director and Amtrak’s Inspector
    General’s statements: “Experts say that virtually no HSR lines
    anywhere in the world have earned enough revenue to cover
    both their construction and operating costs, even where
    population density is far greater than anywhere in the United
    States. Typically, governments have paid the construction costs,
    and in many cases have subsidized the operating costs as
    well.”143 While repeated in both their 2008 and 2009 business
    plans, the CHSRA’s claims of profitability are contrary to
    worldwide experience.”

  • garyg

    egk,

    Do you two really believe that CAHSR will not make a profit (if they can get the rails built)? That would require such a denial of all available evidence, from decades of ridership studies, to actual real-world lines throughout the world.

    Hilarious. Do please show us this real-world evidence that CAHSR will make a profit.

    Alon’s statement is correct – proposed (or perhaps suggested) but not yet committed: “The state-owned Japan Bank for International Cooperation is prepared to lend funds for California’s rail project, Transport Minister Seiji Maehara told reporters late yesterday in Tokyo. He declined to comment on the amount of the possible loan.” – Bloomberg

    Huh? You do realize that LOANS have to be repaid, right? They’re not offering to pay any of the costs themselves. They’re offering only to lend California some money.

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