Obama's High-Speed Rail: An Economic Magic Bullet (Train)?

On Thursday, President Obama will follow up the State of the Union address with an announcement that his administration is releasing $8 billion in funding for high-speed rail lines. This program, which Obama and Vice President Joe Biden will discuss in a town hall assembly in Tampa, Fla., will provide financing for 13 rail corridors spread over 31 states.One of the major rail lines under consideration would run from Tampa to Orlando, and Obama's decision to make his announcement in the Florida city indicates that it will be among the places receiving funding. Other likely contenders include the California Corridor, a proposed 800-mile line that would run from Sacramento to San Diego, and the Chicago Hub Network, a rail project that would connect at least eight states in the Midwest.

It's not hard to see why the White House is making a big deal out of high-speed rail. Two of the major critiques of the government's stimulus plan has been its lack of infrastructure spending and its anemic level of job creation. Although the economy is beginning to grow, unemployment is still around 10%, and underemployment hovers closer to 17%, a situation that has eaten into the president's once-enviable approval ratings. While a jobless recovery may not be a concern for Wall Street, it is clearly a major problem for middle America -- and for Obama.

The Ultimate Beneficiary

Thursday's high-speed rail announcement should help quiet critics on both of these concerns. According to James P. RePass, president and CEO of the National Corridors Initiative, it would be hard to overestimate the employment effects of a high-speed rail network: "In addition to creating construction jobs, high-speed rail will enable commerce and encourage travel and tourism."

In the case of Tampa, a fast rail link to Orlando could ease commutes between the cities and connect tourist attractions in central Florida. The upshot would be a major boost to Florida's economy and a significant jump in employment.

An understanding of this extended benefit is vital for any discussion of to rail's profitability. For years, critics have argued that rail ticket sales don't cover the cost of passenger service. However, the same could be said of America's highway and airline infrastructure, both of which receive far more state and federal funding than Amtrak. The key point is that passenger rail's profitability doesn't accrue to the rail line -- which will almost always operate at a deficit -- but rather to the areas that it serves, where the influx of people will bring business opportunities, tourist dollars and other investment.

The question then, is not only how to build a high-speed rail infrastructure but how to permanently fund it. The ticket-revenue-based model of Amtrak has proved to be severely flawed, and former President Bush's decision to begin consistent yearly budgeting for the rail service demonstrated that, given sufficient cash, state-supported American passenger rail can provide a viable travel alternative.

In the end, the stakes couldn't be higher. As RePass notes, "If we do this right, we can not only rescue, but reinvent the American economy."
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