The U.S. is struggling with the construction and operation of high-speed rail, facing serious problems such as poor passenger rail patterns, constant party disputes, petty calculations by local governments, long construction cycles, inefficient state-owned operations, and high costs. The main reason is that the current system in the United States has formed a division of vested interests, and the positive spillover effect brought by high-speed rail can not form a closed loop of interest flow back.
In the face of China’s infrastructure achievements in recent years, the U.S. is also realizing its lagging state. The United States has only one 700-kilometer Acela Express (Acela Express) can barely be called high-speed rail, but in most cases the average speed is only slightly more than 100 kilometers per hour. Biden has repeatedly said the U.S. needs to close the gap with China on high-speed rail. In the $2.3 trillion American Jobs Plan proposed by the Biden administration on March 31, 2021, $80 billion is earmarked for repair and modernization of the U.S. rail system, with an average annual investment of $10 billion. This is the largest U.S. rail investment plan in decades, but there is no explicit mention of a new high-speed rail project.
On May 28, Biden formally proposed to Congress a federal budget for fiscal year 2022 with a total spending of $6 trillion. However, the funding for related infrastructure construction in it has shrunk significantly. The spending of the American Jobs Plan was reduced to $2.2 trillion, and the time was extended from the previous eight years to ten years, in which the average annual investment in transportation infrastructure construction was compressed from $77.6 billion to less than $60 billion.
History creates a complex pattern of interests
The United States is not incapable of large-scale infrastructure. In fact, the United States began building a massive railroad network in the 19th century, averaging more than 8,000 miles of railroad per year over the 40-year period from 1871 to 1910, and at its peak in 1916, the United States had more than 400,000 miles of railroad mainline, nearly half of the world’s total railroad mileage at the time.
Behind the historical U.S. railroad infrastructure was a government support policy similar to the current model in China. At that time, the U.S. federal and local governments gave private railroad companies large amounts of land along the railroad lines at no cost, granted tax incentives, and granted loan support, which led to a race by the railroad companies to build new lines. The great development of railroad infrastructure greatly prospered the U.S. economy at the time, lowering the cost of logistics and human traffic and spurring industrial development.
Early U.S. law required railroads to operate passenger service in the “public interest,” initially forcing them to subsidize their long-lost passenger service with more profitable freight business. However, the gradual creation of monopolies by private railroads led to strict government regulation, tariff restrictions, and the fragmentation of mainline railroads. This, coupled with a gradual shift in passenger traffic to air and road, led to huge losses and difficulties for private rail companies.
To address the systemic difficulties of the railroad industry, in 1970 the U.S. Congress passed the Railroad Passenger Service Act, which provided substantial funding to restructure the struggling railroads and exempted them from the obligation to provide passenger service. The U.S. government created the National Railroad Passenger Corporation (Amtrak) in May 1971 to take over the passenger rail operations, with financial support and subsidies from the state.
The game with freight railroads
In 1980, the U.S. further introduced the Staggers Rail Act to deregulate freight railroads, allowing railroads to contract with customers according to market supply and demand free pricing. With the intervention and support of the U.S. government, railroads continued to increase their investment in lines and transportation equipment, achieving significant cost reductions while increasing the volume of rail freight, and improving their transportation efficiency to the top of the world.
In November 2009, Warren Buffett’s Berkshire Hathaway spent about $26 billion to privatize the Burlington Northern Railroad, the largest in North America, and has since made a considerable return. This is a good indication that freight railroads have a relative advantage in the U.S. transportation system.
However, under the structure of separate passenger and freight operations, Amtrak, which specializes in passenger transportation, is having a hard time. Of the 21,400 miles of North American passenger rail network it operates, 75 percent is owned by public companies, local governments and other small businesses. Because it does not own much rail track, Amtrak needs to pay a lot of money every year for the use of the network.
The current Amtrak-operated Asil Express uses a common passenger and freight track model, requiring freight trains on the line to stop at any time to make way, severely impacting freight efficiency. The private railroads that own the network mainly operate freight, which itself does not have a strong demand for rail speed, focusing on the logic of profit maximization to reduce costs and improve efficiency, and are reluctant to make high-speed improvements to the existing rail network. The lagging network facilities are far from being able to take advantage of the performance of high-speed trains, resulting in the weak competitiveness of the Asil Express and serious losses.
The only solution to this problem is to build a new high-speed rail line, which can give full play to the advantages of high-speed rail and also significantly improve the freight efficiency of the original road network. But this undoubtedly requires the U.S. federal government to coordinate across state levels and invest huge amounts of money.
U.S. bipartisan political game
In the United States, the attitude toward high-speed rail construction is first and foremost a political issue. The Democratic Party favors high taxes and big government, while the Republican Party favors low taxes and small government.
As a result, Democratic presidents in the U.S. tend to propose large-scale infrastructure plans during their terms of office and try to promote the construction of high-speed rail projects. For example, the Clinton administration provided funding for Amtrak to upgrade the Northeast Corridor railroad and was a major driving force behind the opening of the Asil Express in 2000. in 2009, the Obama administration invested $8 billion in the American Recovery and Reinvestment Act to build or improve railroads, of which $7 billion was earmarked for the development of high-speed rail projects in California, Florida and elsewhere.
Obama had ambitiously proposed in his State of the Union address to connect 80 percent of the U.S. population with high-speed rail in the next 25 years as one of the keys to achieving U.S. economic recovery. To this end, the Obama administration in February 2011 threw out a total of $ 53 billion six-year investment plan to promote the construction of intercity high-speed rail network. At this time, Biden was serving as vice president of the United States. However, the majority of Republicans in the House of Representatives strongly opposed the plan, arguing that the federal deficit should not waste too much money on high-speed rail, and that even if part of the high-speed rail project can be built, most of the money should come from the private sector. In May 2011, the Obama administration invested only an additional $2 billion in the high-speed rail project.
In the Biden administration’s original $2.3 trillion infrastructure plan, the Democratic plan was funded mainly by raising the corporate income tax rate from 21 percent to 28 percent and increasing the minimum tax paid by multinational corporations and large companies. However, there are major differences between the two parties on the size and composition of infrastructure construction and the sources of funding in the U.S. The size of the infrastructure package proposed by the Republicans on May 27 is $928 billion, which is still substantially lower than the $1.7 trillion scaled-down package subsequently proposed by the Democrats. Moreover, the Republicans want to spend all the money on physical infrastructure rather than “human infrastructure” for the elderly and disabled, and are strongly opposed to raising corporate taxes and income taxes on high-income individuals to pay for infrastructure investments.
Currently, Biden’s Democratic Party controls the House of Representatives, while the Republican Party still has strong checks and balances in the Senate, and the intense game between the two parties makes it difficult to pass the large-scale high-speed rail construction proposal. To avoid opposition from the Republican Party, the Biden administration can only weaken the content of high-speed rail in infrastructure projects.
The game with local governments
The U.S. political system is highly localized, reflecting the game based on regional distribution and interests. The construction of high-speed rail in the United States requires not only the political determination and financial support of the federal government, but also the cooperation of local governments at the state and county levels.
For the Democratic Party to promote the construction of high-speed rail, the Republican Party dominated states often lack enthusiasm, and even resist. For example, the Obama administration has provided tens of billions of dollars for states that carry out high-speed rail projects. However, Wisconsin, Florida and Ohio have all terminated progressing high-speed rail projects and returned high-speed rail grants provided by the federal government after Republican governors won their elections.
As a Democratic stronghold, California has a stronger will to build high-speed rail, with the Obama administration earmarking $3.5 billion in strong support for California’s high-speed rail project and the state government issuing nearly $10 billion in special bonds for high-speed rail construction. But the high-speed rail project did not make much progress during the tenure of Republican-born Schwarzenegger as governor of California. in February 2017, Trump from the Republican Party announced the suspension of the release of $647 million in grants for the Caltrain electrification project soon after he became the president of the United States, which had a large negative impact on the related California high-speed rail project. Eleven years after the project was established, California officially announced in 2019 that it was abandoning its original plan to connect the two major cities of San Francisco and Los Angeles via high-speed rail, with the intention of completing only a small section of it. The reason behind this was that “the project was too costly and time-consuming. There is little oversight of the project and not enough transparency,” and the projected cost of the California high-speed rail project has climbed from $33 billion in 2008 to $77 billion in 2019, and continues to grow in the face of its slow progress.
In September 2020, the Federal Railroad Administration officially approved the Texas high-speed rail project. The approximately 386-mile project, which will connect the two major cities of Houston and Dallas, is expected to open to traffic in 2027. However, Texas is the traditional territory of the US Republican Party, and several counties along the route have come out against the construction of the high-speed rail earlier this year. Whether the Texas High Speed Rail will be successfully funded and completed on time is yet to be seen.
The game with Amtrak
Amtrak, which operates the only high-speed rail line in the United States, is one of the few state-owned companies in the country and is controlled by the federal government. Amtrak’s Board of Directors is appointed by the President of the United States, but requires confirmation by the U.S. Senate. Under the structure of separate passenger and freight operations, Amtrak is unable to make up for passenger losses from the profits earned on freight, but is still characterized as a for-profit company. However, the company is inefficient and has been losing money year after year.
In fiscal year 2020, Amtrak collected about $1.2 billion in revenue from passengers, including passenger tickets, but had operating expenses of $4.2 billion, including nearly $2 billion in wages and benefits for employees, or $114,000 per capita. Such high costs stem largely from the highly unionized 17,500 railroad employees. In addition, Amtrak’s revenue from the sale of beverages and food in fiscal years 2019 and 2020 is only $140 million and $77 million, respectively. However, according to media reports, Amtrak generates hundreds of millions of dollars in losses on the sale of beverages and food each year due to mismanagement.
Faced with Amtrak’s huge operating capital shortfall, state governments across the U.S. need to cover hundreds of millions of dollars in operating costs and provide subsidies and capital support. Even so, Amtrak lost $1.68 billion in FY 2020, $700 million more than in FY 2019. in FY 2020, the U.S. federal government provided an additional $1 billion in subsidies for the new crown epidemic on top of the $2 billion in regular appropriations.
Therefore, even if the U.S. government is able to massively allocate funds to build an interstate high-speed rail network, it is questionable whether Amtrak, which enjoys a passenger franchise, can effectively undertake it. And if the private railroad company is responsible for the construction and operation of high-speed rail projects, it will be more controversial as to whether the government should provide high subsidies. In addition, the railroad sector’s labor unions are an important vote bank for the U.S. Democratic Party, and the U.S. government’s investment in and operation of high-speed rail will also consider its interests.
Dividends can not form a closed loop of benefit flow back
One view is that the U.S. is a sparsely populated country with a high rate of car ownership due to the cheap price of cars and gasoline, and a well-developed civil aviation industry that does not need to spend a lot of money on developing and building high-speed rail.
This view is valid in many cases, but it does not explain the difficulty of building clean, efficient high-speed rail even between large, densely populated cities in the United States.
High-speed rail projects test a country’s ability to coordinate and operate efficiently. The reason China has been able to move forward so quickly on a high-investment, long-cycle, low-return infrastructure project like high-speed rail is because it has adopted a “national chess” philosophy.
For example, local governments in China often locate HSR stations in new, more remote urban areas in order to maximize the benefits of land appreciation along the HSR line and are willing to invest large amounts of money to build HSR in cooperation with national railway groups. China has mastered the key technology of high-speed rail, and its own infrastructure capacity is strong and relatively low cost. Although most of China’s high-speed rail lines themselves generate losses, they bring positive spillover effects in terms of high-speed rail industry development, freight rail efficiency improvement, local economic development, and greenhouse gas emission reduction, and Chinese governments at all levels have been able to quickly reach consensus and invest resources in building high-speed rail.
In contrast, the U.S. HSR has faced multiple problems including poor passenger rail patterns, constant party disputes, petty calculations by local governments, lengthy construction cycles, inefficient state-owned operations, high costs, high prices from private landowners, numerous lawsuits, and lobbying by damaged industries such as airlines and highways. The huge sums of money invested in high-speed rail by all levels of government are likely to face a drawn-out construction schedule and escalating budgets, and ultimately fail to get off the ground as scheduled.
I thought that the main reason why the United States is struggling with the construction and operation of high-speed rail is that its current system has created a division of vested interests. High-speed rail involves more subjects of interest, and the dividends brought by each link is divided, can not form a closed loop of interest flow back. The small government model currently used in the United States is difficult to balance the complex and complicated interests involved in high-speed rail, and a sustainable development model for high-speed rail in the United States has not yet emerged.