What is a Boondoggle and is California High Speed Rail one?   July 20th, 2012

Opinions and Facts from Noel T. Braymer

During the ongoing debate over High Speed Rail and improved rail passenger service in general such projects are generally dismissed as Boondoggles by its critics. The term Boondoggle implies something is wasteful, expensive and corrupt. The California High Speed Rail Project has gone through several evolutions and has been subject rightly to criticism. The current proposal is greatly improved over the original unrealistic proposal but will likely  see more changes for the better before it is finished. For now 12 Billion dollars is available;  2 billion from the 4.7 billion in new bond money matched with 4 billion dollars from other sources goes towards building long overdue projects that will be needed to feed or be shared with the future High Speed Rail service. The other 6 billion from Federal Funding and State Bonds will build 130 miles of new high speed tracks between Madera and Bakersfield. These new tracks will be used by San Joaquin Trains capable of 125 mile per hour by 2017 and used in the future by faster trains.

The current proposal calls for 432 miles of rail between Los Angeles to San Francisco to cost 68 billion Dollars in the next 10 years. That is a lot of money. How does it compare to current rail construction costs? The 15.2 mile Los Angeles County Expo Light Rail line when finished is budgeted at 2.43 billion dollars. This comes to around 160 million dollars a mile. The Los Angeles to San Francisco segment of High Speed Rail is budgeted at about 157 million dollars a mile. Both projects have high costs from construction in areas that require  tunnels and elevated structures. Los Angeles Country is currently working on other rail projects which are also largely funded locally with regional sales taxes approved by voters for transportation.

Let’s look at a popular “‘Boondoggle” the Central Artery/Tunnel Project (CA/T) or the Big Dig as it is usually known. This entailed many local highway projects in the city of Boston but the most expensive part was rerouting 3.5 miles of downtown freeway into a tunnel. The original budget for the project was 2.8 billion dollars as planned back in 1982 with the project’s expected finish by 1998. The project wasn’t finished until the very end of 2007 by which time the project’s cost had reached 14.6 billion dollars which was 8.08 billion in 1982 dollars. The Boston Globe has estimated that the final cost of this project will end up being 22 billion dollars after the cost on the interest is paid off for the loans in 2038.

There is criticism of the 2012 Summer Olympics in London which is now setting a new record as most expensive. The original budget for the London Games was 10.2 billion dollars in 2005 when London’s bid was accepted. At the time it was expected that much of the money would be raised from the private sector. Most of this private funding has failed to materialize particularly after 2008 and the economic slump. Recent estimates place the cost now at over 20.4 billion dollars. Some critics of the London Games claim that when all costs of the games are counted which are not included in the official budget then the final cost will be over 37.6 billion dollars. Hard to believe that in 1984 the Olympics in Los Angeles by using mostly existing sporting facilities was able to hold the Games for 1.5 billion dollars and turn in a profit of 225 million dollars.

The military has its fair share of critics. The most expensive weapon program right now is the F-35 fighter plane. Since the project’s start in 2001 the price tag has nearly doubled to almost 400 billion dollars for 2,443 planes. There has been criticism that many of the missions for the F-35 could be flown by new F-18′s at a third of the price per plane. The government has recently revised its estimate of the lifetime cost of this project which is spread over 50 years to 1.45 trillion dollars adjusted for future inflation. In 2003 after little debate but with broad bi-partisan support the United States invaded Iraq. At that time the assumption was that our forces would be greeted as liberators by the Iraqis and the total cost of the operation would run 50 to 60 billion dollars. The final direct cost of the war has reached 823 billion dollars. When accounting for all Iraq related expenses such as future care of disabled service personal, and the cost of paying the debt run up by the war among other costs the final bill is expected to surpass 3 trillion dollars.

Between 2007-08 the Housing Bubble popped around the world triggering a near economic shutdown. In 2008 alone the Federal Government pumped in at least 900 billion dollars related to the costs from the Housing Bubble. Half of this money went to supporting the mortgage providers Freddie MAC, Fannie Mae and the Federal Housing Administration. At the peak of the housing bubble in 2006 Americans had 13 trillion in private home equity. After the crash it dropped to 6.2 trillion in equity for a loss of 6.8 trillion dollars of equity for American home owners while at the same time their debts cost for home ownership went up.

The cause of much of our recent economic problems and world wide is not too much government debt. or personal debt but massive commercial debt for very risky financial transactions. Economic bubbles are created by speculators  using massive debt to inflate the selling price of something far beyond its true value. For example in the Republic of Ireland a county with the population about half of Los Angeles County’s the banks of Ireland before 2007 first borrowed and then lent twice as much money as the entire Gross National Product of Ireland. The result today is numerous empty office buildings, unfinished business parks and 20% of Irish housing empty due to lack of demand. The Irish Government had a balanced budget before 2007 yet now is staggering under the assumed debt of the banks the government wasn’t responsible for. A market bubble is usually an inside job were the people behind it sell out before the bubble pops and make a killing while the suckers lose. This is very profitable for some but it doesn’t create wealth like investments in new products or services: instead this transfers wealth.

Expensive public projects like High Speed Rail need to be carefully considered and costs kept under control. But despite hysteria that High Speed Rail will turn California into an economic basket case, this claim is nonsense. California is responsible for over 13% of US GNP which is around 2 trillion dollars a year out of a National GNP of over 14 trillion. Assuming roughly 70 billion dollars spent spread out over 10 years for High Speed Rail this is around 7 billions dollars a year in an annual economy now around 2 trillion or 2 thousand billion a year in California. That doesn’t include the value added from improved transportation or money saved in energy savings or improved productivity.

This entry was posted on Friday, July 20th, 2012 at 12:53 PM and is filed under Editorials.