Why High-Speed Rail Fails as a Jobs Program

Obama's plan for commuter trains won't stimulate the economy

The only major transportation program inserted into the $787 billion federal stimulus package was $8 billion for so-called high-speed rail. The Obama administration later added another $5 billion to the passenger rail kitty, bringing the federal commitment to $13 billion. The administration's initiative, however, may soon become a potent symbol of the economic stimulus program's failures.

In April, President Barack Obama claimed "my high speed rail proposal will lead to innovations in the way we travel" and new rail lines "will generate many thousands of construction jobs over several years, as well as permanent jobs for rail employees and increased economic activity in the destinations these trains serve."

Even House Minority Whip Eric Cantor (R-Va.), who voted against the stimulus bill, now wildly praises rail's job-creation potential, writing, "It is estimated that creating a high-speed railway through Virginia will generate as many as 185,500 jobs, as much as $21.2 billion in economic development, and pull nearly 6.5 million cars off the road annually. Providing a high-speed rail service from Washington, D.C. to Richmond will drive economic development throughout our region for many years to come."

Michigan Gov. Jennifer Granholm calls the Midwest high-speed rail corridor a "one-of-a-kind partnership that will create jobs for Michigan workers, enhance transportation options for citizens, and provide significant economic development opportunities for communities."

Parroting estimates made by the Association of American Railroads, Gov. Granholm claims that a $1 billion  investment in rail will generate 20,000 jobs. The $1 billion estimate for "investment" refers to construction, maintenance, and the purchase of equipment such as locomotives and train cars to run on rail lines.

Setting aside Rep. Cantor's ludicrous 185,000 job creation claims—which are so unreasonably high as to strain credibility, let alone plausibility—even the 20,000 jobs per billion dollars spent figure cited by Gov. Granholm would represent a very expensive public jobs program. At the most basic level, that works out to $50,000 per job and would likely represent a subsidy higher than the wages paid to the typical worker.

There are, in fact, better and cheaper ways to create jobs. For example, the federal government could give tax credits to private firms that create new jobs. This type of new jobs subsidy would run about $20,000 per worker and spur up to 1.3 million jobs according analysis by the Upjohn Institute for Employment Research in Michigan.

Of course, rail proponents argue that spending money now on high-speed rail is a long-term investment that will pay off in higher economic productivity over the long-haul. But these job creation and income estimates they use are based on spending for freight rail, not passenger rail.

Freight rail in America is a crucial part of our transportation infrastructure, accounting for 43 percent of the shipment of goods and services from one city to the other. Thus, investments in freight rail have a direct impact on the bottom line for American businesses, increasing the speed and reliability of goods shipment and improving productivity.

Passenger rail in the U.S. is a different story. Passenger rail currently carries a very small portion of city-to-city travel—the market targeted by high-speed rail—and it's likely to remain modest well into the future. In 2008, Amtrak carried 28.7 million passengers. By comparison, there were 687 million airline passengers in 2008, in part because air service provides frequent high-speed travel to geographically distant cities. Then there's our well-developed highway network that makes automobiles very competitive with rail for distances under 200 miles. In most cases, once travel and wait times to train stations are factored in, travelers will spend as much time in route on the train as they will in a car.

Consider a trip from Los Angeles to San Francisco, or Chicago to St. Louis, for a typical high-speed train traveler. You'll likely have to drive to the train station and pay to park. Once arriving in downtown St. Louis or San Francisco, you will likely have to take a taxi or rent a car to get to your hotel or meeting place (which is likely to be outside the central business district). The reliable, diverse, and nimble transit system that many advocates envision surrounding high-speed rail stations simply doesn't exist in most cities today, limiting the appeal of trains. To compensate for these disadvantages, taxpayers will have to steeply subsidize train ticket prices for the business travelers and tourists that are most likely to use them.

Ultimately, high-speed rail's impacts on American travel patterns and employment productivity are going to be negligible, and the actual job creation potential for high speed rail is much more modest than proponents admit.

Take, for example, the Ohio Hub corridor linking Cincinnati, Cleveland, Columbus, and Toledo to regional destinations such as Chicago and Toronto. Ohio is one of the nation's largest state economies, employing 5.3 million people. As an old-line manufacturing state, Ohio has lost 300,000 jobs just in the past year. Needless to say, Ohioans will be attracted to the optimistic rhetoric of rail's job creation potential. Moreover, preliminary estimates by independent consultants suggest the Ohio Hub may actually cover its annual operating costs (although supporters are counting on the federal government covering 80 percent of capital costs of the $3.7 billion project).

Yet, even with these federal subsidies the consultant reports suggest that a $2.3 billion investment in building the rail corridor would generate only 54,540 jobs over the projected nine-year construction phase. That works out to 2,635 jobs per year at a cost of $42,170 per job. Further analysis found 16,700 permanent jobs would be created by the system once the system was up and running, assuming optimistically that ridership reaches forecasted levels and fares are set to cover its operating costs. While that might seem like a lot of jobs, the effort will do little to stem the economic tide turning against Ohio and other states facing the headwinds of global competition and a rising services-based economy.

For transportation investments to have a meaningful economic impact, they will need to cost-effectively improve America's ability to move goods, services, and people from one place to another. High-speed rail doesn't do that. It is an extremely costly way to achieve limited portions of these goals, and it inevitably fails as a broad-based solution to the country's transportation challenges.

In the end, high-speed rail's contribution to the economic recovery and the nation's economic productivity is being oversold. Elected officials, from Rep. Cantor to President Obama, would do a far greater service to the public's understanding of the economy if they would focus on economic fundamentals, not glitzy boutique policy programs that will inevitably fail to meet grandiose expectations they have created for them.

Sam Staley, Ph.D., is director of urban growth and land use policy for Reason Foundation and co-author of Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield). This column first appeared at Reason.org. Reason Foundation's transportation research and commentary is here.