House Bill 422, No High-Speed Rail Money from Federal Government, has been under attack by major media outlets, special interest groups, and big-spending politicians in Raleigh. True to its name, the bill would prevent North Carolina’s Department of Transportation from spending federal grant money it receives designated for high-speed rail projects without approval of the General Assembly.
Indeed, these attacks have helped to de-rail the bill, so to speak. The bill was pulled from the agenda of the House Transportation Committee last week, which had scheduled a vote on the bill. The bill, however, is back on the House calendar for discussion this week.
The bill has been vehemently opposed by those who view this federal high-speed rail money as some sort of “free lunch” bestowed upon us from D.C. that will “create jobs” without any negative consequences whatsoever. In short, they claim the rail money is all benefit, no cost.
Those of us living in reality, however, know better.
Indeed, supporters of HB 422 recognize that there is no such thing as a free lunch, and accepting federal funds for high-speed rail will certainly come at a cost.
First, critics overlook the highly likely scenario that these rail projects will incur significant cost overruns. The latest such example comes from California, where a high-speed rail route was originally projected to cost $33 billion. Less than a year later, cost estimates for the project already ballooned to $43 billion, and that’s before the project has even broken ground.
Supporters of HB 422 are concerned about North Carolinians being forced to finance the inevitable cost overruns likely to occur in our state. And then there is the ongoing annual operating costs, as well as repair and replacement costs in the future. That’s one price we may have to pay for this “free lunch.”
But what about those jobs?
Indeed, many North Carolinians are out of work. But how do high-speed rail supporters know that the $152 million worth of rail projects in the Charlotte area, for instance, will “create” jobs in perfect concert with the nature of those unemployed in Mecklenburg County? Unemployed roofers, realtors and investment bankers laid off due to the bursting of the real estate bubble won’t be of much use laying track.
Thoughtful analysis suggests that the jobs “created” by the high-speed rail projects across North Carolina won’t just absorb those who are currently unemployed, because those who are unemployed are very specific in nature regarding their location and skillset.
Federal rail projects, however, will likely at least employ some labor and resources currently sitting idle. But this means that these workers and equipment will be tied up building high-speed rail, and be unavailable for private entrepreneurs seeking to start or expand businesses and help our economy recover. The lack of available labor and other resources will discourage new business activity – serving to prolong our recession.
No, there is no free lunch, and these rail projects will divert labor and other resources away from other uses. This is known as the “crowd out” effect, where productive private investment is bid away toward politically chosen endeavors. Thus, there are no jobs “created” by these government-funded rail projects. There is merely a change in the mix of jobs in the economy. And because politically-selected projects create less value by nature than private sector investment, another cost to North Carolina will be slower economic and job growth.