The United States is struggling in the construction and operation of high-speed rail, mainly because its current system has formed a division of vested interests.
During the 13th Five-Year Plan period, China invested huge sums of money to accelerate the construction of high-speed rail. As of the end of 2020, China’s high-speed rail operating mileage has reached 38,000 kilometers, and the “four vertical and four horizontal” high-speed rail network has been completed ahead of schedule. The next step is to complete the “eight vertical and eight horizontal” high-speed rail network.
In the face of China’s achievements in infrastructure construction in recent years, the United States is also aware of its backwardness. There is only one Acela Express (Acela Express) of more than 700 kilometers in the United States that can barely be called a high-speed rail, but in most cases the average speed is only slightly higher than 100 kilometers per hour. President Biden has repeatedly stated that the United States needs to narrow the gap with China on high-speed rail. In the US$2.3 trillion “U.S. Employment Plan” proposed by the Biden administration on March 31, 2021, US$80 billion is dedicated to repair and modernization of the US rail system, with an average annual investment of US$10 billion. This is the largest railroad investment plan in the United States in decades, but there is no explicit mention of new high-speed rail projects.
On May 28, Biden formally proposed to Congress the federal government budget for the 2022 fiscal year with a total expenditure of 6 trillion US dollars. However, the related infrastructure construction funds have shrunk significantly. The expenditure of the “U.S. Jobs Program” has been reduced to 2.2 trillion US dollars, and the time has been extended from the previous eight years to ten years. The average annual investment in transportation infrastructure construction has been compressed from 77.6 billion US dollars to less than 60 billion US dollars.
Why does the United States always have “thunder and rain” when building high-speed rail?
Unlike China’s concept of “a game of chess across the country,” American society is faced with a series of complex interest games.
History has formed a complex interest pattern
The United States is not incapable of large-scale infrastructure construction. In fact, the United States began to build a large-scale railway network in the 19th century. During the 40 years from 1871 to 1910, an average of more than 8,000 kilometers of railways were built each year. At its peak in 1916, the United States had more than 400,000 kilometers of main railway lines. , Nearly half of the total railway mileage of the world at that time.
In the history of the U.S. railway infrastructure is a government support policy similar to China’s current model. At that time, the U.S. federal government and local governments gave private railroad companies a large amount of land along the railway for free, granted tax incentives, and issued loan support, which led to various railway companies racing to develop new line construction. The great development of railway infrastructure greatly prospered the American economy at that time, reduced the cost of logistics and people flow, and promoted industrial development.
The early laws in the United States stipulated that railway companies must operate passenger transport services “in the public interest”. The original intention was to force railway companies to subsidize long-term loss-making passenger transport services with more profitable freight services. However, the gradual monopoly of private railway companies has led to strict government controls, restrictions on freight rates, and division of main railway lines. Coupled with the gradual transfer of passenger traffic to aviation and roads, private railway companies have suffered huge losses and are in trouble.
In order to solve the systemic difficulties of the railway industry, in 1970, the US Congress passed the “Railway Passenger Transport Service Act”, which provided a large amount of funds to reorganize railway companies in trouble and exempted them from their obligation to provide passenger transport services. The U.S. government established the National Railroad Passenger Corporation (Amtrak) in May 1971, which took over the right to operate passenger railroads, and the state provided financial support and subsidies.
Game with freight railway company
In 1980, the United States further promulgated the Staggers Rail Act to deregulate freight railroads, allowing railroad companies to sign contracts with customers freely based on market supply and demand.
With the intervention and support of the U.S. government, railway companies have continuously increased their investment in lines and transportation equipment. While the volume of railway freight has increased, it has also achieved a significant drop in costs, and its transportation efficiency has risen to the forefront of the world at that time.
In November 2009, Buffett’s Berkshire Hathaway invested approximately US$26 billion to privatize the Burlington Northern Railroad Company, the largest in North America, and it has since made a considerable return. This fully shows that freight rail has a comparative advantage in the transportation system of the United States.
However, under the structure of passenger and freight division, Amtrak, which specializes in passenger transportation, has a difficult time. In its 21,400-mile North American rail passenger transport network, 75% of the owners are listed companies, local governments and other small businesses. Since there are not many railway tracks it owns, Amtrak has to pay a lot for the use of the road network every year.
At present, the Asira Express operated by Amtrak adopts a common rail mode for passenger and freight, requiring freight trains on the line to stop and give way at any time, which seriously affects freight efficiency. The private railway companies that own the road network are mainly engaged in freight transportation. They have a weak demand for railway speed and focus on the profit maximization logic of reducing costs and improving efficiency. They are unwilling to transform the existing railway network to high-speed. The lagging road network facilities are far from being able to give full play to the performance advantages of high-speed trains, resulting in the weak competitiveness of Asira Express and serious losses.
The only way to solve this problem is to build a new high-speed railway line, which can not only give full play to the advantages of high-speed railway, but also greatly improve the freight efficiency of the original road network. But this undoubtedly requires the U.S. federal government to coordinate at the interstate level and invest huge amounts of money.
The political game between the two parties
In the United States, the attitude towards high-speed rail construction is primarily a political issue. The Democrats tend to have high tax burdens and big government, while the Republicans advocate low tax burdens and small government.
Therefore, the Democratic presidents of the United States often propose large-scale infrastructure plans during their tenure and work hard to promote the construction of high-speed rail projects. For example, the Clinton administration provided Amtrak with funds to upgrade the Northeast Corridor railway, which was the main driving force behind the opening of the Asira Express in 2000. In 2009, the Obama administration invested US$8 billion in the “American Recovery and Reinvestment Act” to build or improve railways, of which US$7 billion was earmarked for the development of high-speed rail projects in California, Florida and other places.
In his State of the Union address, Obama had ambitiously proposed to use high-speed rail to connect 80% of the US population in the next 25 years, and regarded it as one of the keys to the recovery of the US economy. To this end, the Obama administration launched a six-year investment plan totaling $53 billion in February 2011 to promote the construction of an intercity high-speed rail network. At this time, Biden is serving as the Vice President of the United States. However, Republicans who occupy the majority of the House of Representatives strongly objected that too much money should not be wasted on high-speed rail when the federal deficit is high, and even if some high-speed rail projects can be built, most of the funds should come from the private sector. In the end, the plan failed to pass. In May 2011, the Obama administration only invested an additional US$2 billion in high-speed rail projects.
In the $2.3 trillion infrastructure construction plan originally proposed by the Biden administration, the Democratic Party’s main source of funding is to increase the corporate income tax rate from 21% to 28% and increase the minimum tax rate paid by multinational companies and large companies. However, the two parties in the United States have major differences on the scale and composition of infrastructure construction and the source of funds. On May 27, the Republican Party’s infrastructure plan was worth US$928 billion, which was still significantly lower than the Democratic Party’s subsequent US$1.7 trillion contraction plan. Moreover, the Republican Party hopes to spend all its funds on physical infrastructure, rather than “human infrastructure” for the elderly and the disabled, and strongly opposes raising corporate taxes and income taxes for high-income individuals to pay for infrastructure investment.
Currently, Biden’s Democratic Party controls the House of Representatives, while the Republican Party still has strong checks and balances in the Senate. The fierce game between the two parties in the United States makes it difficult to pass large-scale high-speed rail construction proposals. To avoid opposition from the Republican Party, the Biden administration can only weaken the content of high-speed rail in infrastructure projects.
Game with state and county governments
The political system of the United States has a strong local character, which embodies the game based on regional distribution and interest relations. 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 all levels such as state and county.
For the high-speed rail construction promoted by the Democratic Party, the states led by the Republican Party often lack enthusiasm and even resist. For example, the Obama administration has provided tens of billions of dollars in funding for states that carry out high-speed rail projects. However, Wisconsin, Florida, and Ohio all terminated high-speed rail projects in progress after the Republican governor won the election and returned the high-speed rail subsidies provided by the federal government.
As the home base of the Democratic Party, California has a strong willingness to build high-speed rail. The Obama administration specifically allocated US$3.5 billion to support the California high-speed rail project. The state government has also issued nearly US$10 billion in special bonds for high-speed rail construction. However, during the time when Schwarzenegger, who was a Republican, was governor of California, the high-speed rail project did not make much progress.
In February 2017, Trump from the Republican Party announced the suspension of the US$647 million grant for the electrification project of the California Railway Company shortly after assuming the presidency of the United States, which had a relatively negative impact on the related California high-speed rail project.
Eleven years after the project was established, California officially announced in 2019 that it would abandon the original plan of connecting San Francisco and Los Angeles via high-speed rail, and only intends to complete a small part of it. The reason behind this is that “the project cost too much and it takes too long. The project is almost unregulated and lacks transparency.” The estimated cost of the California high-speed rail project has risen from US$33 billion in 2008 to US$77 billion in 2019. The progress of the project is still increasing.
In September 2020, the Federal Railroad Administration formally approved the Texas high-speed rail project. The project is about 386 kilometers long and will connect the two major cities of Houston and Dallas. It is expected to be completed and opened to traffic in 2027. However, Texas is the traditional territory of the Republican Party of the United States, and many counties along the route have come forward to oppose the construction of high-speed rail at the beginning of the year. It is not known whether the Texas high-speed rail can successfully obtain funding and complete the construction on time in the future.
The game with Amtrak
Amtrak operates the Asira Express, the only high-speed rail line in the United States, and is a rare state-owned enterprise in the United States, controlled by the federal government. Amtrak’s board of directors is appointed by the President of the United States, but needs to be confirmed by the U.S. Senate. Under the structure of the division of passenger and freight operations, Amtrak could not make up for passenger losses from the profit from freight, but it was still characterized as a for-profit company. However, the company’s efficiency is low, and it has been losing money year after year.
In fiscal year 2020, Amtrak received approximately US$1.2 billion in revenue from passenger tickets, but its operating expenses were as high as US$4.2 billion, of which employees’ salaries and benefits were nearly US$2 billion, or US$114,000 per capita. Such high expenses are mainly due to the highly unionized 17,500 railway employees. In addition, in the 2019 and 2020 fiscal years, Amtrak’s revenue from sales of beverages and food was only US$140 million and US$77 million, respectively. However, according to media reports, due to poor management, Amtrak incurred hundreds of millions of losses in the sales of beverages and food every year.
In the face of Amtrak’s huge operating funding gap, state governments across the United States have to bear hundreds of millions of dollars in operating costs and provide subsidies and capital support. Even so, Amtrak still lost $1.68 billion in fiscal year 2020, which is $700 million more than in fiscal year 2019. In fiscal year 2020, the US federal government provided an additional US$1 billion in subsidies for the new crown epidemic on the basis of US$2 billion in regular allocations.
Therefore, even if the U.S. government is able to allocate large-scale funding to build a cross-state high-speed rail network, it remains a question of whether Amtrak, which enjoys the exclusive right of passenger transportation, can effectively undertake it. And if private railway companies are responsible for the construction and operation of high-speed rail projects, there will be greater disputes over whether the government should provide high subsidies. In addition, the trade union organization of the railway sector is an important ticket warehouse of the US Democratic Party, and the US government will also consider its interests in the investment and operation of high-speed rail.
High-speed rail dividend cannot form a closed loop of profit return
One view is that the United States is sparsely populated, cheap cars and gasoline have led to a high rate of residential car ownership, and the civil aviation industry is also quite developed, so there is no need to spend huge amounts of money to develop and build high-speed rail.
This view is reasonable in many cases, but it does not explain the difficulty in building clean and efficient high-speed rail between densely populated large cities in the United States.
The high-speed rail project tests the ability of a country to coordinate and operate efficiently. For high-speed rail infrastructure projects with high investment, long-term cycles, and low returns, the reason why China has been able to advance rapidly is the adoption of the concept of “a game of chess across the country”.
For example, local governments in China tend to locate high-speed rail stations in more remote urban new areas, with the goal of benefiting to the greatest extent from the land appreciation along the high-speed rail lines, and they are willing to invest a lot of money in cooperating with the China National Railway Group in the construction of high-speed rail. China has mastered the key technology of high-speed rail, and its own infrastructure capacity is strong, and the cost is relatively low. Although most of China’s high-speed rail lines have made losses, they have brought positive spillover effects in terms of high-speed rail industry development, freight rail efficiency improvement, local economic development, and greenhouse gas emission reduction. All levels of government in China can quickly reach consensus Invest resources to build high-speed rail.
In contrast, the U.S. high-speed rail is faced with a poor passenger rail pattern, constant partisanship, small calculations by state and county governments, lengthy construction cycles, inefficient state-owned operations, high costs, high prices from private landlords, numerous lawsuits, aviation and highways. Various issues such as lobbying by damaged industries. The huge amount of funds invested by governments at all levels in the high-speed rail is likely to face delayed project progress and rising budgets, and ultimately fail to land as scheduled.
Based on this, the United States is struggling in the construction and operation of high-speed rail, mainly because its current system has formed a division of vested interests. There are many stakeholders involved in high-speed rail, and after the dividends brought by it are divided up by each link, it is impossible to form a closed loop of return of benefits. The small government model currently adopted by the United States is difficult to balance the complex interest demands involved in high-speed rail, and there has not yet been a sustainable development model for high-speed rail in the United States.