It sounded too good to be true, and it was. Travel from downtown San Francisco to downtown Los Angeles in two hours via high-speed rail. California voters in 2008 approved Proposition 1A, authorizing $9.95 billion in general obligation bonds to build this so-called “bullet train.” They were told not only that the total cost would only be $33 billion but also that the entire 500-mile system would be running by 2030.
Fat chance.
In March of this year, the California High-Speed Rail Authority released its latest progress report. The project is now projected to cost $127 billion, and there is no longer a projected completion date. The initial stretch of track, a 171-mile segment across the sparsely populated, pancake-flat San Joaquin Valley, is projected to be done by 2030 at a cost of $35 billion.
These are staggering numbers, a testament to a staggering waste of financial and material resources. For this first segment of track, Californians are going to pay $206 million per mile, and that’s if there aren’t any more overruns. The financing alone—based on preposterously optimistic ridership projections for this segment of 6.6 million riders per year, and a 30-year-term at 5 percent annual interest—would work out to a cost of $348 per ticket. Not exactly an easily affordable means of travel.
California’s high-speed rail project, in short, is a disaster. Everything about it fails any rational cost-benefit analysis. It will be a permanent financial drain on Californians, because in order for anyone to be able to afford to use the train for a daily commute, ticket revenue won’t even pay operating costs, much less pay back the construction costs.
From an environmental perspective, the California High-Speed Rail Authority boasts that the initial segment will reduce total vehicle miles traveled in California by 183 million miles. That sounds like a lot until you take into account that Californians logged 340 billion vehicle miles traveled in 2022. High-speed rail by 2030 expects to reduce that total by 1/20th of one percent.
But the opportunity cost of blowing $127 billion, and counting, on a train that will not significantly alleviate either traffic congestion or “greenhouse gases” is perhaps the bitterest joke of all. For $127 billion, Californians could build infrastructure that would improve their quality of life for generations.
Even in absurdly expensive California, $127 billion goes a long way. That much money could pay to raise the height of the Shasta Dam, build the proposed Sites Reservoir to its original 2 million acre-feet storage capacity, restore every aqueduct in the state, build new systems to harvest and store storm runoff, upgrade every major treatment plant in the state to recycle and reuse wastewater, refurbish the Diablo Canyon nuclear power plant to last till 2050 or longer, build two additional nuclear power plants of the same size, and resurface and add lanes to every major interstate freeway.
For $127 billion, even at ridiculously inflated California prices for public works, Californians could have abundant, affordable water and power, they could have a freeway system upgraded for the 21st century, and they would still have tens of billions left.
Corruption and Waste as a Way of Life
The problem with spending money on rational, practical solutions that lower the cost of living and improve the quality of life for millions of Californians is that this goal is inconvenient for the special interests that run California. On the other hand, pouring every spare bit of money, materials, and labor into a make-work megaproject serves several hidden agendas.
The rationale for high-speed rail is to help save the environment, as if adding a 500-mile scar to the landscape, consuming millions of tons of steel and concrete in the process, is somehow preferable to simply upgrading the capacity of existing road and rail assets in the state.
But the true motivation to fund useless megaprojects is a desire to neglect California’s essential water, power, and transportation infrastructure, because by creating scarcity and high prices for these resources, public utilities and private energy producers reap larger profits. This plays out across several economic sectors.
For example, public utilities collect regulated profits, fixed at a percent of revenue. If renewable electricity costs several times more than conventionally generated power—and it does and always will if you do honest cost accounting and factor out the punitive permitting costs—then utilities make more profit. Ten percent of $0.40 per kilowatt-hour of renewable electricity at peak is a much bigger number than 10 percent of $0.04 per kilowatt-hour for clean natural gas-generated electricity.
With water, the higher the price goes, the easier it is for big agricultural corporations to outlast and buy out small family farms, consolidating the industry. It’s also more lucrative for hedge funds that are buying land in California just for the water rights. The higher the price of water, the more valuable their investments.
One would think California’s powerful unions would recognize the benefit that practical infrastructure investments would have for all working families in California, but they don’t. As long as their construction workers have lucrative jobs on the high-speed rail project, there is no upside to them taking on the environmentalist lobby or the corporate and financial players that profit from scarcity and high prices. Nonetheless, California’s construction unions could be a political wild card. If they want to demand projects that would generate positive economic benefits and help all working families, they have the political power to make it happen.
The Ripple Effects of Scarcity Policies
Affordable and abundant water and energy form the foundation for broad-based prosperity. They make home ownership more affordable, because the supply of homes cannot be significantly increased unless there is adequate water. They make electricity and gasoline affordable, which benefits households and businesses. And scarcity of water and energy are not the only essential resources that California denies its citizens.
Building materials, lumber in particular, need to be imported from other states and nations since California’s state legislature has regulated in-state timber harvesting to less than 25 percent of what it was as recently as the 1990s. But rather than thin the forests with responsible revitalized logging, every year the firefighting industrial complex gears up to collect additional billions fighting cataclysmic fires in overgrown, mismanaged forests, and silences criticism with two words, “climate change.”
California’s overregulation of everything has led to its so-called housing crisis because it is now impossible for private developers to make a profit building homes that working families can afford. Instead, a host of special interests, collecting countless billions in money from taxpayers, have created a massively subsidized industry in low-income housing and “permanent supportive housing” for the homeless.
These projects waste stupefying amounts of money, but if regulations were loosened up to allow private development of homes people could afford, or if homeless people were humanely moved off the streets into supervised encampments where they could recover their sobriety and their dignity, the scams would come to a screeching halt.
Spending $200 million per track mile on high-speed rail and over $500,000 per unit of “permanent supportive housing” has nothing to do with saving the planet or helping the disadvantaged homeless. These insanely overpriced projects endure because spending that money wisely would create a competitive economic environment, threatening the margins and the market share of the special interests that run California.
Wasting billions on projects that will never yield the public benefits they promise but will nonetheless ensure permanent sources of profit and power for California’s public sector bureaucrats, its environmentalist pressure groups, its public utilities, its hedge funds and pension funds, its corporations, and its subsidized land developers is the business of California’s elite now. All of them are determined to keep things just the way they are. Because for all of them, ongoing public failure is ongoing special interest success.
California’s High-Speed Rail project is a failure. It is also a metaphor for a state that has turned its back on the ordinary, hardworking people who live there. The larger problem is that California is exporting this mentality into the rest of America, along with its propaganda, and its corrupt, punitive economic model.