Saturday, June 11, 2011

The Latest Government Solution to a Non-Problem

Megabus already provides low-cost, high-speed service between Iowa City and Chicago, so why spend hundreds of millions of taxpayer dollars for "high speed" rail?
Megabus provides low-cost, non-stop express bus service twice daily between Iowa City and Chicago for fares as low as $10 each way for service on some days, and $18 and $23 on other days.  The single and double decker luxury buses offer free wireless Internet, convenient power outlets for laptops and cell phones, and panoramic windows (see photo above), and the one-way trip takes less than four hours.  To provide this affordable, convenient, dependable and low-cost daily bus service between Iowa City and Chicago, Megabus receives no taxpayer funding, federal or state subsidies, loan guarantees, support payments, etc.  

So what's the federal government's response to the "non-problem" of affordable public transportation between Iowa City and Chicago?  At New Geography, Wendell Cox writes:

"The federal government is again offering money it does not have to entice a state (Iowa) to spend money that it does not have on something it does not need. The state of Iowa is being asked to provide funds to match federal funding for a so-called "high speed rail" line from Chicago to Iowa City. The new rail line would simply duplicate service that is already available (Megabus).

Perhaps most surprisingly, the luxury buses make the trip faster than the so-called high speed rail line, at 3:50 hours. The trains would take more than an hour longer (5:00 hours). No one would be able to get to Chicago quicker than now. Only in America does anyone call a train that averages 45 miles per hour "high speed rail."

The state would be required to provide $20 million in subsidies to buy trains and then more to operate the trains, making up the substantial difference between costs and passenger fares. This is despite a fare much higher than the bus fare, likely to be at least $50 (based upon current fares for similar distances). By contrast, the luxury bus service charges a fare of $18.00 (or less, see above), and does not require a penny of taxpayer subsidy. Because the luxury bus is commercially viable (read "sustainable"), service can readily be added and funded by passengers. Adding rail service would require even more in subsidies from Iowa. The bus is also more environmentally friendly than the train."

MP: H.L. Mencken summarizes the situation well: "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary."  And the government solutions to the imaginary hobgoblins, e.g. the need for "high speed" transportation between Iowa City and Chicago, are always very, very costly, in this case hundreds of millions of dollars to solve a "non problem."

HT: Michael Barone via Pete Friedlander

15 Comments:

At 6/11/2011 10:47 PM, Blogger Benjamin said...

H.L. Mencken summarizes the situation well: "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary."

Excellent description of our defense establishment since the end of the Cold War.

 
At 6/12/2011 2:22 AM, Blogger PeakTrader said...

It's better than building pyramids, because it also creates overpaid government jobs to operate and maintain it.

So, the U.S. will end up less poor than Egypt.

 
At 6/12/2011 9:17 AM, Blogger hidisbeeric said...

Don't forget that Megabus and other low cost bus companies are using highways that were originally built with government subsidies and are still maintained with some government support.

 
At 6/12/2011 1:36 PM, Blogger Emil said...

"Don't forget that Megabus and other low cost bus companies are using highways that were originally built with government subsidies and are still maintained with some government support."

Those (at least the construction costs) are sunk costs and are therefore not relevant.

I would also expect the marginal cost of maintenance that can be attributed to the bus company to be only a fraction of what they alreadt pay in taxes

 
At 6/12/2011 2:41 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 6/12/2011 2:49 PM, Blogger Ron H. said...

"Don't forget that Megabus and other low cost bus companies are using highways that were originally built with government subsidies and are still maintained with some government support."

What does that have to do with the fact that a proposed high speed rail line is unneeded, unwanted, and there is no money available for it?

 
At 6/12/2011 7:48 PM, OpenID briancarrillo said...

Interesting thought, but I really don't see a future built on double decker bus technology. I think we need to use busses for a short term strategy but high speed rail for the long haul.

Brian superspeedtrain.com

 
At 6/12/2011 9:32 PM, Blogger Ron H. said...

"I think we need to use busses for a short term strategy but high speed rail for the long haul."

As I'm sure you're aware, passenger rail service in the US has been a money loser for at least the last 50 years. I don't believe you can find a single rail system at any speed that doesn't depend on subsidies, and in some cases massive subsidies, to operate.

Why would you recommend something that isn't cost effective, and in the case addressed in this blog post, not needed and not wanted?

Here's an interesting comment by someone who has closely followed the development of a light rail system in their city from the beginning.

 
At 6/12/2011 10:43 PM, Blogger hidisbeeric said...

What does that have to do with the fact that a proposed high speed rail line is unneeded, unwanted, and there is no money available for it?

I'm just trying to point out that part of the reason for the low cost of bus carriers is their capital costs (land, roads and highways) were subsidized by the government and amortized over decades. They don't have any capital costs on their books so they can charge very low fares.

I am open to the possibility that high speed rail companies can also provide low cost service if they get the same subsidy that bus carriers have gotten.

 
At 6/12/2011 11:07 PM, Blogger Robert said...

BusinessInsider.com reports on 108 Chinese infrastructure projects including the Nanjing Metro Line which "was completed in 2005 and is used by almost 180 million people a year." That should set our standard of use for rail projects here.

A rail project seems like the perfect fit for a progressive. It goes where THEY want, when THEY want, at a price THEY set. A true economic cost will be too high of course, so they will subsidize it.

 
At 6/13/2011 4:00 AM, Blogger Ron H. said...

"I am open to the possibility that high speed rail companies can also provide low cost service if they get the same subsidy that bus carriers have gotten."

But as you read in the Newgeography article, Megabus receives no subsidies of any kind, but operate entirely on the fares passengers pay.

As I'm sure you are aware, the Interstate Highway system was built almost entirely from state and federal motor fuel taxes, with very little subsidy required. Motor vehicles currently using these highways, including Megabus, pay user fees in the form of state and federal taxes on fuel, and vehicle registration and weight fees that cover operation and maintenance.

High speed rail systems, on the other hand, require huge upfront capital outlays, and then operating costs far in excess of what passengers would be willing to pay. In other words, they are all money losers.

We haven't even mentioned the advantages in flexibility a bus system has over rail.

Surely you're not suggesting that everyone should be forced to pay for rail systems whether they use them or not.

 
At 6/13/2011 5:11 AM, Blogger niknaknoo said...

I'd be interested to hear what the definition of "high speed" is if it's quicker to take the bus!!

 
At 6/13/2011 10:55 AM, Blogger Dave Thomas said...

How can someone say that a highway is built by the "government" as if it is an autonomous entity. So you and I suddenly don't pay for the highways we ride on with the tax that is on every gallon of gas we buy? Now this money is a mysteriously appearing "government subsidy?" An expenditure of tax money by any other name is what a "government subsidy" is. The government turns a profit and pays for the highways with no burden on me? Megabus isn't paying for the highway it rides on with the tax on the gallons of gas it burns? The concept of "government" as a self-sustaining entity that is no burden on the people who pay taxes is pure fantasy. How can rational individuals make such statements?

 
At 6/14/2011 4:38 PM, Blogger juandos said...

"How can someone say that a highway is built by the "government" as if it is an autonomous entity"...

I'm curious Dave Thomas who implied that?

hidisbeeric?

 
At 6/22/2011 3:08 AM, Blogger Ayesha said...

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