Boehner’s bosom-buddy Gov. John Kasich (R-OH) beat a similar drum on the campaign trail. Touting his plan to help the private-sector “quickly help create jobs,” Kasich insisted he would help “improve the atmosphere in our state for real business development” by meeting “the needs of businesses to overcome” governmental “snafus.” But Kasich undermined his rhetoric by killing Ohio’s high-speed rail project. In doing so, he derailed many businesses’ economic development plans and effectively killed the private-sector jobs he promised to create, leaving one businessman to call his decision “unbelievable,” “mind-boggling,” and “naive”:

Locally, certain not to happen is construction of a $15 million facility planned for Columbus by US Railcar Co. The plant would have employed up to 200 when fully staffed, said Mike Pracht, president and chief executive officer of the Columbus-based railroad-car manufacturer.

“It’s unbelievable these states would send back $400 million and $800 million in free money,” Pracht said. “It’s mind-boggling.”

“The only thing I can compare it to is the interstate-highway program back in the ’60s. Where would Ohio be today if it opted out of the interstate highway system? To suggest passenger rail would be any different is naive.”

Pracht said that in addition to the jobs his company would have added, abandoning the rail plan negates millions of dollars in potential development that would have clustered around each rail station along the 258-mile route.

Pracht’s anger is legitimate. The Cleveland developer Forest City Enterprises was planning projects that would create $180 million of taxable property. Dayton, OH anticipated around $250 million worth of downtown development around the rail station and, in Columbus, OH, the rail line “was expected to spur business development” and “provide a link between Downtown and Port Columbus.” But, as Forest City’s spokesman put it, “Clearly, it won’t happen now. It’s a governmental decision.” A decision that has already cost Gov. Scott Walker (R-WI) private-sector jobs as well.

But Kasich is “unrelenting” in his mission to overtly rebuke his campaign promises. While acknowledging that the train would create private-sector jobs, Kasich’s spokesman Rob Nichols scoffed Kasich wasn’t going to build a train that “will cost taxpayers.” A curious excuse given the fact that Kasich is perfectly willing to spend taxpayer money to “pay for security improvements” at his own private residence. Because Kasich is choosing to be “the first Ohio governor in a generation” to live in his private residence rather than in the already secured governor’s mansion, Ohioans will now pay for “around-the clock security at the Kasich home” as well as at the official residence.

Decisions like these help to explain the seven point drop in his approval rating before he’s even taken office. But rather than rethink high-speed rail and his other poor economic policies, Kasich is committed to driving the state into further economic disaster. As Nichols said, “We had the debate. The train is dead. The matter is closed.”

But campaign rhetoric has very real consequences. Last Thursday — on the same day the World Congress for High Speed Rail announced the next HSR Congress will be held in America for the first time — Transportation Secretary Ray LaHood pulled the funding from Ohio and Wisconsin, offering it instead to states more eager to spur economic development. What’s more, because of Walker’s narrow-minded politics, the Spanish train manufacturing company Talgo, which moved into Wisconsin for this project, is closing its Milwaukee plant and taking the much-needed jobs with it:

Talgo Inc., the Spanish manufacturer of high-speed train cars, will abandon its plant in Milwaukee in 2012, according to Nora Friend, a spokeswoman for the company.[...]

“We can’t stay and manufacture in Milwaukee without the high-speed rail to Madison,” Friend said. “This is terrible news.”

Friend said the state’s decision to back away from the high-speed rail project sends a terrible message to businesses considering locating in the state.

“We were encouraged by the business community,” Friend said. “We are really discouraged by what has happened.”

State residents should also be discouraged, she said. Talgo and the construction of the rail line would have created jobs badly needed in the construction industry.

“For anybody to think that there is another $800 million to invest in another project is foolish,” she said. “There is no other pool of money.”

Talgo currently employs 40 people in Milwaukee, WI and “was hoping to grow their staff to as many as 125 to fulfill the orders” that current Gov. Jim Doyle (D) and his administration had made in preparation for the project. Those orders would’ve spurred some 13,000 badly-needed jobs in a state facing a 7.8 percent unemployment rate. (Ohio will lose 16,000 jobs.) Instead, Talgo plans to take that business to three of the states that will share in the federal money taken away from Wisconsin and Ohio, most notably Florida.

Florida’s Gov.-elect Rick Scott (R) also sounded off against high-speed rail during his campaign but, unlike Walker and Kasich, has waffled on whether he’d actually kill the project. With over $2 billion in stimulus money and the prospect of new business flocking to the state, Scott isn’t as willing to shun such potential economic development as his Tea Party brethren.

But Wisconsinites should not be fooled by the flight of business. As he said on election night, Walker’s victory means “Wisconsin is open again for business” — regardless of what actually happens.

If the Boston-to-Washington megalopolis were its own country it would have over five times the population of Sweden and a population density higher than any European country. In other words, nobody woud say it was an area unsuited to intercity passenger rail. Which is no doubt why Amtrak’s Northeast Corridor features by far the best and most useful service in the system. But by international standards, the Acela is unimpressive so it’s good to see Amtrak coming up with a plan that can do better:

Amtrak is unveiling a $117 billion, 30-year vision for high-speed rail on the East Coast that would drastically reduce travel times along the congested corridor. At a news conference at Philadelphia’s 30th Street Station on Tuesday, Amtrak President Joseph Boardman said the proposal is at the visionary stage, and there’s no funding plan in place. It aims for high-speed rail by 2040.

Boardman says the Next-Gen High Speed Rail line would reduce the travel time between Washington, D.C., and New York City from 162 minutes to 96 minutes. The travel time between New York and Boston would go from 215 minutes to 84 minutes.

Obviously, that’s a ton of money. But it also highlights the central problem with our current approach to rail. The Obama administration’s high-speed rail initiative is not only pretty stingy, it’s also spread incredibly thin because that’s what you get when you need to frame initiatives that can be approved by a congress based on representing distinct geographical areas. Any kind of national legislation that would raise $117 billion for northeast rail service would need to also spend a ton of money on rail service elsewhere in the country where the case for massive investment is much weaker. We’re essentially destined to be perennially under-investing in the northeast corridor and a handful of promising city pairs (Tampa-Orlando, Portland-Seattle) scattered around the country while sporadically over-investing elsewhere.

Presumably the advantage of some kind of privatization of transportation infrastructure is that it would allocate investment capital more efficiently. But the world being what it is, in the real world we’d be much more likely to get a giant boondoggle of one sort or another. If there’s one thing I’ve learned from the 111th Congress it’s not to expect anything to be done in a reasonable way.

An alert industry observer brought to my attention legislation by Senator Herb Kohl (D-WI) aimed at revoking the anti-trust exemption the freight rail industry currently enjoys. I don’t want to claim to be an expert on all the ins-and-outs of this but my understanding is that this would be a mistake and that it’s good that Jay Rockefeller (D-WV) has switched sides and is now joining Sens. Kay Bailey Hutchison, Frank Lautenberg, and John Thune in opposing this.

One of the reasons the rail situation in the United States has gotten so bad is because of a lot of infighting between the freight rail people and the passenger rail and transit people. More recently, however, the OneRail coalition has come together, which recognizes that rail advocates of all kinds have a great deal in common and can best advance their goals working together. A strong freight rail industry can and should be an important part of America’s transportation network, both because of its own intrinsic benefits (this is a very energy efficient way of moving stuff) and also as part of building a rail system that’s robust enough to also support viable passenger traffic. The fact that rail shipping rates are rising reflects the fact that rail is an appealing option under present conditions. It looks to me like an argument for increasing freight rail capacity not for harsher regulations.

Given that legislators who want to provide accurate information to their constituents have no had ample time to learn that the stimulus package does not contain an $8 billion earmark for high-speed rail between LA and Las Vegas, I’m going to go ahead and call John McCain a liar:

So, we will be seeking fair and transparent use of the money. I believe that Arizona can compete with any other state or locality to get the much-needed money. Already we’re seeing a good example. There was $2 billion in the Senate bill of the stimulus package for light rail; there was zero in the House. It came out of conference – only Democrats, no Republicans in the room – with $8 billion for light rail. And guess where it’s going to go? A light rail between Las Vegas and L.A. Everybody knows that.

Could we have competed for that money? Maybe so. So it’s business as usual in Washington, and I think that Americans are generally very disappointed. Sorry for the long answer.

It can’t be the case that “everybody” knows that because it’s not true. The thing that John McCain wants where different states can compete for the high-speed rail money is what the bill already says. Except McCain has piled ignorance onto dishonesty by confusing high-speed rail (advanced passenger trains that run between cities) with light-rail (relatively low-capacity trains used for intra-city mass transit). They have a light rail system right in Phoenix so it’s not as if there’s no way he could have informed himself about these issues.

David Rogers has a piece in Politico that offers a nice summary of the recovery plan’s actual high-speed rail provisions and the direct role of the White House in securing them:

The $787.2 billion economic recovery bill — to be signed by President Barack Obama on Tuesday — dedicates $8 billion to high-speed rail, most of which was added in the final closed-door bargaining at the instigation of White House chief of staff Rahm Emanuel. [...] The same Maine and Pennsylvania Republican moderates who had criticized Obama’s school construction initiative were more accepting of the rail funds, since the Northeast corridor has a major stake in more improvements. To help pay for the added cost, a business tax break — providing a five-year carry back for net operating losses — was narrowed to keep the focus more on smaller firms with receipts of less than $15 million.

Needless to say, this reality is at odds with the made-up story conservatives have been telling all weekend about $8 billion being earmarked for a train to Las Vegas. And Rogers, as we’ll see, knows what the truth is, knows what conservatives have been saying, and knows that the two are different things, but he can’t quite seem to describe what’s happening with regular English words:

At the same time, conservative Republicans seemed almost blind to Obama’s role. Instead, in their campaign to find pork barrel projects in the stimulus bill, they painted the whole funding as a scheme by Senate Majority Leader Harry Reid on behalf of Las Vegas interests seeking a rail link to Los Angeles. “Sin City to Tomorrow Land” was one description.

Here is Rep. Candice S. Miller (R-Mich.) explaining her vote against the bill Friday despite the benefits to her home state: “Michigan is a state of about 10 million people, and we are the hardest hit, as I said, by this economy. And yet we are expected to get approximately $7 billion from this bill. And apparently the Senate majority leader has earmarked $8 billion for a rail system from Las Vegas to Los Angeles? You have got to be kidding. You have got to be kidding.”

Rep Miller wasn’t “explaining” anything, she was lying to her constituents. Nor were conservatives running a “campaign to find pork barrel projects int he stimulus bill” they were inventing fictional projects. Nor were obscure House backbenchers like Miller running a rogue operation here. House Minority Leader John Boehner led the charge on peddling this lie, and Senator Jim Demint was on the case as well.

The President has a point that taxpayer money should not be used to pay for Wall Street fat cats to fly to Las Vegas but why is it okay for taxpayer money to be used to help pay for Hollywood elites to get there on a fancy gambling train? And why are we subsidizing leisure in a stimulus bill rather than encouraging work and greater productivity?

Several points. One — there’s no such provision in the bill. Two — there are two million people in the Las Vegas metro area, so it’s not as if taking the train to gamble is the only conceivable use of such a route. Three — lots of people go from L.A. to Las Vegas, it’s not an “elites only” option. I would refer Senator DeMint’s staff to this well-known scene from Swingers:

The larger rhetorical theme here seems to be that DeMint believes there should be no infrastructure projects of any sort in Southern California because any such project would, per se, be a taxpayer subsidy to “Hollywood elites.” It’s a pretty repugnant sentiment. For whatever reason, conservatives are constantly allowed to get away with this business of summarily dismissing vast regions of the country as unworthy and never get called on it. But this sort of thing is leading the movement on a direct (albeit, non-rail) route to a Dixie-only ghetto.

The madness continues on the right-wing’s crusade against a mythical high-speed rail to Las Vegas project that Harry Reid is alleged to have snuck into the stimulus bill. “Tell me how spending $8 billion,” asked House Minority Leader John Boehner (R-OH) on the floor, “in this bill to have a high-speed rail line between Los Angeles and Las Vegas is going to help the construction worker in my district.”

For one thing, if we stuck by the standard that members of congress should only agree to fund infrastructure projects located in their own districts, then obviously we’d have no infrastructure at all. This is a debate that I thought we settled in the days of Henry Clay. But beyond that there is no such provision in the bill. This, by contrast, is an accurate description of the high-speed rail provisions of the Recovery Act:

The Stimulus Plan includes two provisions modeled after the Act that finance high-speed rail development. First, the Stimulus Plan provides a $2 billion grant for high-speed rail projects that will remain available until September 30, 2011. The grant will be distributed among applicant states, interstate compacts, public agencies having responsibility for providing high-speed rail service and Amtrak for capital projects associated with inter-city passenger rail services reasonably expected to reach speeds of at least 110 miles per hour. The Secretary of Transportation will have discretion to award grants based on an extensive set of criteria, including the legal, financial and technical capacity of the applicant to carry out the project; compatibility with relevant national plans; and anticipated economic, environmental and transportation effects.

In a last-minute change, the total quantity of funds available was increased. But there’s no special plan for Las Vegas. The money will be spread all across the country. As it happens, I think an LA-Vegas HSR line is a perfectly reasonable project. But in practice the areas that will get a leg up should be the Federal Railroad Administration’s officially designated high-speed rail corridors. As it happens, LA-Vegas doesn’t make the cut. But guess who does have such a corridor? Ohio!

Indeed, the existing plan is a bit freakishly Ohio-centric, offering both a Cleveland-Toledo-Chicago line and a Cleveland-Columbus-Cincinnati-Indianapolis corridor while leaving things like Houston-Dallas and Orlando-Jacksonville (and, indeed, LA-Vegas) off the list. Long story short, John Boehner doesn’t know what he’s talking about and his position on this issue would imperil both short term jobs for Ohioans and an opportunity to substantially improve Ohio’s long-run capacity for economic growth.

Good news for people who like fast trains as it seems a significant amount of high speed rail funds made it into the stimulus:

And while many initiatives were scaled back as Congress and the White House sought to cut the overall cost, there were some surprise increases, including a quadrupling of money for high-speed rail projects to $8 billion.

The White House pushed for the added money in the final rapid-fire negotiations, seeing it as a tangible way to create jobs and benefit different parts of the country. It also added a futuristic element to legislation that has been criticized as lacking forward vision.

I’m glad to see this happen, though it’s still the case that my first, second, and third preferences for transportation funding in the stimulus would have been money for mass transit system operating costs. The really good news about this is that my understanding is that the President took a personal interest in this provision, which is crucial because building-out an HSR network in such a big country would require a lot of followthrough.

Meanwhile, it seems that Harry Reid was talking about this provision and mentioned the idea that a high-speed rail corridor from Los Angeles to Las Vegas might be eligible for some of the money. That’s true. It’s also, I think, a pretty good idea. But some conservatives have decided to portray this as Reid sneaking a special “high speed rail to Las Vegas” provision into the stimulus package. There is no such provision and he did no such thing. The United States has many metropolitan areas and no true high-speed rail corridors. Consequently there are a lot of plausible city pairs and corridors that could benefit from these measures. My guess would be that the folks best-positioned to take advantage of this would be in California where they’ve already got the HSR ball rolling. Pennsylvania also has an actively ongoing initiative to upgrade service to Pittsburgh and Ed Rendell puts a high priority on this sort of thing and Arlen Specter was a pivotal Senator in pulling the deal together, so they might benefit.

Rep Peter DeFazio has authored an amendment that would increase the level of rail funding in the stimulus bill. It’s an excellent idea. Funds for highway repairs are a fine use of stimulus money, but insofar as we’re investing in new transportation capabilities we ought to be investing in what we don’t have enough of—mass transit and intercity rail—while fixing up our vast, but crumbling, road network. Right now the amendment is being bottled up by the Rules Committee, so if you happen to live in a district of one of the members you have a special obligation to get in touch with their office and offer your opinion. But even if DeFazio wins there, there’s still the small matter of the actual vote so even if your member isn’t on Rules, it’s never too early.

Meanwhile, The Hill reports on the promising development—the creation of a new broad-based pro-rail coalition that includes all the key stakeholders:

The newly minted OneRail coalition markets itself as a first time assembly of disparate groups representing commuter rail lines, freight rail lines, public transportation and the environment. [...] Several trade and issue advocacy groups are part of OneRail, including the Natural Resources Defense Council, Amtrak, the American Short Line & Regional Railroad Association, the Association of American Railroads, and the Surface Transportation Policy Partnership.

The group will be working on the stimulus package but also, and in my view more importantly, on the reauthorization of the big transportation bill.

Phillip Longman has a piece in The Washington Monthly making the case for increased investments in high-quality freight rail. I think this is about right. There are certain kinds of trips that are — if the trains exist — intrinsically better-suited to passenger rail than to driving or flying. But that’s a limited set of trips, especially in the United States which is relatively sparsely populated. For freight there’s a similar calculus, but you wind up with a different answer, and there’s a much wider set of trips that are best done by rail. Which is one of the reasons why in even our current pathetically train-deprived state a great deal of freight shipping happens on trains. But we could be doing much more. He observes:

By all rights, America’s dilapidated rail lines ought to be a prime candidate for some of that spending. All over the country there are opportunities like the I-81/Crescent Corridor deal, in which relatively modest amounts of capital could unclog massive traffic bottlenecks, revving up the economy while saving energy and lives. Many of these projects have already begun, like Virginia’s, or are sitting on planners’ shelves and could be up and running quickly. And if we’re willing to think bigger and more long term—and we should be—the potential of a twenty-first-century rail system is truly astonishing. In a study recently presented to the National Academy of Engineering, the Millennium Institute, a nonprofit known for its expertise in energy and environmental modeling, calculated the likely benefits of an expenditure of $250 billion to $500 billion on improved rail infrastructure. It found that such an investment would get 85 percent of all long-haul trucks off the nation’s highways by 2030, while also delivering ample capacity for high-speed passenger rail. If high-traffic rail lines were also electrified and powered in part by renewable energy sources, that investment would reduce the nation’s greenhouse gas emission by 38 percent and oil consumption by 22 percent. By moderating the growing cost of logistics, it would also leave the nation’s economy 13 percent larger by 2030 than it would otherwise be.

One appealing thing about freight rail investments is that there’s a greater potential for interim steps that make a difference. Since there’s already a lot of freight rail happening, there are plenty of places where smallish improvements would increase usage and capacity a great deal. And then when the small improvements have piled on, that creates a bigger rail infrastructure that can also support passenger projects like commuter rail lines.

One word of caution I would offer about all this, however, is that while we certainly should try to get stimulus money to fund good infrastructure projects, we shouldn’t think of infrastructure spending as primarily a stimulus issue. A genuinely good infrastructure investment is worth making whether or not there’s a need for short-term stimulus. And just spending on infrastructure for the sake of spending can get you a lot of pointless garbage like we’ve seen recently in Japan which isn’t what we want. And people who have worthwhile projects to advocate shouldn’t invite people to think of the projects as make-work by talking about them exclusively in terms of the stimulus. This freight rail stuff would be worth doing in a totally normal economic climate.

John Judis has an article expressing skepticism that Barack Obama’s stimulus is of the right size and nature to meet our present challenges that winds up touching on a subject near and dear to my heart—high-speed rail:

One area that is ripe for such investment–and that is not, from what I have seen, a declared priority of the Obama administration–is high-speed rail. Amtrak’s Acela trains–the closest thing we have to one–average less than 100 mph between Washington D.C. and Boston, whereas trains in Western Europe and Japan go more than twice as fast. Many of them also run on electricity. They would be the most energy-efficient and quickest means of getting between places like Boston and New York, or Los Angeles and San Francisco. But they would require a massive investment. For instance, installing high-speed rail in the Northeast corridor could cost about $32 billion, while California’s high-speed rail system would require up to $40 billion. A system that would address the other areas of the country could easily raise the cost to the hundreds of billions. The House transportation and infrastructure committee has currently proposed $5 billion in stimulus funds for intercity rail–not even a down payment on what it would cost to convert the U.S. to high-speed rail.

Investing in high-speed rails would be very expensive, but unlike tax cuts–the benefits of which can be siphoned off in the purchase of imported goods–the money spent would go directly to reviving American industry and improving the country’s trade balance. That doesn’t just mean jobs creating dedicated tracks or new rail stations: Though the U.S. abandoned train manufacturing decades ago to the French, Germans, Canadians, and Japanese, this kind of production could be undertaken by our ailing auto companies or aircraft companies–if the federal and state governments were to place orders. And building trains that would run on electricity would be a paradigmatic example of the “green jobs” that Obama often touts.

Like Special Agent Mulder, I want to believe in this. In particular, I do believe that it would be a good idea to make these kind of investments. But I also know that many people hear about the idea of spending $40 billion in California and $32 billion in the Northeast and maybe comparable amounts to build HSR systems in Florida and the rust belt and they start to blanche. So now that all of a sudden there’s broad political consensus in favor of adding a few hundred billion dollars to the deficit, I really want to put my hand up and say “hey! look over here! some productive infrastructure investments we should make!”

The trouble is this—how much high-speed rail could you really build on a 24 month month time frame? When you think about the permitting, environmental review, NIMBY lawsuits, etc. it’s plausible to imagine it taking 24 months to just finish all the lawsuits much less build anything. Spain decided to build its first high-speed rail line, from Madrid to Seville, in 1986 and it seems to have taken five years:

On 11 October 1986 the Spanish government decided to build a new railway between Madrid and Seville. On 25 February 1988, the international tender for the acquisition of 24 high-speed trains AVE followed; these trains were ordered by 23 December 1988. The first train, based on the third generation of TGVs, was delivered on 10 October 1991.

In December 1988 it was decided to build the new line in standard gauge. Construction was ordered on 16 March 1989, and it lasted for 33 months; actual construction activity lasted only 24 months. Commercial use of the line commenced on 21 April 1992. In the first weeks, over 23 thousand passengers used the new trains – an occupancy rate of 81%.

On 20 April 1992, services started between Madrid and Seville. Non-stop travel time between the two cities were 2:45 hrs; with stops at Ciudad Real, Puertollano and Córdoba it was 2:55 hrs. In 1992, tickets cost around 50-70 euros in second class, in first class over 100 euros.

Now presumably if the intention was specifically to do this as a hurry-up project you could do it somewhat faster. But then on the other hand, Madrid-Seville Line is shorter than the kind of projects Judis is talking about. And the Spanish didn’t try to create a train-building industry from scratch—they bought French trains.

Long story short, I don’t think it’s some kind of inexplicable scandal that comprehensive high-speed rail construction isn’t the centerpiece of the Obama stimulus agenda. But I do think it’s very distressing that I’m not seeing any effort to think this issue through at all. Sure as I am that it’s not feasible to undertake $100 billion in new HSR construction over the next two years, I’m also absolutely certain that it’s possible to undertake more than $0.00 in such new construction. And these really are infrastructure investments that are worth doing for reasons totally independent of the need for stimulus. If the economy were doing okay, I’d be saying we need to be finding a way to pay for this stuff. But the economy’s not doing okay so instead we need to find things that are worth spending money on. And high-speed rail definitely fits the bill. How much is feasible? I don’t know. But I do know that if I had all the resources of the federal government at my disposal I’d be looking into it.

I will say that I think the plan to try to create a domestic train-producing industry is a little bit misguided. Among other things, the US and Canadian economies are so integrated that having US stimulus money get into the hands of a Canadian manufacturer like Bombardier would be about as good as it getting into the hands of a US manufacturer. And for related reasons, it’s much more plausible to think that if North American demand for rolling stock increased dramatically that foreign firms would start locating plants in the United States to meet that demand than that we would actually start up a brand new firm. Just from the perspective of getting a system set up, it makes a lot more sense to buy trains that we know actually work made by people who have experience in the field than to try to reinvent the wheel.

But I would go further than Judis in other respects. What about rail projects other than intercity high-speed rail? In particular, where are the studies of what we can do to speed up completion of currently envisioned programs? Both the Silver Line to Dulles Airport in Fairfax County and the Westside “subway to the sea” in LA are projected to be completely sometime after pigs fly at this point. In part, that reflects logistical realities. But my understanding is that in both cases the issue in part has to do with financing. Can’t we fight the recession in part by doing this stuff faster? And LA and DC can’t be the only metro areas in that boat. Accelerate the Second Avenue Subway, put in streetcars, etc. There are clearly limits to what can be done, but someone needs to be identifying those limits and making sure we walk up close to them rather than just getting discouraged and turning around.

Inauguration planning we can believe in:

In the tradition of past Presidents-elect, the daylong trip will include a series of events on the way to Washington, D.C. Saturday morning, President-elect Obama and his family will hold an event in Philadelphia before boarding a train bound for Wilmington, Delaware, where he will be joined by Vice President-elect Biden and his family. Together, the families will travel to Baltimore, Maryland, and hold another event, before finally arriving in Washington, D.C. on Saturday evening.

Good times.

Bruce Bartlett has a very nice summary of Keynes’ thinking on liquidity traps and the need for stimulation:

What Keynes figured out is that when conditions such as these exist, the federal government must step in to raise spending in the economy and thereby increase velocity. This means running a budget deficit, but that is only part of the solution [...] Keynes argued that the only thing that will really work is if the federal government uses its resources to purchase goods and services. It must buy “stuff”–concrete, computers, paper, glass, steel–anything as long as it is tangible. In other words, the government must spend the way households do, by buying things. It must also employ labor, because much of what people spend money on today is in the form of services [...]

At this point, Federal Reserve policy will become effective again. As prices and interest rates rise, the liquidity trap disappears and money begins circulating more rapidly; i.e., velocity increases. This is what ends an economic crisis. Unfortunately, it was not until World War II that the federal government spent enough on real resources–because they were needed for the war effort–to make Keynes’ theory work in practice. [...]

For what it’s worth, Keynes didn’t know what to do in this situation, either. He suggested building pyramids and burying bank notes in deep mine shafts that had been filled in. As people tried to dig up the money, they would be forced to employ labor and purchase equipment that would raise spending and thereby growth. In the end, it took the greatest war in history to make Keynes’ theory work.

I think that mine idea is pretty clever. But obviously the better answer is SUPERTRAINS. In particular, whenever I start prattling on about high-speed rail, people point out that it would cost an ongodly sum of money. But in our current crisis, one of our main problems is a lack of non-ridiculous ideas about things to spend money on. For example, it turns out that the total cost of “ready to go” infrastructure projects in this country is valued at tens of billions of dollars rather than the necessary hundreds of billions. That’s because planning was done in the old “how will we find the money” world. At the moment, we’re in a weird “how will we find things to spend money on” world. Under the circumstances, one thing I’d be doing if I were president is dedicating a small slice of the 2009 stimulus making sure that we get a big and absurdly expensive list of high speed rail projects “ready to go” in some sense by 2010. Hopefully, by then the economy will be back on the path to recovery in which case interest rates will be back at a level where we don’t necessarily want to engage in huge gargantuan deficit spending. In that case, most of those plans will have to be shelved. But if not, some can roll forward.

There’s a reason when you turned on the olympics to watch them this past summer, you saw mag-lev trains going over 200 miles an hour in supposedly a third world country [i.e., China] in terms of its economy, blowing into town, dealing with environmental problems they have as well as transporting people in a way that we don’t even come close to being able to do. And as Barack has pointed out, and John Corzine knows, I may have a bit of a pro-rail bias. I think think of the jobs we can create in both construction and innovation if we make similarly bold investments here in the United States as well as the environmental payoff that flows from that kind of investment.

Of course it’s not just a question of jobs we create directly through rail construction, it’s also the prospects of greater long-term growth through more efficient use of space and energy resources that should get us excited. But good for Biden — hopefully he’ll have some influence as the key transportation policy jobs get filled.

If you were willing to spend tens of billions of dollars on aid to auto companies, that would help people living in the rust belt. But by the same token, if you agreed to buy tens of billions of dollars worth of cereal that would also help the Michigan economy. Or what if you spent it on this:

High-speed rail could cut travel time between Detroit and Washington from nine hours to three — just a smidge longer than the train ride from Washington to New York, from downtown to downtown. And you’d never have to take your shoes off, unless you wanted to. High-speed rail would also cut a five-hour drive from Detroit to Chicago to just over an hour. Detroit to Cleveland? Just under and hour. Detroit to Pittsburgh? About an hour and a half.

High-speed rail would, in other words, turn Rust Belt distances into northeast corridor distances, while also shifting the Rust Belt closer to the northeast corridor. It would increase the return to doing business in every city in the region. It would be the Erie Canal and the original railroads on steroids.

And here’s the thing — California is estimating that its 800-mile high-speed rail network will cost it about $45 billion over twenty or so years. The actual cost will probably be higher than that, and a Midwest network would be larger and therefore more expensive, but the total cost is in the same ballpark as the $50 billion in aid automakers are begging for (which wouldn’t even be spread out over a period of years).

I think after what’s just been done for Citigroup, nobody — myself included — has much of a leg to stand on in opposing giveaways to car companies or anyone else. But it’s still the case that money could be better spent on public investments that would both directly create demand for industrial products and also build productive infrastructure for the future, than simply on covering the operating costs of industrial firms and hoping for the best.

Since Kevin Drum’s decided to become a California High-Speed Rail opponent, perhaps I should say more on this. Or, at a minimum, offer some links since Kevin’s post sort of makes it out that this is just some nutty idea being pushed by blogger train enthusiasts:

1. Here’s an endorsement from the LA Times.
2. Here’s one from the San Francisco Chronicle.
3. Here’s one from the San Jose Mercury News.
4. Other endorsements from smaller papers can be found here.
5. The Sierra Club is for it too.

On the idea that ridership estimates are unrealistically optimistic, it seems to me that the sad reality of politics is that it would be irresponsible for advocates of any large-scale infrastructure project to do anything other than present unrealistically optimistic measures. For better or for worse, that’s politics. Similarly, I never really understand the sentiment that Large Infrastructure Project A shouldn’t be done because Large Infrastructure Project B might be better. Sometimes you really do get asked “should we do A or should we do B” in which case, of course, if B is better than A you ought to answer “B.” Similarly, sometimes doing A really does prevent you from doing B — like if A and B would both require the same right of way. But that’s not generally the case, and it’s certainly not the case when you compare a statewide HSR system to a series of different local transit projects. In general, large infrastructure projects should be evaluated on their own merits. If California HSR is worth doing, then it really doesn’t matter if there may be other transit projects that are also worth doing. You do the HSR, and then you start organizing for the other projects. Doing worthwhile infrastructure projects ultimately grows your capacity to do future infrastructure projects.

For example, it seems that when we started building the Interstate Highway System the first projects funded were a stretch of I-70 in Kansas and a stretch of I-44 in Missouri. I seriously doubt that those two were the highest-value projects conceivable or, indeed, anywhere close to being the highest-value projects conceivable. But the goal of the National Interstate and Defense Highways Act of 1956 was, rightly, not to impose some kind of incredibly strict scrutiny to different projects. Rather, the goal was to make money available for a wide variety of worthwhile projects rather than spending decades tied up in arguments about exactly which highway would be the best one.