New Geography

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  • Victor Kulkosky

  • The Failed State of California – The Changing Landscape of America

    The Golden State is not so golden anymore. California is broke. With a $20 billion dollar deficit and tax revenues down 27% from last year, Governor Schwarzenegger looks to Washington D.C. for a bail-out to rescue the state from financial ruin. Like the executive passing a beggar on a street corner, Washington looks the other way. Unemployment is statistically 12.3%, but functionally, it runs closer to 20% of the work force. Nowhere is unemployment more tragic than in the Central Valley, the fruit and vegetable producer of the world. The unemployment rate in arguably the most fertile land on the planet is near 30% as residents line up in bread lines to feed their families. How did this happen? What happened to the Golden State?

    California is a victim of its own success.

    For decades following WWII, people flooded into the golden state in search of weather, opportunity and the good life. California delivered. Under Governor Pat Brown in the 1960s, California had wonderful weather, plentiful water, new highways, and the best public school systems in America. Every student had access to a strong community college system and top students were guaranteed admission to the University of California. Agriculture, Hollywood, aerospace and construction provided more jobs than workers.

    The 1970s brought harbingers of California’s future. The environmental movement muzzled a robust real estate industry with alphabet agencies like AQMD, CEQA, EIR and CCC. Building moratoriums raised home prices along the coast. Aggressive land use controls pushed development inland creating urban sprawl and long commutes as residents sought affordable housing inland. Governor Jerry Brown quipped, “If we do not build it, they will not come” and shut down highway construction, public school construction and added layers of new regulations. The people came anyway.

    The collapse of the Soviet Union in 1989 dealt California a cruel blow. The peace dividend meant the end for many high paying aerospace jobs and defense contracts. The recession that followed was felt far deeper than in the rest of the country. California climbed out of its recession led by wave after wave of new millionaire software developers during the dot com revolution.

    In 2001, the dot come bubble burst. The politicians in Sacramento, emboldened by an endless supply of money from the dotcommers to state coffers, spent over $100 billion while revenues fell to just $70 billion. They ran up a $38.2 billion deficit in 2002 under Governor Gray Davis – more than the other 49 states combined. The people recalled Davis in 2003 and replaced him with the Terminator, Arnold Schwarzenegger.

    The politicians learned nothing.

    California survived the bursting dot com bubble with yet another round of real estate escalation (the housing bubble) that lifted home prices by 20% per year. Spending escalated in line with home prices. More regulations were added to burden industry. Taxes were raised. Tuition increased. California added “The Global Warming Solutions Act of 2006” as if California alone could stem global warming. In response to 9-11, politicians passed SB 400, a feel good law that allowed cops and fireman to retire at 50. It was budgeted to cost “just $400 million” per year. Last year it cost $3 billion. Then, they passed SB183 the next year, applying the same benefits to non-safety state employees like billboard inspectors. When the housing bubble burst in 2007, California found itself with a $20 billion deficit – again.

    This time, California will not climb out so easily. Federal regulators, implementing the Endangered Species Act that was invented in California, diverted water from the farms of the Imperial Valley to the ocean to protect the engendered Delta Smelt. This tiny fish, with no commercial value, threatens the well being of tens of thousands of agricultural workers and contributes to unemployment figures worse than the Great Depression. California’s schools now rank 49th in the nation. They no longer generate the brilliant minds that fueled past economies. California’s 11.6% income tax has forced many high income earners to no income tax states like Florida or Nevada. The housing industry that created 212,960 units in 2006 was only able to build 36,000 units in 2009.

    Former state librarian and California historian Kevin Starr talks about the potential of California being the nation’s first failed state. John Moorlach, Orange County Supervisor says, “We better start talking about this. What are we going to do when the entity (state government) above us crumbles? I think we are already technically bankrupt.” He should know: Orange County went bankrupt in 1994. The City of Vallejo, population 120,000, was forced into bankruptcy in 2008 by commitments by its politicians to pay its City Manager $400,000 per year and its fireman an average of $175,000 annually.

    The biggest obstacle facing California’s recovery is a dysfunctional pension system created by politicians indebted to the public employee unions. The pension obligation is now $17 billion per year. California has 260,000 state employees and 38,000 are paid more than $100,000 per year. The University of California employs another 250,000 and 19,000 are paid over 100,000 annually. These generous salaries have been converted into lifetime annuities. The Legislative Analyst’s Office estimates the unfunded pension obligations of California to total $237 billion. In an era of retiring baby-boomers, this trajectory is clearly unsustainable. With tax receipts down, huge pension obligations and a state budget deficit of $20 billion, the vast majority of municipalities in California are suffering deficits and facing the prospect of Chapter 9 municipal bankruptcy.

    A train wreck is coming.

    Schwarzenegger, once the Terminator but now a Termed-Out lame duck, told the Sacramento Press Club, “No single issue threatens the fiscal health of this state more than our exploding pension obligations. Over the last 10 years, our pension costs have gone up by 2,000 percent from $150 million per year to $3 billion a year (for state government workers). That means hundreds of billions in unfunded liabilities and it means the $3 billion we are spending now will go up to $10 or $12 billion.”

    In October, state Treasurer Bill Locker told lawmakers they needed to reform the pension system or “it will bankrupt the state.” The California Public Employees’ Pension System chief actuary has described the current pension system as “unsustainable.” Adam B. Summers, a policy analyst at the Reason Foundation and author of “California Spending By The Numbers: A Historic Look At State Spending From Gov. Pete Wilson to Gov. Arnold Schwarzenegger” warns, “I think we are starting to approach a tipping point.”

    Do the politicians in Sacramento want to do something about the train wreck that is coming? The answer as of now is clearly no. There is no evidence that they are willing to curtail spending and reform the pension laws that cover 500,000 state employees. They know the State of California cannot go bankrupt under existing laws. However, if they will not act, the people may act for them. Just as they did in 2003 with the recall of Gray Davis, the people are taking the initiative. They are sponsoring the Citizens Power Initiative to curtail the ability of unions to use payroll deductions for campaign purposes. Another initiative would make California’s full-time legislature part-time. In the meantime, the California economy continues to grind to a halt. Will the people of California shock the nation like the people of Massachusetts did with the election of Scott Brown? Or will the unions buy another election and drive the Golden State over the edge, making it the First Failed State?

    ***********************************

    During the first ten days of October 2008, the Dow Jones dropped 2,399.47 points, losing 22.11% of its value and trillions of investor equity. The Federal Government pushed a $700 billion bail-out through Congress to rescue the beleaguered financial institutions. The collapse of the financial system in the fall of 2008 was likened to an earthquake. In reality, what happened was more like a shift of tectonic plates.

    ************************************

    This is the eighth in a series on The Changing Landscape of America written exclusively for New Geography

    Robert J. Cristiano PhD is a successful real estate developer and the Real Estate Professional in Residence at Chapman University in Orange, CA.

    PART ONE – THE AUTOMOBILE INDUSTRY (May 2009)
    PART TWO – THE HOME BUILDING INDUSTRY (June 2009)
    PART THREE – THE ENERGY INDUSTRY (July 2009)
    PART FOUR – THE ROLLER COASTER RECESSION (September 2009)
    PART FIVE – THE STATE OF COMMERCIAL REAL ESTATE (October 2009)
    PART SIX – WHEN GRANNY COMES MARCHING HOME – MULTI-GENERATIONAL HOUSING (November 2009)
    PART SEVEN – THE FATE OF DETROIT: GREEN SHOOTS? (February 2010)

  • Anti-Smart Growth Governor Wins Primary

    There are many factors and issues that go into winning a political campaign, and the ones swirling about the Texas Republican Primary were numerous. Incumbent governor Rick Perry cruised to an easy victory over sitting U.S. Senator Kay Bailey Hutchison and activist Debra Medina on Tuesday to set up a general election showdown with former Houston mayor Bill White, a Democrat.

    It’s worth recalling that last year Perry distinguished himself as the anti-Smart Growth governor, bucking a trend in which political leaders at all levels embrace this command-and-control planning doctrine. In June 2009, Governor Perry vetoed SB 2169 – a bill relating to “the establishment of a smart growth policy work group and the development of a smart growth policy for this state.”

    In his veto message, Governor Perry said:

    Senate Bill No. 2169 would create a new governmental body that would centralize the decision-making process in Austin for the planning of communities through an interagency work group on “smart growth” policy…. This legislation would promote a one-size-fits-all approach to land use and planning that would not work across a state as large and diverse as Texas.

    I’m not sure if this was on many minds as voters headed to the polls, but there does seem to be a strong sentiment among Texans against top-down centralized planning. The recent mayor’s race in Houston grabbed national attention because of the winner’s sexual orientation. But earlier Annise Parker had soundly defeated über-Smart Growth advocate Peter Brown, setting up her run-off with Gene Locke. Brown had made zoning and central planning a centerpiece of his campaign.

    Texas has out-performed most other states in terms of economic vitality, housing affordability and other quality of life indicators, and its cities crowd Business Week’s top ten list of metros least touched by the recession.

    When it comes to Smart Growth and centralized planning, political leaders at all levels and in all states should embrace the Lone Star attitude: Don’t Mess With Texas!

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  • MILLENNIAL PERSPECTIVE: Kindle 101

    The rising Millennial Generation has been cast as the leading force in teaching current technological advancements, and in predicting what will come next. Labeled “Digital Natives” because of our familiarity with digital communications and media technologies, the rise of the Millennials has run parallel with the rise of the cell phone, the computer complete with Internet, and the launch of MP3 players. In keeping with expectations that we’ll provide leadership on the digital media world, here’s what to expect of the sophisticated technology of Kindle, the digital book:

    Named “Kindle” to evoke the crackling ignition of knowledge, this software and hardware platform was developed by Amazon.com for rendering and displaying e-books and other digital media.

    First released in the U.S. in, 2007, the device represents the turning point in a transformation toward Book 2.0, the revolution in progress that will change the way readers read, writers write and publishers publish. Originally it was designed to present an aura of “bookishness”. With the dimensions of a paperback, the Kindle weighs 10.3 oz and mimes the clarity of a printed book by using a colorless “E-Ink”. Unlike most wireless devices, the Kindle doesn’t run hot or make beeps, and the battery is durable and made to last at least 30 hours on charge. It runs on “Whispernet”, a wireless connectivity-based on EVDO broadband service offered by cell phone carriers which provides access everywhere, not just in Wi-Fi hotspots.

    Any bookworm can carry 200 books onboard the device and hundreds on a memory card. “The vision is that you should be able to get any book—not just any book in print, but any book that’s ever been in print—on this device in less than a minute,” says Amazon president Jeff Bezos.

    Search tools provide convenient access to a high volume of books. Consumers can read multiple books online for free, instead of buying books one at a time at a higher price. It pairs nicely with a trend towards short content: news stories, online journals, blogs, and short e-books. The short story phenomenon has grown among young writers who prefer writing short fiction blogs rather than lengthy novels.

    Amazon prices Kindle editions of New York Times best sellers and new releases at $9.99. The price for the Kindle edition books drops for classic novels; Edgar Allan Poe works are under $5.00, and vintage hardboiled reads are available for under $7.00. The first chapter of almost any book is available as a free sample.

    Digital book prices are in danger of rising. Beginning in March, books from Macmillan will reportedly cost up to $14.99. Five additional publishers have negotiated higher prices for digital publication on iPad.

    When purchased, the Kindle e-book is auto-delivered wirelessly to your Kindle in under a minute. A Kindle owner can also subscribe to major newspapers or popular magazines. When issues go to press, the virtual publications are automatically beamed into the user’s Kindle. A user can also subscribe to selected blogs, which cost either 99 cents or $1.99 a month per blog.

    Kindle allows the reader to personalize the reading experience. Users are able to change the font size, which is particularly accommodating to the Boomer generation and those older who may struggle with small print. For tech savvy multi- taskers, an electronic highlighter captures passages, which can be linked via web access to Wikipedia and Google. Another feature includes a personalized Kindle e-mail, which allows users to file any word document or PDF file into a personal digital library.

    The original Kindle proved to be revolutionary and popular device, selling out within its first six hours on the market. Within less than two years, Kindle 2 and Kindle DX were released.

    Kindle 2 developed into an “international version” of Kindle. Currently, it works in 100 countries using AT&T’s U.S. mobile network. Kindle DX is a little larger, with greatly increased book storage and, of course, a higher price.

    As authors adapt to online literature, the current book readership demographics may change as well. Scott Moyers, Director of the NY office of Wylie Publishing Agency, categorized the readers of e-books as “People who view the physical book as disposable”. Moyers believes that the first genres to solely go e-book will be Romance and Mystery novels, based on rapid turnover of the vast amount of works available in those genres. Visually intensive books — such as photography books that are beautifully produced — will be the last genre to go e-book, suggests Moyers, since these would be a “paler echo on the colorless Kindle”.

    Piracy poses a threat, as in the music industry; pirate sites may gain access to scan the online books. As far as “peer-to-peer” file sharing, Kindle has attempted to create a limit: a user can freely borrow an e-book for one month. Although this suppresses most excessive file sharing, online file sharing could become more popular.

    Despite potential dangers, Kindle has expanded along with the wild success of internet visibility on computers and cell phones. “Kindle for PC” and the Kindle application for the iPhone are now available. Can “Kindle for Mac” and “Kindle” for Blackberry be far behind?

    Kjellrun Owens is a freshman at Chapman University. Originally from Minnesota, she plans to pursue a career in Broadcast Journalism/TV.

  • Creating a Pearl River Delta Megapolis, The Growth Story of the 21st Century

    In Southern China, the Pearl River Delta is giving rise to an urban super-power in the first rank.

    In 2005, the wealthiest metropolises were still led by the thriving urban agglomerations of the leading advanced economies in North America, Western Europe and Japan; that is, Tokyo, New York City, Los Angeles, Chicago, Paris and London. The scale economies of these metropolises are as significant as those of many national economies. For instance, the estimated GDP of Tokyo and New York City, respectively, was not that different from the total GDP of Canada or Spain, whereas London’s estimated GDP was higher than that of Sweden or Switzerland.

    In contrast with 2005, when most of the top-100 wealthiest cities were in the G-7 economies, by 2020 a third of these wealthy cities will be in the large emerging economies. However, such rankings are based on linear extrapolations, which tend to downplay growth differences and the impact of rapid urbanization. One of such rapid-growth regions is the Pearl River Delta (PRD), or Zhusanjiao – Southern China’s low-lying area where the Pearl River flows into the South China Sea.

    This area includes Metropolitan Guangzhou, a city of 10 million, capital of the Guangdong Province, which has more than 110 million people; Shenzhen, one of the fastest-growing cities in the world; and Hong Kong, one of the most competitive cities worldwide. In this region, urban planners are joining forces to create a massive Pearl River Delta Megapolis – which includes half a dozen cities of more than 4 million people each (Guangzhou, Shenzhen, Hong Kong, Dongguan, Foshan, and Jiangmen).

    Since the economic liberalization in the late 1970s, the PRD has become one of the leading economic regions and a major manufacturing center of China. It is an ideal place for foreign investment. Hong Kong provides a world-class financial, logistics and service center, while Guangdong has first-rate electronics and manufacturing capabilities. It is these complementarities that are expected to drive the rise of the PRD region.

    Two Cities, Two Systems: Hong Kong and Shenzhen

    In 1997, Hong Kong reverted to Chinese sovereignty as a Special Administrative Region (SAR). China promised Hong Kong a 50-year autonomy; “one-country, two systems”, as Deng Xiaoping put it.

    Measured by purchasing power parity, Hong Kong’s GDP per capita today is about $42,600 (the U.S. average is $46,600). With its seven million people, it is almost as prosperous as Switzerland in terms of GDP per capita.

    This success is linked to China’s soaring economic growth, Hong Kong’s tax incentives, financial services, and its role in global trade. Despite Asia’s 1997 crisis, the technology sector slowdown, and SARS, Hong Kong’s economic engine has continued to hum. Today, the resilient city-state remains a globally important trade, shipping and the financial hub for the Greater Pearl River Delta.

    In the past, Hong Kong was the main gateway to mainland China. As the mainland has given rise to rapidly-growing and increasingly prosperous 1st tier metropolises, there are now almost 110 cities with more than 1 million people in China (by 2025 there will be more than 150 such cities in China). As a result, the role of gateway cities is becoming redundant.

    In 2008, Hong Kong International Airport handled almost 48 million people. However, since the opening of the Baiyun International Airport in Guangzhou, just one hour away from Hong Kong via a high-speed ferry, the region has been growing as an air transportation hub for the region. In 2008, it handled more than 33 million people and was the 2nd busiest airport in mainland China in terms of passenger traffic. Currently, Guangzhou is preparing for the Asian Games in late fall 2010, which will attract millions of visitors.

    Despite 30 million tourists in Hong Kong last year, the growth levels are highest in nearby Macau, China’s Las Vegas, where half of the $22 billion GDP is attributed to gaming, tourism and hospitality industries. It was shipping that initially made Hong Kong, still one of the world’s biggest container ports by output. Ever since Yangshan, a massive deepwater port off the southern coast off Pudong, opened its first phase in 2004, Shanghai’s role has risen rapidly. In 2008, the list of the world’s busiest container seaports – measured by total mass of shipping containers – was led by Singapore, followed by Shanghai, Hong Kong, Shenzhen and Guangzhou.

    Since Shenzhen was established as China’s first economic zone in 1979, the former fishing village has exploded into a prosperous city of 9 million; if, floating migrant population is included, the population base probably exceeds 14 million. Today, Shenzhen has been rated the fifth most crowded city in the world, following Mumbai, Calcutta, Karachi and Lagos – and the first in population density in China, according to Forbes magazine.

    The urban density of population in Shenzhen is 17,150 people per square kilometer, followed by Shanghai at 13,400 people. For a comparison, urban density in metropolitan Los Angeles and New York is 2,750 and 2,050 people, respectively. Unlike the U.S. cities, however, Chinese cities continue to grow – rapidly.

    Shenzhen lacks Hong Kong’s financial sophistication and global mindset. Hong Kong would like to take advantage of Shenzhen IT capabilities and manufacturing cost-efficiencies. Together, the two could evolve into the mainland’s technology hub and IPO venue.

    In 2008, Shenzhen’s GDP per capita was already $13,200 (almost approximate with Taiwan or South Korea). Combined, the total GDP of Hong Kong ($215 billion) and Shenzhen ($120 billion) would be about the same as that of Argentina or Iran.

    “Front Shop, Back Factory” Is No Longer Enough

    As the United States was swept by the global recession in late 2007, the Guangdong and Hong Kong governments intensified their high-level strategies for cooperation. The leaders of the province and the city-state see the next 20 years as a golden age in the acceleration of economic integration between the two territories, and in the creation of a world-class Pearl River Delta Megapolis.

    The proponents of the integration tend to use the term ‘metropolis.’ In fact, the PRD agglomeration would simply dwarf existing metropolises worldwide. Accordingly, the term ‘megalopolis’ may be more appropriate.

    The basic goal of this massive integration would be to enhance quality of life and status of the Greater Pearl River Delta agglomeration. Accordingly, the proponents of the GPRD seek to speed up the upgrading and restructuring of industries in the region. They hope to ensure Hong Kong’s continued prosperity and stability and increase the integrated competitiveness of the region. They also hope to develop an important engine for the development of China and the Pan-Pearl River Delta Region.

    Naturally, such objectives require substantial industrial restructuring and upgrading. In the course of 30 years of China’s reform and opening up, Hong Kong and the Pearl River Delta region jointly created an economic miracle based on the model of “Front Shop, Back Factory”. In this model, the PRD region served as the factory of the world, while Hong Kong exploited its service capabilities.

    The growth model is no longer sustainable. It has been continuously weakened. At the same time, signs of change have already become apparent in Guangzhou.

    The Pearl River Delta manufacturing industry has entered an era of restructuring, consolidation, and upgrading in three major sectors; that is, the region’s key industries, the high-tech industry and industry supporting systems. Overall, future prospects for the manufacturing industry look bright.

    Megapolis-in-Progress

    In Guangdong, Party Secretary Wang Yang has called for new thinking on Guangdong-Hong Kong economic integration, while Hong Kong’s Chief Executive Donald Tsang has stressed the need to strengthen Guangdong-Hong Kong economic cooperation. Nearly 80 percent of the residents in the two territories surveyed express confidence in accelerated cooperation between the two territories.

    Still, the plan also poses monumental problems and obstacles, including differences between Guangdong and Hong Kong in their legal, economic, public administration and social services systems. In addition to these differences, the region’s rapidly-growing urban centers have strategic objectives of their own. Competitive strains also exist between the different cities in the region.

    Yet, the incentives for agglomeration are more powerful. The development of the PRD Megapolis would spur growth in the region’s GDP, trade and investment. Some think-tanks expect the GDP of the PRD Metropolis to exceed $2.7 trillion on the basis of the current exchange rates in the next 30 years. For all practical purposes, this would mean that, by 2038, the PRD GDP would be comparable to that of the New York or London metropolitan areas. It will no longer be and up-and-comer; like Tokyo, it will stand as an urban super-power in the first rank – but more than three times bigger.

    Dr. Dan Steinbock is research director of international business at the India, China and America Institute (USA). He currently also serves as senior fellow at the Shanghai Institute for International Studies (SIIS), and visiting professor at the Shanghai Foreign Trade Institute. Dr Steinbock divides his time between New York City, Shanghai and Guangzhou, and occasionally Helsinki, Finland. His new book is Winning Across Borders: How Nokia Creates Strategic Advantage in a Fast-Changing World (Jossey-Bass/Wiley, April 2010) and his most recent policy brief is “Legacy and Globalization: Shanghai and Hong Kong as China’s Emerging Global Financial Hubs” (SIIS).

  • The Transportation Community Braces for Continued Uncertainty

    Recent game changing events — notably, the Massachusetts election depriving the Senate Democrats of a filibuster-proof 60-vote majority, and the projected record breaking $1.6 trillion deficit in the FY 2011 budget proposal — have introduced serious uncertainties into the President’s domestic agenda. The federal surface transportation program is no exception.
    Even though this program traditionally has enjoyed bipartisan support it, too, is being buffeted by the shifting political winds. What follows is an assessment of the status and prospects of four legislative initiatives that bear directly on the future of the federal transportation program.

    The National Infrastructure Bank
    The National Infrastructure Bank (NIB) has been receiving a lot of attention lately. It was the subject of a January 20 press conference sponsored by the Building America’s Future coalition. It was endorsed in a Wall Street Journal op-ed by three members of the president’s Economic Recovery Advisory Board. And it was discussed by a panel of experts at a January 25 seminar on “Financing Public Works in Turbulent Times” sponsored by New York University. Responding to the multiple pleas, the White House included a modest $4 billion for the bank in its FY2011 budget request.

    The press conference featured a group of prominent long-time NIB advocates — Pennsylvania Gov. Ed Rendell, Senator Chris Dodd (D-CT), Rep. Rosa DeLauro (D-CT), former House Majority Leader Dick Gephardt and Ambassador Felix Rohatyn. Representatives of some 20 interest groups and trade associations provided a supporting cast. The speakers spoke eloquently about the need for greater infrastructure investment in America and how the National Infrastructure Bank could effectively serve that purpose. The Bank, they said, would fulfill three policy objectives: finance projects of regional and national importance, and create jobs and long-term economic growth. It also would serve as a vehicle for making better resource allocation decisions — based on merit rather than on pork barrel politics.

    The press conference failed to do, however, was to clarify some of the questions posed by critics of the NIB concept. Reason’s Robert has noted that if the NIB were set up “as a genuine bank, operated on commercial principles“, it would not able to fund a broad range of public infrastructure projects, some of which, such as schools, public housing and mass transit facilities which do not generate a revenue stream that could be used to repay the bank loans. Hence, the NIB would require periodic federal appropriations to cover grants for non-revenue producing projects. In that sense, it might turn out to be more like a foundation than a bank.

    There is little likelihood that Congress would be willing to turn the power of decision over large-scale capital projects to a new bureaucratic organization lodged in the Executive Branch. Many lawmakers, including the powerful chairman of the Senate Finance Committee, Sen. Max Baucus (D-MT), believe that Congress must not abdicate its authority over the spending of public capital. As one Senate aide remarked, one cannot “depoliticize” the project selection process, as NIB advocates would urge, because major public infrastructure investment decisions are inherently and fundamentally political in nature.

    The High Speed Rail Program
    The White House decision (announced on January 28) allocates the $8 billion in high-speed rail grants authorized in the Recovery Act to a total of 30 separate projects in 13 different rail corridors. Principal beneficiaries are the California High-Speed Rail Authority ($2.25 billion), the Florida Rail Enterprise and its 84-mile Tampa-Orlando high-speed line ($1.25 billion) and the Chicago-St. Louis rail corridor ($1.10 billion). The remainder of the money is spread around in amounts ranging from half a billion to as little as a few million dollars among 26 rail improvement projects in 31 states.

    Generally, high-speed rail advocates have been disappointed by the Administration’s selections because few of the projects offer the promise of true high-speed service — even the Florida project is not expected to attain European-like average high speeds. In contrast, the Administration’s decision to fund upgrades of rail infrastructure in as many as 13 different rail corridors makes good sense both in terms of politics and cost-effectiveness.

    True “high speed” service (as that term is used in Europe and the Far East, i.e. top speeds of 150 mph and higher) would require separating freight and passenger traffic. It would require building entirely new rail infrastructure in dedicated rights-of-way — something that is clearly not within the scope of a $8 billion program. The final price tag for California’s complete high-speed rail system could reach $60 to $80 billion and a recent Government Accountability Office report cites a range of construction costs for high-speed rail between $22 million/mile to $132 million/mile. From that perspective, the $8 billion looks like a drop in the bucket.

    In the meantime, with railroads expected to assume an ever growing share of intercity freight transport, upgrading infrastructure in existing rail corridors has become an urgent necessity. Since nearly all of Amtrak’s passenger trains run on rail lines owned by freight railroads, such improvements will also benefit passenger traffic. In most corridors, track and signaling upgrades on existing shared passenger/freight lines would permit raising speeds from today’s 60-80 mph to (0-100 mph, according to railroad experts.

    To be sure, a strong case can be made that true high-speed rail service will eventually be necessary between major city-pairs separated by less than 300 miles to relieve unacceptable levels of highway and air traffic congestion. But building a national network of dedicated high-speed rail lines from scratch will require decades of a sustained national commitment, spanning many administrations. There is no assurance that future presidents and future Congresses will share President Obama’s and Transportation Secretary LaHood’s enthusiasm for high-speed rail.

    Climate change legislation
    Chances of enacting tough greenhouse gas (GHG) emission reductions during this session of congress are remote. Senator Byron L. Dorgan (D-ND), Chairman of the Senate Energy Appropriations Subcommittee, has made it clear that a cap-and-trade bill, such as the giant House-passed Waxman-Markey bill, is “probably dead on arrival.” The prospects for a Senate compromise bill authored by Sens. John Kerry (D-MA), Joseph Lieberman (I-CT) and Lindsey Graham (R-SC) are also dubious at best.

    There are many factors that have contributed to the fading prospects for climate change legislation including disappointment over the inability of the Copenhagen Summit to reach a binding agreement to reduce carbon emissions. The revelations of ClimateGate, casting doubts on the integrity of some climate scientists’ objectivity as well as more recent disclosures about false claims of melting Himalayan glaciers have undermined the credibility of the UN Intergovernmental Panel on Climate Change (IPCC). Add to this the opposition of 14 Senate Democrats from coal-dependent states who fear that a cap on GHG emissions would raise energy costs and utility rates and growing public skepticism about the “consensus” over global warming and the future for any strong legislation seems murky. Indeed when the President in his the State of the Union address mentioned “the overwhelming scientific evidence” about global warming, it provoked muffled but clearly audible laughter among the assembled lawmakers.

    With the hopes of enacting a comprehensive cap-and-trade bill fading, attention is turning to energy initiatives that could launch the nation on the road to energy self-sufficiency and greener energy sources. Those prospects have brightened considerably since President Obama spoke of “building a new generation of safe, clean nuclear power plants” and “opening new offshore areas for oil and gas development” during his State of the Union address. However, the prospects for a more sweeping energy bill during this session of Congress remain in doubt.

    The Surface Transportation Reauthorization
    Finally, what of the oft-delayed multi-year surface transportation authorization? The responsibility for enacting this measure will very likely fall upon the shoulders of the next Congress. In the meantime, during the remainder of this year, the U.S. Department of Transportation may be expected to continue its series of “listening sessions” on how to reform the program and develop a vision that would merit broad stakeholder and congressional support. The Senate, for its part, is expected to launch its own process of legislative development. Sen. Barbara Boxer, Chairman of the Environment and Public Works Committee, has announced that her committee will begin drafting a multi-year authorization bill in March and will hold hearings later this year.

    Finding the revenue to support an ambitious multi-year bill will remain the overarching challenge facing reauthorization drafters in 2011. That new Congress may well be more tax-averse; the state of the economy and the price of oil will determine whether a hefty increase in the price of gas will be feasible. Until the question of funding is resolved, the transportation community will continue to live in a state of uncertainty, improvisation and a limited ability to plan ahead.

    Ken Orski has worked professionally in the field of transportation for over 30 years and is publisher of Innovation Briefs

    Photo: Center for Neighborhood Technology