Building Lasting Economic Recovery Through High Speed Rail

Crossposted from the California High Speed Rail Blog

Today I’m going to be in Sacramento for the California Labor Federation’s Economic Recovery Summit. The agenda includes discussions about creating jobs that can provide lasting economic recovery, ensuring a broadly shared prosperity that won’t be dependent on a massive wave of debt as were the last three economic booms. It also includes a discussion of “rebuilding California’s crumbling infrastructure.”

The Labor Fed has been a strong supporter of high speed rail and for good reason: it will create an estimated 130,000 construction jobs and 450,000 permanent jobs. In a state facing the worst unemployment since the Great Depression, these are compelling numbers. HSR opponents need to explain where exactly they plan to create similar numbers of jobs.

Those are familiar stats to blog readers. But it’s worth exploring in some depth just how high speed rail can contribute to lasting prosperity in California beyond the obvious benefit of over a hundred thousand construction jobs.

First, the big picture. California is suffering from an economic crisis right now partly because of overdependence on oil-based forms of transportation. When gas prices broke $3 per gallon in 2006, the housing market peaked as buyers were no longer able to service debts. That bubble would have eventually burst, but it burst at a specific time and for a specific reason, that being the ripple effect of high oil prices throughout the economy. When oil prices spiked again in 2008, it helped push the nation into a severe recession.

As we know, oil prices are projected to keep rising in coming years. The only reason they’ve stayed below $100/bbl is the recession, and even then the prices at California pumps have hovered around $3 all year.

There can be no lasting economic recovery without bringing down transportation and energy costs. High speed rail is a key part of that. By providing both regional and intercity transportation, it helps stave off the impact of the oil-driven airline crisis, enabling business travel to continue in the state at stable prices. By helping produce electrification on the Caltrain corridor, and potentially on some of the SoCal railroad corridors, HSR will help daily commuters enjoy stable costs as well.

Those savings have been described as a green dividend. Sustainable and green transportation policies have saved residents of Portland, Oregon $2.6 billion. The ripple effect throughout the local economy has made Portland one of America’s leading cities, and provides a model that California would do well to emulate.

We’ve talked often at this blog about how high speed rail can play the same role as Depression era projects like Shasta Dam and the Golden Gate Bridge in driving economic recovery. The construction generates badly needed short-term employment, and the system operations generates long-term savings and economic activity, just as the Golden Gate and Bay Bridges do after 70+ years.

There’s another interesting aspect of HSR and economic recovery, which we touched on in yesterday’s post, and that is the construction of the trainsets themselves.

For 6 years earlier this decade, 2001 to 2007, I lived in Seattle, Washington. One of the dominant players in Washington’s economy since World War II has been Boeing. The state’s economy has often risen and fallen with the cycle of aircraft production, but that production was a central part of growing the state’s middle class.

There’s no reason why California cannot play a similar role for the rest of the nation, and maybe even a global market, with high speed train construction. Already Siemens and Alstom have set up plants in California. Since we are further ahead than any other state in HSR plans, it’s likely that by the time other states start their own HSR construction efforts, California will already be producing trainsets. Those other projects could conceivably look to California to produce the trainsets they will use on their own systems, and provide an ongoing market for high speed rail production based in California.

Of course, it’s not a given that it would turn out that way. Talgo is planning to open a factory in Wisconsin. The Detroit area is full of cheap land and skilled assembly line workers needing jobs. And you can bet other state HSR projects will try and woo the trainmakers to their states.

But if California starts making trainsets first, we’ll still have an advantage. It would likely be cheaper to buy trains made in pre-existing California factories, with an existing workforce, than to buy trains made in a new factor with a new workforce – the latter has higher start-up costs to recoup than the former. And other states would still be able to meet Buy American rules by ordering California-made trainsets.

Other states are beginning to blaze this trail. In 2007, Oregon Iron Works established a subsidiary called United Streetcar to produce streetcars for Portland at its Clackamas factory. Their success has already led to orders from Tucson, and other cities planning streetcar lines are considering ordering from United Streetcar. Colorado Railcar would likely have been in a similar position in the DMU market were it not for its financial collapse last year.

California used to be a major producer of industrial products – steel at the Kaiser mill in Fontana, automobiles in Van Nuys and Fremont (among other places), even tires in Salinas. Those industries produced broadly shared economic prosperity, at least until the great wave of deindustrialization and offshoring hit after 1975.

Today we can restore some of that prosperity by building more environmentally sustainable, clean, green industrial products like HSR trainsets. California can and should take the lead in producing them – and the only way we will do it is by seeing through to completion the high speed rail project voters approved in November 2008.