Virginia Postrel has a good article on Bloomberg discussing the latest snags in the HSR project, the boondoggle being kept on life-support to shield the careers of politicians who have kept it going long after the original promises to voters were broken. I ended the previous post on the project with this:
A high-speed rail line through dense urban areas and mountains was always going to be a difficult project. But pie-in-the-sky projects pay off when you can direct money to your political supporters preparing for it, get back some of that as campaign contributions, and retire from public life before the public realizes they got nothing for their tax dollars. As in all these Bootleggers and Baptists stories, the “bootleggers” — politicians, unions, and contractors — pushed the project through fully aware the proposal was a fantasy and sold the dream to idealistic voters. Having foolishly voted for the bonds, the voters will never be allowed another vote to stop the project.
I don’t remember my own vote on the bond initiative — I may well have said yes since like other voters, I believed the promises made in the initiative would be kept, or if not, that the funding would be blocked. But courts have allowed the project to proceed and bond money to be spent despite ample evidence that those promises have not and cannot be met.
When I mentioned this on Facebook, I got this response back from friend David Gerrold, who is a good representative of those dreamers (the Baptists) who want something good and ignore until the bitter end the evidence that it can’t happen. I sympathize with the idealism, but also see the damage done when fantasy is more politically important than reality. Here’s his reaction:
This is the dream we were sold. None of those promises can be kept, especially the climate change benefits — since the fate of the project is now certain, further expenditure of $billions will leave behind nothing but partly-constructed tracks for a route that won’t be used enough to save even the carbon emissions used in materials to build it, so it’s even going to be a big net loss on the global warming front.
Developments since my last post make this even clearer. The Obama administration gave the project a temporary exemption from the rule requiring the state put up its own matching funds before the Federal money would be released. This exemption is the only reason project work can continue, with the state essentially borrowing its own contribution from the Federal government until its own funds are available.
The funds the state expected to have from emissions control credit auctions have gone missing. The latest auction was a failure, providing only $2.5 million for the train project vs the $150 million expected. The original promise of private matching investment has not happened and no private company is interested. The emissions money amounts to a tax on California industry and citizens and is not structured to be a reliable stream of funding. The entire funding scheme teeters on the brink as legislators eye the lists of much more critical infrastructure projects that would have to be cut to fund the train. While Governor Jerry Brown continues to support it, others are edging toward the door, eying each other as the realization sinks in that the merde is about to hit the rotational airfoil. No one wants to be first on the governor’s team to declare the truth, and so the zombie project appears to live. Here’s the original proposed route:
California HSR Original Route – Wikipedia
The original promise of high-speed service from downtown SF to downtown LA (and San Diego) was scrapped years ago, with the current $65 billion project estimate for the originally-proposed first phase from SF to LA unfunded and likely to remain unfunded. The desperate goal of project proponents now is to build something to entrench the project. The LA Times story on the rationalizations for building the least-useful part first:
The shift to the Bay Area [building the segment from San Jose to Bakersfield first] will help the California High-Speed Rail Authority hold down costs and expedite construction of the system, which is already two years behind schedule, according to details of the new plan released Thursday.
The change would also avoid expensive tunneling and viaduct construction through the geologically complex Tehachapi and San Gabriel Mountains, where several potential routes have been proposed through the Angeles National Forest. Those options have generated political opposition in communities that border the forest.
The high-speed rail authority said shifting to the Bay Area will allow it to have the initial segment operating by 2025, earlier than planned, which will make the project attractive to private investors that would help fill holes in funding.
California HSR Downsized Route – LA Times photo
The HSR Authority has failed to get rights-of-way through the urban areas needed to reach the stations in SF and LA, and the state’s laws giving local NIMBYs power to stall or block any major project with lawsuits funded by wealthy residents of towns like Atherton along the way means those routes will never be available as initially envisioned. Having compromised away all the speed benefits, the high-speed rail project is now a medium-speed rail project, offering little time advantage as its trains will proceed slowly through urbanized areas and stop at every intermediate city. And the low density of California cities, especially LA, means it will be more practical for most people not living near downtown stations to drive directly to their diverse destinations — trips from one downtown to another downtown are only a small fraction of the total demand for instate travel. Improvements to bus services in all metropolitan areas, and smaller, cheaper projects serving the real needs of middle and lower-income workers and families, are being neglected so this shiny dream choo-choo can keep going.
It’s clear the original project proposal was designed to offer some service to most towns in California, whether that was feasible or not, and it was on that basis that it got enough support to get the bond issue through the legislature and the voters. Every single one of the promises — routing, trip times, costs, self-supporting operation, private investment matching — has been broken since, yet the inertia of the project keeps the consulting companies, lawyers, and union workers spending borrowed money to build the train to nowhere.
The Great Slackening is caused by the bureaucratization of everything and the lack of accountability for failure. California’s government is no longer capable of building major infrastructure projects in a timely or efficient manner, and the state will exhaust its funds trying before recognizing that the system must be reformed.
Death by HR: How Affirmative Action Cripples Organizations
The first review is in: by Elmer T. Jones, author of The Employment Game.Here’s the condensed version; view the entire review here.
Corporate HR Scrambles to Halt Publication of “Death by HR”
Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.
New eastern span of the Bay Bridge – photo SF Chronicle
See the lovely bridge above? It cost about $13 billion dollars.
To update last week’s post about California’s disastrous high speed rail project, Regulation Strangling Innovation: Planes, Trains, and Hyperloop, the Obama administration has just given the already-failed project another four years to throw taxpayer money at connected consultants and contractors, delaying a halt to the boondoggle and recognition of its failure until long after Jerry Brown and Barack Obama are out of office (and then its waste of $billions will be blamed on “Republican intransigence”– which is rich in a one-party state.) The inept and corrupt process for building any large government project, especially in California, is more to blame.
First we’ll take a look at the mismanaged and endlessly-delayed project to replace the eastern half of the San Francisco-Oakland Bay Bridge, which had been damaged by the Loma Prieta quake of 1989. After the quake, temporary repairs reopened the old bridge to traffic but it was clear the span needed to be replaced as soon as possible.
The Atlantic’s Citylabsummarizes the disastrous Bay Bridge saga:
The first cost estimates, released in 1995, figured both east and west spans of the bridge could be upgraded for a cuddly $250 million. By the time the new east span opened in September 2013 the price tag for that span alone had reached a reported $6.5 billion, with a B. Just your run-of-the-mill rise of 2,500 percent.
Cover: Remaking the Bay Bridge – Amazon
UC Berkeley planning scholar Karen Trapenberg Frick meticulously chronicles the reconstructed bridge in a new book, Remaking the San Francisco-Oakland Bay Bridge. With Frick and her book as guide, CityLab tracked bridge expenses over time to get some sense of how the project that Herbert Hoover once called “the greatest bridge yet constructed in the world” became yet another example of a major public works project in which the cost ended outrageously higher than it began — and some ideas for what to do about it.
$250 million (1995)
Following the earthquake, the California Department of Transportation (which goes by Caltrans) assembled a board to advise on a seismic retrofit of the Bay Bridge. The agency’s initial estimate for fixing both east and west spans came to $250 million…
$1 billion (1996)
In the blink of an eye, the Bay Bridge cost quadrupled. “I remember one day I woke up and it was a $1 billion estimate,” says Frick, who was working at the Metropolitan Transportation Commission (MTC) at the time. “Here you tell the public in ’95: we can do the whole thing for $250 million. They vote on a bond measure that allows them to fund this plus other retrofits in the state. Then they come back and go, actually it’s $1 billion.”
The cost increase was the result of detailed engineering studies conducted during the year or so after the initial estimate was released. Among other things, soil testing in the Bay had revealed that bridge pilings would need to be anchored “deeper into bedrock than expected,” she writes. The public, of course, wasn’t pleased. In the book, one Caltrans manager recalled the immediate reaction:
“The numbers we put together (on the bridge costs) at lunchtime on Tuesday became the main front-page heading in both the San Francisco Chronicle and the Los Angeles Times on Wednesday morning.”
$1.3 billion (1997)
In 1997, Caltrans offered a range of cost estimates for various retrofit designs to the east span. Ultimately the state legislature agreed to fund the bridge to the tune of $1.285 billion.
There was still the big question of what the bridge would look like. Governor Pete Wilson expressed official preference for a basic “skyway” — a straightforward viaduct unadorned by a tower. He said if Bay Area residents wanted “an aesthetically enhanced bridge,” they should pay for it themselves.
That didn’t sit well. Pulitzer-winning architectural critic Allan Temko blasted the skyway option as “dull” and likened it to “an outsized freeway ramp.” MTC head Mary King said of the skyway: “While we appreciate the governor has offered vanilla ice cream, we want chocolate sauce on top.” One Oakland resident wrote that since the Bay Area was full of such creative types, “I think each of us should draw our own bridge” and send it to MTC for consideration….
$2.6 billion (2001)
When Caltrans released new estimates for the east span in April 2001, the cost had roughly doubled to $2.6 billion. The agency gave two main reasons for the rise. Construction costs were way up with a strong economy — steel and concrete prices, in particular, spiked 18 percent from 1999 to 2000. Caltrans also blamed the two years of delay associated with selecting the final single-tower design.
Despite a cost increase of a couple billion dollars in just six years, Caltrans was confident in its new figure. “We’re pretty comfortable with these numbers,” said its director in 2001. The legislature passed a new law to fund the bridge in October. It included a $448 million rainy day provision that one state senator said “insulates us from what we were worried about—open-ended cost overruns.”
$5.5 billion (2005)
Famous last words. In August 2004, a new cost of $5 billion was announced, with the tower alone expected to cost at least twice the estimated $750 million. Caltrans blamed the rise on three factors: elevated insurance rates in the wake of 9/11, a 50-percent rise in steel costs related to China’s boom, and greater staff needs owing to so many bridge projects going at once. A state auditor added one more to the list — poor cost management.
“People like to blame the tower,” says Frick. “Well, the whole span increased cost, and the other bridges increased cost, too. We really have a problem of cost-estimating in addition to a challenge of doing a design at this magnitude in earthquake country. That’s what gets lost in the story.”
In late 2004, Governor Arnold Schwarzenegger tried to terminate some of the costs by suggesting the bridge didn’t need the tower at all. (“Without thinking that there’s a ton of engineering and that this has actually been designed as a whole structure,” says Frick.) The following year he relented and signed a law to cover the new costs — with a provision that any further overruns be the region’s responsibility….
$6.5 billion (Current)
In April 2006, a consortium involving American Bridge and Fluor won the tower contract. It was built in China to save money — a decision that carried its own costs when inspectors later found poor welding and busted bolts at key points that required fixing. [Ed. note: there are still suspect welds and parts of the bridge understructure that may fail in a quake the bridge was designed to survive — investigations are ongoing.] Frick says the current $6.5 billion total is a rough estimate, and that it doesn’t include interest or financing costs.
With those costs included, some expect the total price to double yet again—to
$13 billion.
At least the state got a functioning half-bridge for its $13 billion, though hidden defects may end up causing it to fail or need more expensive repairs. But an entire cross-continent standard 4-lane Interstate highway could have been built for that — the usual figure cited for rural Interstate construction costs is $4 million per mile, so one could have built 3,000 miles of Interstate with enough left over to handle suburban bypasses. Did the state learn any lessons from the bridge fiasco?
Not really. Because of the long drawn-out nature of these boondoggles, voters can find no single politician or legislator to bring to task for failures. Meanwhile, politicians can promise new projects and collect campaign contributions from interested unions and contractors. Voters are inclined to turn down big bond issues for infrastructure as a result, rightly suspecting they are being sold a fantasy budget for projects which will end up costing more and doing less. But they weren’t cynical enough to dodge the bullet train… which voters authorized in 2008 with passage of Proposition 1A.
Eight years have passed, and the goals of the project have been downsized: from the original promise of routine and fast passenger service from downtown LA to downtown San Francisco, to maybe a line from San Jose ending in the Central Valley. Speeds are down, costs are up, and ridership estimates and operating costs are far from the goals promised. Yet California courts have refused to halt the project, and it lives on through a drip of federal funds and California carbon credit subsidies — another tax weighing down state industry. The most recent Republican candidate for governor got some traction by labelling the project the “Crazy Train,” but not enough to overcome California’s preference for Democrats:
An attempt to get enough signatures to put an initiative on the ballot to shift some of the bullet train money to water supply and storage projects has been postponed until 2018.
Now the struggling project has received an extraordinary lifeline from the Obama administration:
The Obama administration threw the California bullet train project another lifeline Wednesday, extending the schedule by four years for construction of 118 miles of rail through the Central Valley, according to congressional officials.
The extension came through modification of a $2.5-billion grant that originally required completion of a segment of rail structures from Madera to Shafter by 2017.
The changes also allow the Department of Transportation to extend a cash advance to the state, which potentially means the California High-Speed Rail Authority can continue spending long after the original deadline that was set in 2009 under the American Recovery and Reinvestment Act.
The change brought an immediate attack by Republican critics, who said the Transportation Department and its Federal Railroad Administration awarded the project an unprecedented concession. “This is the oversight agency that is supposed to monitor taxpayer money,” said Rep. Jeff Denham, (R-Turlock) chairman of the House rail subcommittee and a longstanding critic of the project. “For them to give a blank check and authorize a cash advance is a clear conflict of interest.”
…The Obama administration has made five previous modifications of the grant in recent years, including one that allowed the state to provide required matching funds after first using the federal money. Normally, grants require states to match federal funds on a dollar-for-dollar basis as they are spent….
A Federal Railroad Administration spokesman said the agreement will not amend the 2017 deadline for spending the grant, but acknowledged that it would allow the state to make its required match several years later. Denham believes the amendment may also attempt to allow spending the federal dollars after the deadline.
The project was supposed to be “shovel ready” when it received the grant in 2010, but has been hobbled by a series of political, legal, environmental and financial problems. One original purpose of the project was to help the nation recover from the Great Recession, which officially ended long ago.
In addition to the stimulus grant, the California project is receiving about $500 million a year from state greenhouse gas fees and an additional $1 billion federal grant approved in 2010. But it faces an estimated $43.5-billion shortfall to complete the San Francisco to Anaheim system by 2029.
The rail authority has had difficulty acquiring property since early 2013, when it claimed publicly that it was going to start construction by that summer even though it hadn’t bought a single piece of land. Even today, fewer than half of the parcels it needs for the 118 miles are in hand. The Central Valley was supposed to be the easiest section of the 500 miles system to build, but has proven to be a virtual minefield.
The delays have forced contractors leave to equipment idle, which is likely to result in multimillion-dollar claims of losses. Some outside construction experts are projecting the first 29 miles of construction alone could be as much as $400 million over budget.
The Central Valley segment had been running about two years behind schedule, based on the start of construction last summer. But this year, the rail authority said that under its new business plan, that segment would begin service from San Jose to Shafter in 2025, about three years past the previously scheduled start.
…Denham said he is alarmed by the potential for Transportation officials to advance far more than that just before the 2017 deadline, allowing the state to bypass the normal process under which grant recipients submit invoices after spending the money….
Without the cash advance and the grant modification, Denham asserted that the state rail authority would have been unable to spend all $2.5 billion by the 2017 deadline and would have forfeited it back to federal treasury.
The rail authority had spent only $1.1 billion of the $2.5-billion federal grant as of February. If it had not received the grant modification, it appears the rail authority would have had to spend nearly $3 million of the federal money and a similar amount of required state matching funds every calendar day through June 30, 2017. That $6 million per day burn rate would be far higher than any transportation project in U.S. history.
Bridge supports for high speed rail under construction in the Central Valley – LA Times photo
Starting in the 1970s, California gave veto and delaying power over all development projects to its politically-powerful attorneys and environmental groups, including local NIMBYs who delay or stifle most for-profit development. This litigious atmosphere now extends to all government projects as well, and it is nearly impossible to bring in a project on budget and on time. Rare exceptions to typical multiyear delays occur only when politicians cut the red tape of contracting and environmental assessments, as in the rebuilding of the Santa Monica Freeway in LA after the Northridge quake of 1994:
Less than three months after the Northridge earthquake knocked down two sections of the world’s busiest thoroughfare, Gov. Pete Wilson announced Tuesday that the Santa Monica Freeway will reopen next week, ending frustrating delays and bottlenecks for thousands of commuters.
State officials hope the final cleanup of construction work can be completed early April 12 in time to let rush-hour traffic inaugurate the two new freeway bridges at La Cienega and Washington boulevards.
Spurred by the promise of an extra $200,000 a day for every day work was completed ahead of schedule, the contractor, C. C. Myers Inc., will finish the project 74 days before a June 24 deadline and rack up a $14.5-million bonus for the company.
The high-speed construction was made possible by crews working around the clock, seven days a week, and by state officials cutting through red tape.
So it’s not that infrastructure is inherently complicated and slow to build; when voters demand action, they can get it. But such a quick project timetable doesn’t allow for all the padding and white-collar lawyering and consulting that returns a fraction of contract dollars as campaign contributions.
A high speed rail line through dense urban areas and mountains was always going to be a difficult project. But pie-in-the-sky projects pay off when you can direct money to your political supporters preparing for it, get back some of that as campaign contributions, and retire from public life before the public realizes they got nothing for their tax dollars. As in all these Bootleggers and Baptists stories, the “bootleggers” — politicians, unions, and contractors — pushed the project through fully aware the proposal was a fantasy and sold the dream to idealistic voters. Having foolishly voted for the bonds, the voters will never be allowed another vote to stop the project.

—
Update: Funding through sale of carbon emission credits has evaporated, and one of the contractors pointed out the system would never be likely to be self-funding (since nowhere in the world is such high speed rail profitable) — Update: California High-Speed Rail Nearly Dead
Death by HR: How Affirmative Action Cripples Organizations
The first review is in: by Elmer T. Jones, author of The Employment Game.Here’s the condensed version; view the entire review here.
Corporate HR Scrambles to Halt Publication of “Death by HR”
Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.
Let’s start by looking at some examples of innovation delayed and strangled by overly-cautious regulation, a problem especially prevalent where agencies are charged with protecting lives. The outcome of a mistake in approving something which turns out to be deadly is an immediate and sharp punishment for the regulators, while delay, increasing costs, and overly cautious blocking of a valuable new product directly hurts only those promoting it — the people who might have benefitted from the innovation tend to be unaware of what they have lost when it’s turned down, an effect also seen with housing, where local residents veto new development but the people who might have wanted to live in the new development get little say.
I have two good examples: the delay of the Valkyrie Co50, a sexy and innovative airplane that has $50 million in advance orders but can’t get timely approval because it is too innovative; and Titan Pharmaceutical’s Probuphine, a lifesaving implantable form of the anti-opioid-addiction drug buprenorphine.
The Valkyrie Co50 can fly at up to 260 knots (roughly 299 MPH), significantly faster than other single-engine aircraft, which typically cruise at a max of roughly 242 knots. The plane stands at 30 feet long and 10 feet high, with a wingspan of 30 feet. Its unusual design, forward stabilizer and rear-positioned engine promised an usually smooth ride with, even in low altitudes, little-to-no-chance of a stall. According to Cobalt, 30% of fatal aircraft accidents are in low altitude stalls, a claim supported by the Air Safety Institute’s 2012 general aviation accidents study.
The company quickly racked up a reported $50 million in orders for a $749,000 aircraft that won’t arrive until 2017, if Cobalt and its customers are lucky. The hold-up? FAA Type Certificate process, which Cobalt describes as long, cumbersome and expensive…. The French entrepreneur and pilot understands the need for certification, “because it’s good for the safety of everyone,” but he contends that the process is needlessly slowing down the industry and increasing costs.
For example, when Loury was designing his planes, he found a $30 fuel valve — one that’s typically used in tractors — would work in the Valkyrie. However, according to Loury, when sold as a certified aviation part, the same valve costs $3,000.[1]
This is the same paperwork and certification problem that results in ballooning Defense Dept. costs, like $2,000 for an aluminum sleeve that would normally cost $10[2] and cost overruns for every major weapons system in the past few decades. The Israelis pioneered cheap, reliable drones for surveillance and warfare, but the US DoD versions cost orders of magnitude more because they have to be designed and built by defense contractors under bureaucratic bidding rules and without cheaper off-the-shelf parts.
The Valkyrie is beautiful:
Cobalt Valkyrie X – Photo: Cobalt
…But the new plane can’t be sold for commercial use without FAA approval, and the requirements are more time-consuming and costly because the plane is so innovative.
Regulators can’t keep up with what the aircraft designers are doing, said Loury, and, worse, the FAA continues to add new regulations — usually in response to air disasters.
Loury contends that, on Cobalt’s end, especially for things they cannot test in the air like a “ground vibration survey,” it takes “six months of work and thousands of dollars for one [certification] paragraph.”
The company is already selling an experimental version which is less regulated, but is barred from commercial use. Just getting its application ready requires years of expensive tests. The FAA notes that they cannot be faulted for delay because they have not received an application for the plane yet, but:
It’s true, Cobalt is still working its way through satisfying all the regulations before they submit their application to the FAA.
When Cobalt does finally submit the Valkyrie Co50 for certification, the FAA could grant it in three years, but it might also take four or more years. It’s a question everyone asks Loury. He really doesn’t have an answer. “I keep pushing because we have no reference…in how long it takes.”
And this is a well-capitalized company which can afford to wait out the lengthy approval process while being unable to sell their plane in the larger market. How many small companies might have accelerated development of new planes if they didn’t face a regulatory buzz saw and years of delay before being allowed to sell?
It’s often asked why we don’t have the flying cars and jetpacks envisioned in the 1960s of Tomorrowland:[3] the answer is that regulators and tort lawyers made it so slow and costly to innovate in the transportation sector that the rate of innovation has declined precipitously since 1970. As Glenn Reynolds writes:
1970 marks what scholars of administrative law (like me) call the “regulatory explosion.” Although government expanded a lot during the New Deal under FDR, it wasn’t until 1970, under Richard Nixon, that we saw an explosion of new-type regulations that directly burdened people and progress: The Clean Air Act, the Clean Water Act, National Environmental Policy Act, the founding of Occupation Safety and Health Administration, the creation of the Environmental Protection Agency, etc. — all things that would have made the most hard-boiled New Dealer blanch.
Within a decade or so, Washington was transformed from a sleepy backwater (mocked by John F. Kennedy for its “Southern efficiency and Northern charm”) to a city full of fancy restaurants and expensive houses, a trend that has only continued in the decades since. The explosion of regulations led to an explosion of people to lobby the regulators, and lobbyists need nice restaurants and fancy houses.
Maybe it’s just a coincidence that progress suddenly slowed down, but I don’t think so. Indeed, the Obama administration’s brilliantly successful policy for promoting private spaceflight ventures (basically one of benign neglect) can be seen as evidence that we can actually get the kind of progress we used to get, when we regulate lightly, like we used to. Who knows, if we regulated pharmaceuticals like we did in the early 1960s, perhaps we’d get as many major new drugs as we got in the 1960s. (“The time for a new drug candidate to gain approval in the United States rose from less than eight years in the 1960s to nearly 13 years by the 1990s,” notes Hanlon.)[4]
US-based light plane manufacturers boomed in the 1970s, but were nearly driven out of business by litigation and insurance costs between 1980 and 1993:
Following the recession in the early 1970s, production rates began to increase very rapidly, from 7,466 units in 1971 to 17,000 in 1977 – an increase of more than 125 percent in six years. Production in recent years is a trickle when compared to the heyday of general aviation. The numbers are compelling: Since reaching a peak of 17,811 shipments of light aircraft in 1979, U.S. production plummeted to 811 units in 1993, a decline of 95.5 percent. Other measures of general aviation activity in the United States are equally dismal. The number of private pilots fell 32.1 percent, from a high of 357,500 in 1980 to 288,078 in 1993. In 1980, there were twenty-nine U.S. manufacturers of piston aircraft and fifteen foreign producers. Today, there are sixteen U.S. and twenty-nine foreign manufacturers.
American manufacturers historically supplied most of the world’s general aviation aircraft and exported about 20 to 30 percent of the general aviation aircraft produced here. However, the nation lost this important contribution to its trade balance. Imports of general aviation aircraft, which include commuter airliners, exceeded the value of general aviation exports for the first time in 1981. By 1988, the trade deficit in general aviation aircraft soared to $700 million. The volume of exports plummeted from 3,395 units in 1979 to 440 in 1986. American aircraft accounted for a full 100 percent of the single engine piston aircraft sold in the U.S. in 1980. Today, American aircraft account for less than 70 percent. It is important to remember that this apparent surge in foreign competition is more an artifact of dramatically lower domestic production of single-engine aircraft, not a sign that the foreign firms were capturing sales that would otherwise go to American manufacturers hampered by product liability claims. [5]
To revive the industry in the US, laws were passed at both state and Federal levels[6] to limit airplane manufacturer liability. Light planes manufactured in other countries had taken most of the market, since they faced much lower regulatory and legal costs. North Dakota tried to bring the industry back to its state in 1995:
The North Dakotans propose something new: an agreement before the accident, rather than a fight after it. The root of the problem, they maintain, is the ascendancy of torts over contract law. In the small-airplane market, for example, the buyer and the seller rarely hammer out their financial risks in a contract. Instead, the manufacturer, fearing suits, buys enormous liability insurance, then charges the buyer for it indirectly by marking up the price of the plane, often doubling it. These high prices, manufacturers say, have driven 20 of 26 small-aircraft manufacturers from the business in the past 20 years.[7]
These liability-limiting laws did help bring some light plane makers back to the US, but much of the industry was permanently lost. The US had dominated small plane manufacturing until the cost crisis, but today is a small player, and has lost even mid-sized airplane manufacturing to Canada’s Bombardier and Brazil’s Embraer. Legal and regulatory overhead tore down the big advantage of US firms — and once lost, the network of expert workers and subcontractors cannot be rebuilt easily.
Credit: Wikimedia
Note the zooming cost of airplanes beginning in the late 1970s, and the weak recovery in numbers shipped after liability-limiting laws were passed in 1994. What had been a booming market was strangled by rising costs — anyone planning to build a flying car could read the tea leaves; they would never get a foothold as a mass-market product like ground cars given the multiplying costs.
Now central planners dream of a continent-spanning high speed rail network, and in California money is being spent at a rapid clip to build 1960s transport today, a multi-billion-dollar line from nowhere to nowhere that doesn’t in any way meet the goals of the project California voters approved and will cost hundreds of dollars per ticket sold in additional operating subsidies. The fantasies of Europhile statists who fail to understand how big the US is compared to Europe, where such lines can make financial sense, result in bizarre proposals like this one:
US High Speed Rail System – proposed by Alfred Twu
I created this US High Speed Rail Map as a composite of several proposed maps from 2009, when government agencies and advocacy groups were talking big about rebuilding America’s train system.
Having worked on getting California’s high speed rail approved in the 2008 elections, I’ve long sung the economic and environmental benefits of fast trains.
This latest map comes more from the heart. It speaks more to bridging regional and urban-rural divides than about reducing airport congestion or even creating jobs, although it would likely do that as well.
Instead of detailing construction phases and service speeds, I took a little artistic license and chose colors and linked lines to celebrate America’s many distinct but interwoven regional cultures.[8]
So festive! How about a line to Yellowstone, wouldn’t that be great?—This romantic Progressive choo-choo dream, free of any tedious thoughts of engineering and economics, would shackle the US to a costly, inconvenient, backward-looking rail system when an updated FAA, with better GPS and more sophisticated air traffic control systems, would allow air passenger service that is faster, cheaper, and serves all destinations. Because the FAA is a hidebound government agency, though, innovation has been slow and costly, and air traffic is held down by antiquated software, scheduling issues and TSA hassles.
This particular accounting-challenged dreamer bills the total cost of his entire system at $40 billion per year for 30 years — that’s $1.2 trillion. Meanwhile, the slightly-less-deluded dreamers of Jerry Brown’s California high speed rail project — which will never be built from LA to SF as originally proposed unless helicopter money starts raining down on Sacramento — have budgeted $64 billion. Soon we’ll be talking about spending real money….
The suit brought by Kings County Board of Supervisors and two Central Valley farmers accused the rail authority of violating restrictions imposed by a ballot held in November 2008 (Proposition 1A) that approved a $9.95 billion bond issue to help pay for the high-speed railway. Voters were told at the time that the project would cost no more than $33 billion, with the federal government stumping up $3.2 billion and private investors chipping in the balance. So far, such private investors have been conspicuous by their absence.
According to the Proposition 1A Bond Act, the high-speed rail project has to be financially viable; trains have to operate (without subsidy) every five minutes in either direction during the day; and funds for each segment of the route need to be identified before work on the leg in question can commence. Above all, trains have to make the 520-mile (840-km) journey between the Los Angeles basin and the San Francisco in two hours and 40 minutes, reaching speeds of 220 mph (350 kph). As for ridership, the rail authority reckoned some 65m to 96m passengers per year would be travelling the route by 2020. The basic fare was to be $55 one way.
That was all pie in the sky, a way of selling the deal to voters in 2008. A review in 2011 put ridership at a more realistic 30m passengers a year, with an end-to-end ticket price of $89. Meanwhile, the overall cost of the project had soared to $98 billion. And instead of going into service by the end of the decade, the high-speed railway would not be ready until 2033.
The uproar that ensued prompted a shakeup along with some hurried rethinking. The cost was subsequently pegged at around $68 billion for the first phase of the network, with an opening date in 2029 — almost a decade later than originally promised…. The draft 2016 business plan has now trimmed the cost of the first phase to $64 billion.
While private funds have shown little interest, at least the project’s finances are no longer quite as gloomy as they were a year or so ago. Jerry Brown, California’s govenor and a stalwart supporter of the high-speed train, strong-armed the legislature in Sacramento into allocating it 25% of the state’s annual “cap and trade” proceeds from auctioning off carbon credits to big polluters, which are currently worth around $1 billion a year. As a result, the rail authority has now identified the $21 billion required for building the project’s initial leg (San Jose to the Central Valley). It still needs a further $43 billion before it can start work on extending the line north to San Francisco and south towards Los Angeles.
With the rail authority’s finances resolved for the time being, opponents have focused instead on the project’s legal requirement to cover the distance between Los Angeles and San Francisco in two hours and 40 minutes. The rail authority claims (optimistically) that such a time remains doable, though cost-saving measures have forced the high-speed train to share tracks with slower-moving freight and commuter services in the Los Angeles basin and the Bay Area.
What also remains in doubt is just how many people will actually ride the high-speed network. In revising its revenue model, the rail authority has incorporated findings from surveys on rider preferences, along with forecasts of California’s likely population, housing and employment growth. The data were then crunched using Monte Carlo simulations to minimise the risks of being wrong. The analysis suggests that, based on a confidence level of 50%, the service will have some 28m passengers by 2029, generating $1.3 billion of revenue. However, as thorough as this analysis is, unanswered questions remain.
Above all, what is it that California’s railway planners know that their Japanese counterparts do not? The former state-owned Japanese National Railways and its partially privatised regional replacements have struggled for decades to make their high-speed Shinkansen (“bullet train”) routes profitable. Japan’s eight Shinkansen lines have little in the way of competition, thanks to over-crowded roads, expressways that charge exorbitant tolls and limited air services. Even so, only one Shinkansen service—JR Central’s 550-km line between Tokyo and Osaka—makes anything like a decent enough operating surplus to cover its costs, make necessary investments and pay a modest dividend.
It does so for one simple reason: the volume of traffic it carries—some 140m passengers a year. The Tokyo plain (Kanto) is home to 42m people, while greater Osaka (Kansai) has 23m. Between these two huge population centres reside a further 10m people in conurbations like Hamamatsu, Nagoya and Kyoto, all served by the Tokaido Shinkansen. At peak hours, trains leave Tokyo Station bound for Shin-Osaka and beyond on average every four to five minutes, and every seven to eight minutes for the rest of the day. The latest Nozomi (limited stop) service whisks passengers between Tokyo and Osaka in two hours and 22 minutes.
Compare that with California. As sprawling as it is, the Los Angeles basin has a population of just 18m. The nine counties surrounding the Bay Area have a little over 7m residents between them. The farming communities astride the proposed high-speed rail line through the Central Valley have a combined population of around 1m. In short, California’s high-speed railway is attempting to do what the Tokaido Shinkansen does, but with a third of the number of potential passengers, on a route that is half as long again. California’s taxpayers will pay dearly for Mr Brown’s high-speed legacy.[9]
Two notable new developments in transport, self-driving cars and the Hyperloop[10] (a passenger capsule propelled through a partly-evacuated tube by linear induction motors at up to 760 mph) have both managed to make progress by staying under the radar and working with the states before going to Federal regulators. One reason, of course, is that (especially in the case of Hyperloop) the risks of accidental death and destruction at high speeds are just as great, but the FAA is not involved because neither ever leaves the ground. And for self-driving cars, people are relatively used to carnage on the roads and it appears to most researchers that these cars will reduce accidents and deaths substantially.
The Hyperloop is especially glamorous (see the video of a test run here), and if the billions being spent on California’s high speed rail were instead spent on a Hyperloop line from LA to San Francisco, the result would be a technology-leading, tourism-generating marvel, not a has-been-technology, almost-as-good-as-French train. But the graft is already in politicians’ pockets, and it’s likely billions more will have been spent before the California high speed rail boondoggle quietly dies.
The Hyperloop technology has problems of its own, as the Economist article points out:
Everyone involved now accepts that Mr Musk seriously under-estimated the cost of building a Hyperloop between Los Angeles and San Francisco—probably by a factor of ten or more. There are few illusions, too, about the engineering difficulties involved. Fabricating an air-tight steel tube hundreds of miles long, with solar-powered linear motors providing propulsion while supporting passenger pods on air-bearings or by magnetic levitation is challenging enough. A bigger hurdle is overcoming the “pistoning” effect, caused by air in the tube (even though it would be at only a thousandth the pressure of that outside) piling up in front of the pod and slowing it down. Calculations done by NASA suggest the tube would have to be at least four times wider than the pod to prevent even the tiny amount of residual air within it blocking the pod’s passage. Mr Musk budgeted for tubes only twice as wide.[11]
In Bootleggers and Baptists terms, neither conventional high speed rail or Hyperloop are much of a threat to incumbent airline companies, and self-driving cars would be built by existing manufacturers, so they too are more likely to be allowed to prosper.
In an age of business meetings by Skype and telepresence, one would guess the market for costly long-distance passenger transportation would shrink, or at least not grow as quickly — flat demand is already observed in many business routes. More-efficient jets and updated air traffic control can limit emissions growth, while the pie-in-the-sky continental high speed rail and Hyperloop ideas would take a vast amount of capital, at least when built by government contracting rules where much of the money goes to law firms and environmental studies before anything is even built. But if California is to spend $billions on a boondoggle, let it be an interesting boondoggle which could probably attract passengers going from nowhere to nowhere.
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[1] “Is the Valkyrie Co50 a test case for the FAA’s willingness to innovate?” – Mashable, Lance Ulanoff, Feb 21, 2016 http://mashable.com/2016/02/21/cobalt-valkyrie-co50-faa-analysis
[2] “For Pentagon, the price isn’t right” – By Lawrence Korb, Alvaro Genie, The Hill, 07/23/14
The first review is in: by Elmer T. Jones, author of The Employment Game.Here’s the condensed version; view the entire review here.
Corporate HR Scrambles to Halt Publication of “Death by HR”
Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.
Death by HR: How Affirmative Action Cripples Organizations
