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Green Economics

California rail project: Who should pay?

California's high speed rail project will likely cost $100 billion to build and operate. But who should pay: California taxpayers or the federal government?

By Guest blogger / May 14, 2012

his 2009 file image provided by the California High Speed Rail Authority shows an artist's rendering of a high-speed train speeding along the California coast. The price tag for California's rail project is expected to hit $100 billion, raising questions about who should foot the bill.

High Speed Rail Authority/AP/File

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California's High Speed Rail will likely cost $100 billion dollars to build and operate.  Who should pay for this? Given that the bulk of the benefits of this project will accrue to the people of California, it's not crazy to ask the people of California to pay for it.  But, the people of California are eager to spend "other people's money" and the Obama Administration has offered a fairly large upfront investment.  As reported in this blog,  the Obama Team is asking some tough questions focused on whether large deficit California will ante up and put roughly $3 billion of its own $ to pay for the train.  An interesting game of "Chicken" is emerging.  Will the Obama Team pull their Federal $ for the train if California doesn't pay its "fair share"?    During this time of national and state deficits, is this project a "good project"?

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Mathew is an economics professor at UCLA and has written three books: Green Cities (Brookings Institution Press); Heroes and Cowards (Princeton University Press, jointly with Dora L. Costa); and in fall 2010, Climatopolis: How Our Cities Will Thrive in the Hotter World (Basic Books).

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You might think that a $200,000 economic consulting study would be a valuable input in the decision process but I don't know of any consulting team with blue chip credentials who has been brought in to conduct this analysis.  In my "rational" world of public policy, the benefits and costs of each option are explored and quantified and the "known unknowns" are identified BEFORE an irreversible multi-billion dollar investment is made.  This is especially true in the case of rail that has a long history of not delivering the benefits its advocates promised before the project was implemented.   For folks looking for objective evidence that substantiate these points; please read this Don Pickrell paper  and my 2005 Brookings Institution paper with Nate Baum-Snow.

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