California’s efforts to build a high-speed rail system is on track (pun intended) to become the biggest public sector “oops” project in American history.
“Oops” is a small word (technically an interjection) that is sometimes uttered when someone makes a mistake. You drop your wife’s favorite serving dish? Oops. (By the way, oops is a word you never want to hear from the guy at the controls of a nuclear power plant).
OPM stands for “other peoples’ money.” It is an abbreviation used by fiscal conservatives to describe why public spending gets out of control. It is because elected officials and bureaucrats aren’t spending their own money (with which they would be far more careful). Rather, they are spending OPM so there is little motivation to be responsible with it.
Throughout history, governments have planned and begun construction on large scale public projects only to later abandon them when it becomes clear that they are not viable. The problem, of course, with abandoning a project already begun — especially in the public sector — is that it already comes with a built-in constituency dependent on its continued existence. This leads to the common phenomenon known as “throwing good money after bad.”
To be clear, the same phenomenon can happen in the private sector as well, and the same sort of “bureaucratic inertia” might sustain continued capitalization of a project even after doubts about its viability have been confirmed. But the private sector has what the public sector does not: Accountability and a harsh influence known as “the bottom line.” Sooner or later, a high-level executive accountable to stockholders is going to pull the plug on a project that has become an albatross incapable of generating a viable return on investment.
Even though it takes a lot longer to pull the plug on a public project, it still happens when it becomes painfully obvious to everyone except those too emotionally invested to be rational that the project just isn’t going to work. In the early 20th century, the city of Cincinnati built an elaborate system of tunnels for a subway system. Later described as “one of the city’s biggest embarrassments” and “one of Cincinnati’s biggest failures,” the project was abandoned when it became clear that it was not economically viable.
More recently, fiscal hawk Gov. Chris Christie of New Jersey pulled the plug on a super-expensive tunnel project under the Hudson River notwithstanding the fact that billions had already been spent on construction. He did so for a very simple reason: It was too expensive and New Jersey couldn’t afford it.
The cheerleaders of California’s high-speed rail project long ago ceased to be rational. Study after study now reveals that both ridership and fare revenue projections are so far off what Californians were told when they barely passed the bond measure that the project, if completed, will be a massive drain on the state’s general fund in the form of subsidies just to keep it running. Because massive, ongoing subsidies are a certainty, California would be better off burning $40 billion dollars in a huge pit rather than fund this monstrosity.
The decision to pull the plug on California’s rail project won’t be easy. The Authority spends a significant percentage of its funding on public relations and lobbying. Between the Board of the Authority, its staff, consultants, lobbyists, the bond industry, contractors and other assorted interests with their noses in the trough, the inertia for continuing this project is substantial.
It will take someone in a major leadership position to bring a dose of reality to the fate of California’s rail project — perhaps someone who characterizes himself as frugal and who is also facing a massive budget deficit.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.
(Lloyd Garver is on vacation.)