We should try to make good trains
Quality service provision, not make-work jobs
Matthew Yglesias. Jun 24.
The tragedy of trains in America is that instead of treating trains as technology that does something useful, they tend to be treated on the right as a culture war totem to be denigrated and on the left as a job-sink that’s supposed to generate make-work employment.
In the highway sector, by contrast, a relatively pragmatic spirit prevails.
Republicans are generally skeptical of spending money, but they acknowledge that it’s good to have roads and roads are useful, and they are normally willing to open the wallet here. And while Democrats always have their concerns about jobs and unions and such, they also recognize that if you do things to make cars drastically more expensive, it will make people’s lives worse and they’ll get mad.
But most people do not ride trains, and therefore nobody seems to particularly mind if the policies they adopt make trains bad. One major culprit here, discussed in a recent Niskanen Center policy brief by Alon Levy, is Buy America rules which hurt train quality in an effort to turn rolling stock manufacturing into a job-creation engine. And House Democrats unfortunately have a bunch of new ideas that would impose all sorts of inefficiency on freight rail again for the sake of jobs.
This is bad stuff. I am glad the Biden administration and the Powell Fed are pushing so hard for full employment. But one reason to push is when you have good macroeconomic policy, you can also insist on good microeconomic policy. You want a fully stimulated economy, and then you want to do things efficiently. We should get the best trains we can, not the most overstaffed ones.
The weirdest strategic industry
One way of thinking about the world is that you should just have free markets, open trade, and not really worry too much about anything — let the chips fall where they may.
I think experience shows us that’s a bit naive, and successful countries try to do a bit of “industrial policy” where they back national champions and try to have certain leading sectors. A good example of this is the airline industry where, over the years, the American government has done various things to ensure that the United States remains a country where big passenger jets are manufactured. Like any policy approach, this has some costs, but it also has real benefits — we really do have a major airplane industry, and we export those planes to others, and it’s something we excel at.
In theory, we could try to use federal procurement policy to turn the United States into a world leader in manufacturing passenger trains or equipment that’s related to passenger trains.
But part of the point of an industrial policy is that you need to pick and choose. And Americans need to take a deep breath and ponder the passenger train industry with a modicum of realism. The United States has one-third the population density of France and one-sixth the density of Germany. The U.K., Netherlands, Belgium, Japan, China, Korea, and Taiwan are all denser than Germany. The whole point of a train is that it has extremely high passenger capacity, which makes it an extremely potent solution to certain problems of urban geometry. But the United States is much less impacted by these problems than Western Europe or developed Asia. It would not make much sense us for to be world leaders in developing technical solutions to these problems.
Then conservatives go off the rails (so to speak) and denounce the whole thing as un-American and irrelevant. But it’s not!
Most Americans don’t live in the northeast corridor, but a lot of people do. Intercity transportation between D.C. and Boston is a very legitimate use case for rail. Over 6% of the country lives in the New York City Combined Statistical Area. America needs mass transit. Not in the sense that most Americans need mass transit, but in the sense that in a country of 330 million, something can be relevant to only 20% of people and still be a big deal. It’s just that this is not an area where we should be trying to lead — we should buy off-the-shelf solutions from around the world and use them.
The high cost of Buy America
The idea of Buy America is that federally funded transit projects (which are basically all of them) should use U.S.-built trains.
And the biggest problem with this is that the market for U.S.-built trains is just not that large. Companies that build trains invest in production facilities in Europe and Japan, first and foremost because that’s where a lot of customers are. It’s a deep, competitive market with lots of players and an incentive to stay on the frontier. But bringing innovations to the American market would cost a lot of money — you’d need to retool the factories, etc. — for minimal benefit since there aren’t that many orders.
While the United States remains a peripheral player in transit, innovations developed elsewhere take a long time to reach here. Buying the same modular products that work elsewhere is difficult because the vendors have to effectively reproduce the manufacturing capacity in the United States, whose market is small relative to the effort this requires. In particular, American subway car technology has largely stood still since the 1980s and early 1990s. For example, recent European subway trains have what are known in industry parlance as open gangways, which permit passengers to walk through from one end of the train to another. American trains do not have open gangways and are only beginning to experiment with the technology. In fact, in San Francisco, Bay Area Rapid Transit’s Fleet of the Future is similar to a modular product running in London, Singapore, Stockholm, and Toronto, but without open gangways.
In exchange for this inferior technology, we also pay a higher price. Excluding double-decker trains and high-speed trains, a normal European rail car costs $100,000 per meter of train. In America, things cost more:
Indeed, recent American rolling stock costs have been escalating. New York’s next train model, the R211, will finally replace the R44s at a cost of $3.7 billion, or about $130,000 per linear meter. Bilevel cars for Caltrain and New Jersey Transit cost about 35 percent and 60 percent more than their European counterparts respectively, the New Jersey Transit order also burdened by compliance with obsolete regulations. A Los Angeles light rail vehicle order from the last decade went up to $3.8 million per car or $140,000 per meter of train length (the average cost in Europe is under $100,000 per meter), while a San Francisco one went up to $170,000 / meter. In Boston, an order with little premium, built at a new factory in Springfield, Massachusetts, was given to Chinese manufacturer CRRC. But European and Japanese vendors had bid $135,000/meter, leading to worries about Chinese dumping and a congressional investigation.
Cost is cost, and it’s not the end of the world.
But the fact that we’re paying a price premium for technologically inferior equipment is the tell here. The idea of industrial policy is that you are paying a short-term cost in order to create a world-leading industry that can compete in global markets. But the United States is not actually trying to have world-leading railcars — we are much too small a market. We’re just making agencies overpay for inferior products.
The case for it is that you get jobs. Steven Greenhouse, in a 2018 American Prospect piece hailing transit protectionism, cited this move in Los Angeles as a success story for creating good union jobs:
L.A. Metro awarded the contract to Kinkisharyo, and Janis was furious. L.A. Metro chose Kinkisharyo because its bid was 5 percent lower than Siemens's and because it had an excellent reputation for quality and on-time delivery. Its Osaka factory manufactures Japan's high-speed trains.
Janis hadn't realized, however, that Kinkisharyo, after talking with L.A. Metro officials, had improved its final offer, saying it would build a 250-employee factory in Los Angeles County.
These 250 positions paying $20.64 per hour cost $1 million each in terms of excess costs. And it’s not like there’s no other way for local governments in LA to spend money on employing people. Hire some guys to keep the sidewalks cleaner. Open up some public child care facilities. Install solar panels. Do anything.
The point is that while there’s a case for industrial policy, this is really just wasteful featherbedding. And that’s what happens when you think of trains as jobs programs rather than as transportation technology. And unfortunately, things could get worse.
Featherbedding freight rail
The main thing people are currently talking about in federal transportation policy is the bipartisan talks on infrastructure between the White House and moderate Senate Republicans.
But there’s also the original, bigger Biden proposal. Progressives are urging the White House to pull the plug on the bipartisan talks and try to jam the moderate Democratic senators into backing a reconciliation bill along the lines of the bigger Jobs Plan. But then there’s a second bipartisan initiative in the Senate — a surface transportation reauthorization bill that Senators Tom Carper and Shelley Moore Capito have written. And then last but by no means least, there’s a second partisan bill, a surface transportation reauthorization bill that Rep. Pete DeFazio wrote in the House.
This last bill has gotten almost no mainstream attention. But alongside many admirable provisions, it has some really dunderheaded efforts to undermine the cost-effectiveness of American freight rail.
Probably the highlight here has to do with a two-person crew mandate. This is an extremely tedious battle that’s been passing back and forth for years, originating in the ongoing rollout of Positive Train Control technology on American railroads. Freight operators want to take advantage of this technology to, in some cases, cut back train staffing to just a single person. Labor interests don’t want to lose the jobs, so after quite a bit of tussling, they got the Federal Railroad Administration to propose a regulation requiring two-person crews. It took a lot of tussling because the FRA never had any real evidence this would deliver safety benefits. Then Trump won the election, and after a couple of years, his administration rescinded the rule. But while Trump’s FRA was working on rescinding the rule, this became a legislative effort to impose the mandate by statute. If Democrats got their way on this, freight shipping would be a bit more expensive than it should be and more cargo would go in trucks and it would be worse for the environment.
But the real doozy has to do with freight trains coming from Mexico.
Specifically, there’s a rail bridge from Nueva Laredo, Mexico into Laredo, Texas that a lot of rail passes over. The way the geography works is the trains cross over near downtown Laredo. So when the trains stop at the international border to switch crews and test the air brakes, it causes delays that block the at-grade crossings. The city and Union Pacific pushed for a new system where the brake test could be done by the Mexican crew in Mexico, who would then drive the train over the bridge, through Laredo, and then over to the railyard north of town.
House Democrats, over the objections of the city and the local House member — Blue Dog Henry Cuellar — want to prohibit this, basically to protect a tiny number of jobs that have the specialist task of shuttling trains from the bridge to the rail yard.
It’s very stupid.
Full employment means bad policy is costly
The Biden administration has placed a big bet on aggressive stimulus and full employment. It’s the kind of bet I’ve been advocating for over a decade, and I think it’s going to have a lot of benefits.
And I’ve always hoped that one of the benefits will be to clarify for the public and for policymakers exactly how costly it is to do things purely for the sake of “creating jobs.” When you have a long spell of mass unemployment, then job creation can be a very tempting siren. Part of the genius of a full-employment economy is that when all kinds of employers are desperate for a chance at hiring an experienced, reliable worker, you don’t need to worry so much about that kind of thing. Anyone who loses a job through no fault of his own will be able to get another job.
What’s costly in a full-employment economy is retaining labor where it’s not needed. Right now, America needs people staffing sawmills, making steel, driving trucks, and doing other things for which we have no good substitutes. But we do have good substitutes for redundant staffing on freight trains. We could buy our light rail vehicles from Japan or Germany or France where they are really good at building that stuff. We could focus on what we really need workers to be doing. And we could let our trains just try to be really good trains that deliver valuable services in cost-effective ways.
