How Two Rail Projects Show Bipartisan Infrastructure Failure

David Ditch

With the public generally supportive of the government’s role in funding transportation infrastructure, elected officials are eager to be seen announcing an upcoming project or attending a ribbon-cutting ceremony upon its completion. This can lead officials to ignore concerns about a project’s cost, especially when some of that cost is put on Uncle Sam’s credit card.

Struggling rail projects on opposite sides of the country show that problems with unnecessary federal activity and the misuse of other people’s money are endemic to both political parties.

In California, a high-speed rail project has been in trouble for years. Originally approved in a 2008 referendum, the initiative was expected to cost $33 billion and begin service in 2020. However, presently, the initial operations for California’s high-speed rail are not expected until at least 2033, and the full system could cost more than $100 billion.

Recently, California’s Office of Inspector General for High-Speed Rail issued a report stating that the High-Speed Rail Authority could exhaust its current funding by December 2027 without more funds or borrowing. The Trump administration pulled federal support, and state officials had assumed some level of federal subsidy in the project’s budget plans.

Sacramento’s decision to expect ongoing support from Washington was unwise. While the federal government provides a dizzying array of grants to state and local governments, the rail project was planned to run entirely within California, meaning it lacked a federal policy nexus. It has also become a political football, with the Federal Railroad Administration shifting its stance each time the White House changed hands since 2016. Making a long-term project reliant on multiple levels of government support invites policy uncertainty and political risk.

More fundamentally, if an infrastructure project benefits only a particular area, its budget should not rely on contributions from people outside that area. That represents an unfair cross-subsidy and invites wasteful spending, as the benefits are concentrated while the costs are diffused. 

Although the California rail project has received most of its support from Democrats, Republicans also use federal dollars to inappropriately pay for state and local infrastructure. 

In Florida, the privately owned Brightline rail line received a fresh downgrade from the Fitch credit rating agency due to the growing risk of default on debt obligations. Brightline has not generated enough revenue from riders to cover the debt it took on to build the system, and Fitch’s analysis states that Brightline will likely default on its debt by mid-2027. 

Despite this, the Trump administration has approved a $57 million grant to fund a new Brightline station in Brevard County. There is a strong possibility that Brightline could go bankrupt before the station’s expected completion in 2028. 

Given that Brightline’s current system operates only in Florida, it is inappropriate for the federal government to be involved in the first place, let alone when there are glaring warning signs about the company’s viability. Further, Brightline is a private for-profit company, meaning the grant is corporate welfare.

Both the federal funding for the California project, since eliminated, and the new grant to Brightline flow from funds appropriated by Congress. While there ought to be more appropriate uses of rail funds than propping up the struggling Brightline system, Congress bears significant responsibility for throwing billions of dollars at passenger rail year after year despite the lack of long-term ridership progress. 

With the federal government having accumulated $40 trillion in gross debt, Congress should seek opportunities to cut spending in areas outside of core federal responsibilities. For infrastructure, that would mean:

• Reforming broad eligibility standards that subsidize infrastructure generally with little regard for a genuine federal policy nexus. 
• Imposing or increasing cost-sharing requirements for state and local governments, which would also reduce their incentive to push boondoggle projects. 
• Barring the subsidization of private infrastructure such as rail lines and stadiums, which involves the public taking on financial risks while the business is positioned to capture any profit. This principle applies to all levels of government.

The California and Florida rail projects show that both parties are vulnerable to the misuse of tax dollars. So long as Congress keeps providing large pools of public funds with insufficient guardrails, we should expect the boondoggles to continue.

Source: https://www.cato.org/blog/how-two-rail-projects-show-bipartisan-infrastructure-failure