Thursday, November 11, 2010

Walker's RR cancellation threatens 15,000 jobs and $100 million

Canceling high-speed rail is economic treason

by Robert Kraig

Governor-elect Scott Walker’s ill-advised campaign posture to cancel the high-speed rail project that is already under construction would cost Wisconsin up to 15,000 family supporting jobs and up to $100 million at a time when both jobs and revenue are desperately needed.

Walker got a lot of campaign mileage out of this issue as a supposed example of wasteful government spending, but now that he actually will have to govern, cancelling the project at this stage makes absolutely no sense, even if you believe his arguments against the project.

Walker’s campaign posturing now threatens thousands of construction and permanent jobs, and will cost Wisconsin much more money to cancel than continue. Given the desperate need for jobs in Wisconsin, and the severe fiscal crisis the state faces, cancelling the high speed rail line amounts to economic treason.

Not surprisingly, other governors are already beginning to line up to request the job-creating money for their own states. Governor-elect Andrew Cuomo in New York has already put out a statement asking for the money to create good high-speed rail jobs for New Yorkers.

First, let’s review the jobs that will not be created if Walker cancels the high-speed rail project. If it is cancelled, it will cost Wisconsin an estimated 4,732 construction jobs. In addition, research on the economic impact of high-speed rail concludes that when the full project is completed, including the link from Madison to Minneapolis, that 9,570 permanent jobs will be created.

Governor-elect Walker has defended cancellation of the high-speed rail project on fiscal grounds, but returning the $810 million in federal funding that is paying for construction of the project would actually cost the state a great deal of money. As the money can only be used for high-speed rail, and the project is already underway, Wisconsin would have to pay back the federal government and contractors for work already done.

Policymakers estimate it will cost Wisconsin between $57 million and $100 million to buy out of the project. The maintenance costs Walker railed against in the campaign are substantially lower than this! Walker projected $7.5 million per year during the campaign, but most analysts think it will be much less. If the federal government pays the same percentage of maintenance costs it now pays for the Hiawatha line between Milwaukee and Chicago, the cost to Wisconsin will only by $750,000 per year, which is a tiny fraction of the state transportation budget.

In addition, the City of Milwaukee spent $10 million to buy the blighted Milwaukee site where the high speed trains are being built by Spanish manufacturer Talgo, and has invested an additional $6 million to upgrade the facility. Talgo has made it clear that they are unlikely to stay in Milwaukee if the Wisconsin high speed train project is cancelled. As a result, Milwaukee would lose the anchor manufacturing facility needed to spur re-development of the blighted Tower Automotive/A.O. Smith site on the near north side.

Given the nearly 15,000 construction and permanent jobs that would be created by the federal investment in Wisconsin in high-speed rail, and the high fiscal cost of cancellation, it would be incredibly short-sighted for Governor elect-Walker to follow through on his campaign posture just to provide more red meat for right-wing talk radio audiences. It amounts to economic treason at a time when everyone, regardless of political and ideological perspective, should be working together to bring desperately needed family supporting jobs back to Wisconsin.


Anonymous said...

I voted for Walker and believe he will do a judicous job for Wisconsin. I am inclined to agree, however, with Dr. Rosen that we should not turn down an opportunity. It would be nice to know the breakdown of the numbers you quote. How many of the 15,000 jobs will actually be permanent? What is the projection of growth along the proposed line for business, housing, schools, etc.? Will this create bigger tax burdens on those communities? The traffic going east/west from Milwaukee is horrendous and either way I don't see how the current situation can remain sustainable.

Anonymous said...

It "only" cost Wisconsin $750,000 every year to run a rail line people want, the route from Milwaukee to Chicago. What will happen when we have a rail line no one will take?
Look at the math. The cost of "creating" each of the jobs is outrageous. Give the high speed rail to someone who needs it, like the east coast. I do not know of one person who would waste time driving into downtown Milwaukee to pay for parking to wait for a train to take them to Madison, on a train that will not be able to run at high speed, to pay money to get around Madison and then wait again to get back to Milwaukee. The drive is a much faster way get there and would be even cheaper to hire a driver and a car. You would still be sitting in a train station instead half way there. The Badger bus is a well run operation that brings students or business people to the heart of Madison and is very efficient. Wisconsin needs money for roads and bridges not for some boondoggle that will cost us money forever. If the money needs to be used for "rail" which sounds like someone is being paid off - then fix the freight lines. This is the best use of rail money in the Midwest. If nothing else - look at the constant state and federal subsidies for Amtrack. Commuter rail in highly congested cities with no parking such as New York and Chicago makes sense. Milwaukee to Madison needs roads.

the other side of the coin said...

If we hire people to dig a hole and hire more people to fill it back in, we created jobs. We can even put lots of free money in that hole. We can spend millions of dollars and hire thousands of people. That's a good thing, right?

Anonymous said...

Why is everyone ignoring the economics behind this, it is not just the "maintenance" costs, but the future impact of cancelling the project AFTER it has already begun. If you were a business and looking at WI to locate, you would think twice because even if money was promised to you, the crazy Governor may take it a way at a moment's notice. You cannot promise money to businesses, start to give it, then take it back. This creates economic uncertainty. The cost of cancelling the project is just too high and it is not just economic treason, but economic death.

Anonymous said...

Stop the propaganda of bogus job #'s! Now way in the world the train project would ever create 15,000 jobs - ever. Once the install would be done there wouldn't even be 100's of permanent jobs. Elections have consequences and the reckless (as you would call it for anything on the Conservative side "draconian") spending habits of the liberals/socialists is over - thank god! Socialism has been soundly defeated in WI and the nation. Government does not create jobs, the private sector creates jobs.

Anonymous said...

If the train ides is so bad, a boondoggle as you call it- then why are other states stepping all over us to get the money?

the other side of the coin said...

"If the train ides is so bad, a boondoggle as you call it- then why are other states stepping all over us to get the money?"

Same reason you bend over to pick up a dollar. It's free. We're addicted to "free stuff". And as long as politicians keep giving out "free stuff", they have an unshakable voter base. More "free stuff" = more votes. Politicians learned the concept, so did drug pushers.

Michael Rosen said...

It is about time we buried the foolish and ideological claim that government does not create jobs.

Tell that to the workers at Oshkosh Truck who are making trucks for the United States government’s army or the 1000 Marinette shipyard workers who will be hired if Marinette Marine lands a new United States Navy contract to build warships. Or even the Bucyrus Erie workers making mining equipment for the Chinese government.

Even many of the small firms that you apparently idealize are making parts for firms with government contracts like those named above. In other words, government purchases, almost 20% of the GDP, are creating those jobs!