Thomas White Global Investing
United States
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March 26, 2009
A Postcard from the Americas
United States: Trains to Speed up with Obama’s Stimulus Plan

A train pulls into New York's New Rochelle train station

The California high-speed rail project plans to make use of $2 billion from the amount allotted by Obama’s package by 2012, but it is only a fraction of the $45 billion that the project requires for completion.

For decades, France has run on the super-fast TGV, while Japan has zoomed by at top speeds of 186 mph on the ‘shinkansen’ or bullet train since 1964. But the U.S. chugs along at an average speed of about 75 mph with Amtrak, the sole national passenger rail service begun in 1971. Now U.S. President Barack Obama’s much talked about $789 billion stimulus package has dedicated nearly $100 billion to infrastructure, including an $8 billion fund for high-speed train projects.

This seemingly princely sum surpasses anything before that has been allotted for infrastructure, much less trains, in the U.S. Part of Obama’s vision of ‘rebuilding America’, the plan is intended to revitalize American rail systems and provide new connectivity.

High-speed trains have been a common feature in Asia and Europe but they have yet to gain traction in the U.S. California will probably be the first state to have a high-speed train network if all goes well. In November 2008, Californian voters approved $10 billion to begin work on an 800-mile high-speed train, which is more than twice as fast as most of its existing trains.

But high-speed trains apart, the existing railroad network in this vast country has come under serious disrepair. So much so that the American Society of Civil Engineers (ASCE) estimates the nation’s infrastructure requires nearly $2.2 trillion to become respectable, and Obama’s budget will provide for just 5% of the ASCE’s estimate. In the ASCE’s 2009 Report Card on the state of the country’s infrastructure, the U.S. rail system received a grade of ‘C-.’ Since passenger and freight trains share the same rail tracks, rail traffic is considerably slowed down when one train is required to pull on to sidings to allow another to pass.

Rail projects can be expensive. For instance, upgrading the 200 miles of track between New York and Boston for Amtrak’s Acela train, which is the fastest in the country, cost $1.6 billion around ten years ago. For now, the ailing Amtrak will receive an exclusive $1.3 billion in funds over the next two years. If spent prudently, the balance could be used to improve existing tracks, as well as crossings and signal systems, which will help trains, run faster than current speeds.

Obama’s plan has staunch supporters who believe that introducing high-speed trains will reduce traffic congestion on highways and at airports as well as provide a boost to the economy. But skeptics equally believe that the plan lacks economic sense. There are 11 regions across the country that the government has designated as high-speed rail corridors and when the $8 billion is divided among them, there might not be enough to cover long awaited improvements to passenger lines. According to transportation experts, the plan’s paltry offering may not meet the cost of even one bullet train like the one planned in California, let alone multiple rail projects. Many argue it would be more sensible to concentrate on getting the nation’s long neglected existing rail system into better shape, which will lay the foundation for high-speed projects in the future.

Obama’s plan may not be as life-transforming as the New Deal in the 1930s, when hundreds of airports were built along with miles of roads and thousands of bridges. And opponents may dispute that the President is on the right track when it comes to infrastructure spending, but everybody will agree, his intention is to get everyone on board.


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