RALEIGH – Repeat after me: Federal money is no gift.
Once again: Federal money is no gift.
Virtually every dollar arriving from “Washington” to state and local governments in North Carolina has either been collected in taxes from North Carolinians or borrowed with principal and interest to be paid by taxes from North Carolinians.
It is not “Washingon’s money.” It is your money – or your debt obligation. So if you hear about a proposed state or local project to be funded with federal dollars, ask yourself if you would be willing to give up some good or service you benefit from today in order to fund.
Consider the example of the nearly half a billion dollars the Obama administration is dangling in front of North Carolina for slight improvements to existing passenger rail service from Charlotte through the Piedmont to Raleigh.
Even the supporters of the idea admit that it would shave only a few minutes off the average travel time between the two cities. Would North Carolina taxpayers really want their government to spend $461 million for such a paltry payoff, while failing to address higher priorities? Not bloody likely.
But advocates argue that the federally funded rail improvements would have benefits for other users of the lines, including the freight industry. Furthermore, they argue that if North Carolina declined to accept the federal rail funds – as Florida, Wisconsin, and other states have already done – all that free federal money will just go somewhere else. And they claim that the rail project will create thousands of jobs.
Let’s take each of these arguments in turn.
First, the existing owners and users of the tracks, the freight railroads, do not see Obama’s rail plans as helpful. They see additional passenger trains as an impediment to the speedy delivery of freight, and don’t like the potential of being held legally and financially responsible for future delays in passenger service.
In North Carolina, as in other states that are moving forward with the grants, government officials have essentially forced the railroads to the table with not-so-subtle threats, and the companies have responded by trying to get the best possible agreement with the least possible disruption of their freight business, which is by far the most valuable use of the existing infrastructure.
Ken Orski, a longtime transportation consultant, explained their predicament in a recent newsletter:
Shared-track operation has raised many questions in the minds of the intended host freight railroad companies. Railroad executives are concerned about safety and operational difficulties of running higher speed passenger trains on a common track with slower freight trains and they are determined to protect track capacity for future expansion of freight operations. Their first obligation, they assert, is to protect the interests of their customers and stockholders. This has led to protracted negotiations with state rail authorities in which the private railroads are fighting Administration demands for financial penalties in case passenger train operations fail to achieve pre-determined on-time performance standards. In some cases, negotiations have hit an impasse causing the Administration’s implementation timetable to fall behind. In other cases, freight railroad companies have reluctantly given in, not wishing to alienate the White House or fearing its retaliation.
Sound familiar?
The second argument is also familiar: that if North Carolina doesn’t do it, take the federal “gift,” some other state will. That may well be true – but that doesn’t make it worth North Carolina’s while to knuckle under to Washington. In addition to the fact that state government would likely be on the hook for cost overruns and operating subsidies in the future, thus turning a “free” good into a costly mess, the more important consideration is that the American taxpayer can no longer afford to fund this pork-barrel game. North Carolina should no longer play it.
With the federal government trillions of dollars in debt, not just for past spending but for the future unfunded liabilities of Medicare and Social Security, the Obama administration’s rail fantasies represent an intolerable waste of scarce resources. All fiscally responsible governors and state legislatures across the country should tell the president that. I guess we’ll find out how fiscally responsible North Carolina’s governor and legislatures are.
Finally, and most foolishly, passenger-rail advocates have resorted to false claims of job creation. Forget faux patriotism. Job-creation claims have now become the last refuge of the scoundrel. To say that spending $461 million on rail improvements would create 4,800 jobs is not to say that it would create a net of 4,800 jobs. You have to compare the jobs associated with what you see – the new tracks and bridges – with the jobs lost from what you don’t see – the goods or services that would have been purchased with the money had it not been diverted to slightly-higher-speed rail. The real effect on employment is likely to be negative, given the job-killing effects of excessive federal borrowing.
By their logic, North Carolina could create tens of thousands of jobs simply by raising the gas tax and using the money to hire people to tear up existing roadways and then rebuild them. Or to hire people to dig ditches along the roadways, fill them in, and then dig other ditches.
What scares me is that some readers might not be laughing at the liberals right now but thinking, “Hey, that’s not a half-bad idea.”
Hood is president of the John Locke Foundation.