Spoiled by success - Econlib

Human beings possess an undeniable restlessness. Even at the height of achievement, we find ourselves unable to simply bask in our success. Instead, we are perpetually driven to stir the pot.

Last October, The Economist graced its cover with an article titled “The Envy of the World.” The United States was outpacing nearly every other developed nation, often by striking margins. Fast forward to 2025, and we seem intent on dismantling the very international trading framework that has underpinned our prosperity.

Take California as another case in point. This state is home to some of the wealthiest corporations globally, and its relatively high income tax rates generate a torrent of revenue from centers like Silicon Valley. In less affluent states, tax dollars are meticulously allocated to ensure a foundational level of public services. However, California, flush with funds, has chosen to squander vast resources on a high-speed rail project that appears to be headed for disaster.

The vision set forth by voters in 2008 aimed to establish a high-speed rail line connecting Los Angeles and San Francisco by 2020. Yet, unsurprisingly, the cost estimates have spiraled, while the project lags far behind schedule:

The latest estimates place the project’s cost at over $100 billion—more than triple the initial forecast. Funding has primarily come from state sources, including a voter-approved bond and revenue from the state’s cap-and-trade program, with less than 25% sourced from the federal government.

To date, approximately $13 billion has already been spent.

Yet, remarkably, not a single mile of track has been laid. But the plot thickens. The state has now abandoned its original goal of constructing a high-speed rail line between Los Angeles and San Francisco. Instead, the new plan envisions a line stretching from Palmdale to Gilroy:

Completing the line in the Valley is merely the initial phase. The next step involves extending the rail north toward the San Francisco Bay Area and south to Los Angeles. Choudri aims to reach Gilroy, located around 70 miles (113 kilometers) southeast of San Francisco, within the next two decades. Under current public transit options, travelers would require at least one additional train transfer to reach the city.

To the south, the plan includes a connection to Palmdale, 37 miles (60 kilometers) northeast of Los Angeles, which currently requires over an hour of driving or two hours by an existing train line to reach Los Angeles.

In theory, travelers could still take a series of trains from LA to San Francisco, but the journey would likely stretch to about 7 hours instead of the promised 3. In the unlikely scenario that this project is completed by 2045, it’s doubtful many will opt for the train (or rather, the collection of trains, complete with transfers). After all, I can fly round trip from Orange County to Oakland for $80 and in just one hour each way; why would I choose a 7-hour train trek at a significantly higher cost?

So, how did we find ourselves in this predicament? In a rational world, authorities would have developed a feasible plan before breaking ground. At some point, they would have realized the project’s impracticality and scrapped the idea. However, the real objective seems to have been not the construction of a high-speed rail line, but rather the distribution of contracts for such lines. That endeavor has thrived. For contractors, a route from Palmdale to Gilroy is just as lucrative as one from LA to San Francisco. Consequently, they opted to begin construction immediately to create “facts on the ground” that would reduce the likelihood of project cancellation. To be clear, on a cost-benefit analysis, it still makes sense to abandon this project, even after spending $13 billion, as the actual costs will likely far exceed the current $100 billion estimate.