Saturday, July 31, 2010
Economy: double dip?
WASHINGTON — They're a minority, but a vocal one, and they're hovering like storm clouds over a brittle recovery. They're the Double Dippers — the politicians, economists and analysts who foresee back-to-back recessions. Their warnings could become self-fulfilling prophecies if they frighten enough people into holding tightly onto their wallets. With consumer spending accounting for two-thirds of economic activity, anything that further rattles consumers can undercut recovery hopes. Recent data has shown that, after growing moderately for most of the past year, the U.S. economy appears to be slowing. This was underscored by Friday's government report that U.S. economic growth slowed to 2.4 percent from April to May, down from a revised 3.7 percent in the previous quarter. Such statistics are providing more ammunition to the double dippers. Recent data has shown that, after growing moderately for most of the past year, the economy appears to be slowing in some parts of the country and in key sectors such as consumer spending. That's providing more ammunition to the double dippers. Long road ahead Most mainstream economists agree the recovery road will be long and bumpy, but probably without leading into double-dip territory. But there are plenty of other voices warning of grimmer times ahead. Nobel Prize-winning economist Paul Krugman of Princeton University argues in his New York Times columns that the U.S. already may have fallen into the early stages of a long, deep depression such as Japan's "lost decade." He claims that President Barack Obama and Congress have failed to provide enough stimulus spending.
How Much Further Do Home Prices Need to Fall?
By Morgan Housel | More Articles
July 30, 2010 | Comments (6)
I'll start by sparing you the details. Nationwide home prices need to fall another 10%-15%. If you want to know how I came to that conclusion, keep reading.
KISS
As much as possible, I try to follow Marty Whitman's philosophy that "rarely do more than three or four variables really count. Everything else is noise."
With housing, three variables tell you most of what you need to know: price-to-income, price-to-rent, and months of supply. So let's see what they tell us.
1. Price-to-income (chart)
Sources: Case Shiller Housing Index, Census Bureau.
Home prices have tanked measured against incomes. That's obvious. But two points here should stick out: One, price-to-income levels are still about 5%-8% above average. Two, the ratio is headed back up already. Don't get too comfortable with that. Since the ratio stabilized at an above-average level, the rebound is likely just a temporary blip caused by housing stimulus. "Temporary" is the key word there. You can't permanently exit the largest housing bubble in history at above-average prices. More on that in a second.
2. Price-to-rent
Sources: Case Shiller Housing Index, Census Bureau.
Prices against rents are actually back inline with average levels. That's encouraging. Four years ago, renting was far cheaper than owning. It's a much more equitable trade-off today. Embrace that -- it's what a normal market should look like.
Just don't get too excited. Supply is what's really important here. And it doesn't look good.
3. Months of Supply
Source: Census Bureau.
This chart is the most important. First, notice the recent spike on the far right. Both the spike and the drop to its immediate left are the result of the expiration of the first-time homebuyers credit. There was a massive buying rush before the deadline, which temporarily juiced sales. After the deadline passed, sales plummeted. Same goes for the drop and spike in late 2009, which shows a period when everyone thought the credit was about to expire, only to learn it would be extended. Congress has become the undisputed champion of creating obnoxious volatility.
The red line in this chart denotes six months, which is usually seen as a neutral level of supply. As a rough rule, prices tend to fall when there's more than six months supply, and vice versa. The temporary trip below six months supply earlier this year might explain why prices began rising.
But with the expiration of the housing credit, we're now solidly back above six months. If you want a good reason to expect housing prices to fall in the coming quarters, there it is. It's also a bad omen for homebuilders like KB Homes (NYSE: KBH) and Pulte Group (NYSE: PHM) -- there's simply too much supply out there to justify building more homes.
And the problem is actually deeper than it looks. This chart only shows actual on-market supply. What it doesn't show is so-called "shadow inventory," which are foreclosed homes that banks own but haven't put up for sale, or homes that are still occupied by homeowners who are about to get foreclosed on.
The size of the shadow inventory can only be estimated -- it's called "shadow" for a reason -- but credible estimates range between 2 million and 8 million units. Yes, that's a huge gap, which is testament to how uncertain things are. What's important is that inventory is still way too high. How high? No one knows. But it's high. And as long as that's the case, the housing bears have the ball.
To get inventory numbers back to healthy levels, homes need to be bought, of course. That happens when prices become so cheap that renters start buying, and to a larger extent when new households are formed.
Unfortunately, household formation is abysmal right now. Over the last decade, an average of 1.3 million households were created every year. In 2008, that dropped to 772,000. In 2009, it was a mere 398,000. What caused the drop? For one, the young and unemployed, especially new college grads, are living with their parents. Others are doubling-up with roommates. At a conference in Vancouver last week, analyst and blogger Barry Ritholtz noted that if you focus on household formation and new home construction at current rates, it could take as much as 12 years to absorb current inventory. Warren Buffett has quipped several times that best way to solve this is by encouraging teenagers to cohabitate, a program "not likely to suffer from a lack of volunteers."
Tying it all together
When I look at these three metrics, I see price-to-income levels that need to fall 5%-8%, price-to-rent levels that look pretty good, and a supply situation that's somewhere between bad and horrific.
Excess supply will cause prices to fall. How far? My best guess is 10%-15%. That would bring prices meaningfully below average against both incomes and rents, which would create a level where homeownership becomes affordable for new households and a better deal than renting. That's when you'll see real demand stabilizing the big picture.
And falling below average is, I think, a realistic expectation. Prices have to fall below average before buyers' animal spirits come back to life. That can last a while. Investor Vitaliy Katsenelson recently gave a great presentation where he notes that valuations "usually stay below average for eight years in a sideways cycle." He was referring to the stock market, but the theory should at least roughly extend to housing. Bubble wounds take time to heal.
Could I be wrong? Of course. Billionaire investor John Paulson, who called the housing crash, thinks home prices will rise 8%-12% in 2011, which explains why he's invested billions in Bank of America (NYSE: BAC), Citigroup (NYSE: C), and Wells Fargo (NYSE: WFC). But I try to keep it simple. And my simple metrics make me think housing isn't out of the woods just yet.
Comments
On July 30, 2010, at 4:16 PM, Melaschasm wrote: Excellent article with many great points. It is likely that your 10% fall in prices prediction will come true. However, there is a major factor which you did not address.
Commodity prices are already rebounding from their price collapse in 2008. Housing is in some ways like a commodity, and the same forces driving commodity prices higher could also keep housing at above average prices.
There is a previous time in US history where the economy was stagnant, yet commodity prices were rising. I am concerned that we are about to see a few years of such unpleasant economic circumstances.
Report this Comment On July 30, 2010, at 4:29 PM, outoffocus wrote: "Commodity prices are already rebounding from their price collapse in 2008. Housing is in some ways like a commodity, and the same forces driving commodity prices higher could also keep housing at above average prices."
I disagree. Housing demand used to "behave like a commodity" in that the price increases were driven by real organic inflation. In other words, wages went up, which increased affordability, which increased demand, which increased housing prices. The housing bubble threw that entire equation out of wack. Now we are dealing with an economy that has little to no growth, stagnant to falling wages, too much leverage, rising commodity prices, and high unemployment. All of this is stagflationary and will hurt housing in the short run.
Also, as with any bubble, once the bubble pops, the asset in question often over corrects to the DOWNSIDE before returning to equilibrium and rising again (see oil as a recent example) . Thanks to all of the bailouts and stimulus, we never saw that over correction. The problem with that is we will never see a true sustained rise in housing prices until that correction happens. All the government did was delay the inevitable and potentially make it worse.
10-15% drop is a fair prediction for a further drop in housing prices in the near term. But I see a more sustained drop over the next couple years before housing fully recovers. You can thank good ol Uncle Sam for that.
Report this Comment On July 30, 2010, at 6:39 PM, rd80 wrote: I agree that housing prices are still overvalued, but I think one of the three variables for housing should be mortgage rates since that determines the affordability for most buyers.
Report this Comment On July 30, 2010, at 7:43 PM, hcshew wrote: I think price to income ratio is a little simplistic because it ignores the effect of interest rates. The real measure of affordability is PAYMENT to income ratio, which inherently takes into account the predominant interest rate. House prices in the 80s and 90s had to be lower because the predominant interest rates ran 8-10% for fixed rate loans. The same home in an era of 4-5% interest rates can be twice as expensive and still be as affordable.
I would be interested in seeing a chart that compares the trend of payment to income ratio. I suspect that that would show homes today to be cheap!
Report this Comment On July 30, 2010, at 10:59 PM, thedavidfactor wrote: I think the interest rate is more then compensated by the increase in consumer debt over the same time period. Consumer Debt is at the highest levels in recorded history and that negatively impacts the affordability of payments more than interest rates positively impacts affordability.
Report this Comment On July 31, 2010, at 12:56 AM, xetn wrote: The simple answer as to how much further house prices should fall is: until people start buying them without government subsidies and no sub-prime loans.
Just as an aside, the same formula could apply to job creation; letting the wage rate (which is nothing more that a price) adjust until there was job for essentially every job seeker. We should end the minimum wage which destroys jobs for people without adequate education and/or job experience.
July 30, 2010 | Comments (6)
I'll start by sparing you the details. Nationwide home prices need to fall another 10%-15%. If you want to know how I came to that conclusion, keep reading.
KISS
As much as possible, I try to follow Marty Whitman's philosophy that "rarely do more than three or four variables really count. Everything else is noise."
With housing, three variables tell you most of what you need to know: price-to-income, price-to-rent, and months of supply. So let's see what they tell us.
1. Price-to-income (chart)
Sources: Case Shiller Housing Index, Census Bureau.
Home prices have tanked measured against incomes. That's obvious. But two points here should stick out: One, price-to-income levels are still about 5%-8% above average. Two, the ratio is headed back up already. Don't get too comfortable with that. Since the ratio stabilized at an above-average level, the rebound is likely just a temporary blip caused by housing stimulus. "Temporary" is the key word there. You can't permanently exit the largest housing bubble in history at above-average prices. More on that in a second.
2. Price-to-rent
Sources: Case Shiller Housing Index, Census Bureau.
Prices against rents are actually back inline with average levels. That's encouraging. Four years ago, renting was far cheaper than owning. It's a much more equitable trade-off today. Embrace that -- it's what a normal market should look like.
Just don't get too excited. Supply is what's really important here. And it doesn't look good.
3. Months of Supply
Source: Census Bureau.
This chart is the most important. First, notice the recent spike on the far right. Both the spike and the drop to its immediate left are the result of the expiration of the first-time homebuyers credit. There was a massive buying rush before the deadline, which temporarily juiced sales. After the deadline passed, sales plummeted. Same goes for the drop and spike in late 2009, which shows a period when everyone thought the credit was about to expire, only to learn it would be extended. Congress has become the undisputed champion of creating obnoxious volatility.
The red line in this chart denotes six months, which is usually seen as a neutral level of supply. As a rough rule, prices tend to fall when there's more than six months supply, and vice versa. The temporary trip below six months supply earlier this year might explain why prices began rising.
But with the expiration of the housing credit, we're now solidly back above six months. If you want a good reason to expect housing prices to fall in the coming quarters, there it is. It's also a bad omen for homebuilders like KB Homes (NYSE: KBH) and Pulte Group (NYSE: PHM) -- there's simply too much supply out there to justify building more homes.
And the problem is actually deeper than it looks. This chart only shows actual on-market supply. What it doesn't show is so-called "shadow inventory," which are foreclosed homes that banks own but haven't put up for sale, or homes that are still occupied by homeowners who are about to get foreclosed on.
The size of the shadow inventory can only be estimated -- it's called "shadow" for a reason -- but credible estimates range between 2 million and 8 million units. Yes, that's a huge gap, which is testament to how uncertain things are. What's important is that inventory is still way too high. How high? No one knows. But it's high. And as long as that's the case, the housing bears have the ball.
To get inventory numbers back to healthy levels, homes need to be bought, of course. That happens when prices become so cheap that renters start buying, and to a larger extent when new households are formed.
Unfortunately, household formation is abysmal right now. Over the last decade, an average of 1.3 million households were created every year. In 2008, that dropped to 772,000. In 2009, it was a mere 398,000. What caused the drop? For one, the young and unemployed, especially new college grads, are living with their parents. Others are doubling-up with roommates. At a conference in Vancouver last week, analyst and blogger Barry Ritholtz noted that if you focus on household formation and new home construction at current rates, it could take as much as 12 years to absorb current inventory. Warren Buffett has quipped several times that best way to solve this is by encouraging teenagers to cohabitate, a program "not likely to suffer from a lack of volunteers."
Tying it all together
When I look at these three metrics, I see price-to-income levels that need to fall 5%-8%, price-to-rent levels that look pretty good, and a supply situation that's somewhere between bad and horrific.
Excess supply will cause prices to fall. How far? My best guess is 10%-15%. That would bring prices meaningfully below average against both incomes and rents, which would create a level where homeownership becomes affordable for new households and a better deal than renting. That's when you'll see real demand stabilizing the big picture.
And falling below average is, I think, a realistic expectation. Prices have to fall below average before buyers' animal spirits come back to life. That can last a while. Investor Vitaliy Katsenelson recently gave a great presentation where he notes that valuations "usually stay below average for eight years in a sideways cycle." He was referring to the stock market, but the theory should at least roughly extend to housing. Bubble wounds take time to heal.
Could I be wrong? Of course. Billionaire investor John Paulson, who called the housing crash, thinks home prices will rise 8%-12% in 2011, which explains why he's invested billions in Bank of America (NYSE: BAC), Citigroup (NYSE: C), and Wells Fargo (NYSE: WFC). But I try to keep it simple. And my simple metrics make me think housing isn't out of the woods just yet.
Comments
On July 30, 2010, at 4:16 PM, Melaschasm wrote: Excellent article with many great points. It is likely that your 10% fall in prices prediction will come true. However, there is a major factor which you did not address.
Commodity prices are already rebounding from their price collapse in 2008. Housing is in some ways like a commodity, and the same forces driving commodity prices higher could also keep housing at above average prices.
There is a previous time in US history where the economy was stagnant, yet commodity prices were rising. I am concerned that we are about to see a few years of such unpleasant economic circumstances.
Report this Comment On July 30, 2010, at 4:29 PM, outoffocus wrote: "Commodity prices are already rebounding from their price collapse in 2008. Housing is in some ways like a commodity, and the same forces driving commodity prices higher could also keep housing at above average prices."
I disagree. Housing demand used to "behave like a commodity" in that the price increases were driven by real organic inflation. In other words, wages went up, which increased affordability, which increased demand, which increased housing prices. The housing bubble threw that entire equation out of wack. Now we are dealing with an economy that has little to no growth, stagnant to falling wages, too much leverage, rising commodity prices, and high unemployment. All of this is stagflationary and will hurt housing in the short run.
Also, as with any bubble, once the bubble pops, the asset in question often over corrects to the DOWNSIDE before returning to equilibrium and rising again (see oil as a recent example) . Thanks to all of the bailouts and stimulus, we never saw that over correction. The problem with that is we will never see a true sustained rise in housing prices until that correction happens. All the government did was delay the inevitable and potentially make it worse.
10-15% drop is a fair prediction for a further drop in housing prices in the near term. But I see a more sustained drop over the next couple years before housing fully recovers. You can thank good ol Uncle Sam for that.
Report this Comment On July 30, 2010, at 6:39 PM, rd80 wrote: I agree that housing prices are still overvalued, but I think one of the three variables for housing should be mortgage rates since that determines the affordability for most buyers.
Report this Comment On July 30, 2010, at 7:43 PM, hcshew wrote: I think price to income ratio is a little simplistic because it ignores the effect of interest rates. The real measure of affordability is PAYMENT to income ratio, which inherently takes into account the predominant interest rate. House prices in the 80s and 90s had to be lower because the predominant interest rates ran 8-10% for fixed rate loans. The same home in an era of 4-5% interest rates can be twice as expensive and still be as affordable.
I would be interested in seeing a chart that compares the trend of payment to income ratio. I suspect that that would show homes today to be cheap!
Report this Comment On July 30, 2010, at 10:59 PM, thedavidfactor wrote: I think the interest rate is more then compensated by the increase in consumer debt over the same time period. Consumer Debt is at the highest levels in recorded history and that negatively impacts the affordability of payments more than interest rates positively impacts affordability.
Report this Comment On July 31, 2010, at 12:56 AM, xetn wrote: The simple answer as to how much further house prices should fall is: until people start buying them without government subsidies and no sub-prime loans.
Just as an aside, the same formula could apply to job creation; letting the wage rate (which is nothing more that a price) adjust until there was job for essentially every job seeker. We should end the minimum wage which destroys jobs for people without adequate education and/or job experience.
Thursday, July 29, 2010
02Superfast Bullet Trains Are Finally Coming to the U.S
FEATURE
U.S. Military Learns to Fight Deadliest Weapons
By James Glave and Rachel Swaby January 25, 2010 | 12:00 pm | Wired Feb 2010
Illustration: Paul Rogers
Believe it: Bullet trains are coming. After decades of false starts, planners are finally beginning to make headway on what could become the largest, most complicated infrastructure project ever attempted in the US. The Obama administration got on board with an $8 billion infusion, and more cash is likely en route from Congress. It’s enough for Florida and Texas to dust off some previously abandoned plans and for urban clusters in the Northeast and Midwest to pursue some long-overdue upgrades. The nation’s test bed will almost certainly be California, which already has voter-approved funding and planning under way. But getting up to speed requires more than just seed money. For trains to beat planes and automobiles, the hardware needs to really fly. Officials are pushing to deploy state-of-the-art rail rockets. Next stop: the future.
Fast Trains: A Brief History
When the first modern rail line connected Liverpool with Manchester in 1830, locals worried that flying sparks would set fire to buildings and that cows near the tracks would stop giving milk. That train couldn’t hit even 40 mph. Those British villagers would be downright terrified now. Here’s a quick trip through high-speed history.
1830 36 mph
Liverpool & Manchester Railway, England
A former member of Parliament was injured at the first modern rail line’s christening, and the Northumbrian train reached its top speed rushing him to a doctor. (He died soon after.)
1839 57 mph
Grand Junction Railway, England
Nine years after the Northumbrian’s emergency run, the high-speed record was broken in Staffordshire by an engine so powerful it was dubbed Lucifer.
1889 89.5 mph
Paris-Dijon line, France
France grabbed the speed title from England after a record run on the Paris-Dijon line. The engine that took the prize was designed by Thomas Crampton … of England.
1897 90 mph
Midland Railway, England
It took almost a decade for England to regain its dominance with a record-breaking run aboard an 8-foot-long, eight-wheeled locomotive from Melton Mowbray to Nottingham.
1903 126 mph
Military railway, Germany
Germany pulled ahead with this 12-wheel all-electric train between Marienfeld and Berlin, which would remain the country’s fastest for more than 70 years.
1932 92 mph Great Western Railway, England
The Cheltenham Spa Express became the Cheltenham Flyer after going 77 miles in just under 57 minutes — the first regular passenger service to achieve such speed.
1964 130 mph
Shinkansen, Japan
This new line between Tokyo and Osaka provided the first regular service operating at speeds above 100 mph. The Shinkansen’s aerodynamic design earned it the nickname “bullet train.”
1981 161.6 mph
TGV, France
When this high-speed rail opened, it became the fastest regularly running line in the world, shuttling passengers 264 miles between Paris and Lyon in just 2 hours, 40 minutes.
2004 267 mph
Shanghai Maglev, China
The fastest passenger train in the world, this line zips from Pudong International Airport to Shanghai via an electromagnetic reaction created between the cars and the tracks.
2007 357 mph
TGV, France
A souped-up, 25,000-hp TGV with oversize wheels holds the current record for non-maglev trains. Journalists on the title run reported dizziness at 300 mph and difficulty standing at around 335 mph.
Florida (roll over for detail) Texas (roll over for detail) Midwest (roll over for detail) California (roll over for detail) Northeast (roll over for detail) The Fast
Tracks
5 areas of the country have the population and geography to support high-speed rail now. But each route poses unique challenges.
California
First Phase
San Francisco
to Los Angeless
Ultimate Goal
Sacramento
to San Dieago
Estimated Completion Date
2025
Top Speed
220 mph
Final Tab
$45B
Conditions here are almost perfect. Not only does California possess a surplus of big-think, tech-whiz envirogeeks, it also boasts two major cities — San Francisco and Los Angeles — an ideal distance apart for bullet trains. In 2008, voters approved almost $10 billion to get started, and some of the environmental studies are already complete. But the biggest point in California’s favor? Ego. Governor Arnold Schwarzenegger wants the system to be his legacy.
Midwest
First Phase
Chicago to Madison, Detroit, and St. Louis.
Ultimate Goal
Hub-and-spoke network: 20 major cities using 3,000 miles of existing railway.
Estimated Completion Date
2025
Top Speed
110 mph
Final Tab
N/A
Nine Midwest states have teamed up to develop a regionwide network with Chicago as the hub. They will need to build atop a legacy freight system without a dedicated right-of-way — which means top speeds will be limited to 110 mph. Still, that should be fast enough to win over business travelers who currently brave three-hour-plus car trips between the region’s cities.
Texas
Ultimate Goal
“T-Bone” connecting Dallas/ Ft. Worth, San Antonio, and Houston
Estimated Completion Date
2020
Top Speed
220 mph
Final Tab
$12-22B
They think big down in Texas — as in a dedicated twin-track, 440-mile elevated corridor that will allow longhorns to wander underneath. The topography is forgiving, but the land-use patterns — miles of suburbs with scant public transit — are less than ideal. Lawyers for Southwest Airlines helped shoot down a proposal back in the 1990s, but with broad popular support this time, a Lone Star Shinkansen might happen.
Northeast
Ultimate Goal
Speed-boosting upgrades to existing lines to get Washington-to-Boston travel time down to five hours, 45 minutes.
Estimated Completion Date
2023
Top Speed
150 mph
Final Tab
$12B
On paper, the steel ribbon between Boston and DC is high-speed heaven: four large cities in close proximity, excellent transit connections, and overwhelmed airports. (The region already has the popular Amtrak Acela Express.) But on the ground, it’s stakeholder hell: eight commuter railroads with five owners, seven freight lines, and nine states — each with its own priorities and vision. And nobody seems to be coordinating the effort.
Florida
First Phase
Tampa
to Orlando
Ultimate Goal
Orlando
to Miami
Estimated Completion Date
2017
Top Speed
180 mph
Final Tab
$11.5+B
Florida has a checkered history with high-speed rail; its own voters nixed a bullet train in 2004. But now that there’s federal money on offer, the state has dusted off its plans and stands a good chance of becoming one of the first to start construction. The advantage: a 90-mile-long median along Interstate 4 that is government-owned and ready for trains. Plus, millions of Mouseketeers to ride the rails each year.
Fast or Superfast?
How rules and money limit speed.
Not all of the projects currently proposed are what many people think of as bullet trains. Turns out that while those 150-plus-mph rockets are insanely fast on the tracks, they’re slow to get off the ground. The first obstacle is regulatory: Federal rules demand environmental assessments, which require years of study and fieldwork by consultants, biologists, engineers, and planners. The second snag is cost: Superfast (or “express high-speed rail”) systems need new, exclusive lines, which are extremely expensive. That explains “emerging high-speed rail” projects, incremental improvements — new stations, bridges, and rolling stock — to existing infrastructure. These, like the Amtrak Acela Express in the Northeast, won’t have a dedicated right-of-way but will share tracks with freight and passenger trains and top out at around 110 mph.
The Bullet Decade
Can we have fast trains in 10 years? Yes we can.
The US hopes to have high-speed lines operational within the next decade. Sound impossible? It’s not. Other nations have shown the way. In 1990, Spain’s rail network was in even worse shape than America’s: Trains were slow and equipment dilapidated. Then the government made a commitment to modernize. Spain now has one of the most extensive high-speed systems in the world. Likewise, Taiwan built its entire infrastructure in just the past 10 years — despite a population density greater than that of the northeastern US. All it takes is planning: According to the island nation’s head of infrastructure construction, by threading the 60-foot-wide corridor carefully through the landscape, the builders had to knock down only about 1,000 homes over 214 miles. Finally, China plans to pour a staggering $300 billion into dedicated high-speed-rail corridors by 2020. Almost all of the first 60 trains will be manufactured in China under a technology-transfer agreement with bullet builder Siemens. In essence, Beijing intends to slash its costs by cloning the Siemens Velaro train, which could provide a model for a cheaper high-speed rollout in the US.
* Proposed by infrastructure-planning think tank America 2050
Illustration: Paul Rogers
The California
Challenge
The Golden State’s bullet train project will likely be a test bed for the nation. Here are some key hurdles.
Ridership
To be cost-efficient, any high-speed rail system needs an ample supply of riders. San Francisco hopes to deliver them through a new million-square-foot terminal. Dubbed the Transbay Transit Center, it will connect the new rail line with nine regional transportation systems, including the Caltrain commuter rail, Bay Area Rapid Transit, and Greyhound — once the thing finally is completed in a decade or so.
Nimbyism
The route across Pacheco Pass and up the San Francisco Peninsula — the California High-Speed Rail Authority’s preferred passage to San Francisco — is in peril. Menlo Park and Atherton have sued to stop construction from bisecting their posh towns. In August, a judge found in their favor. As an alternative, the train could run through the East Bay, but planners say the hurdles — 46 acres of wetlands, a San Francisco Bay crossing, and a little thing called the San Andreas Fault — are too great.
Instant Exurbs
High-speed rail will transform isolated and depressed Central Valley cities like Merced into commuter towns overnight, instantly cutting the hours-long odyssey to Sacramento to just 43 minutes. The resulting population boom (planners are already expecting an increase of more than 80 percent over the next 20 years) will mean higher employment rates and tax revenue but also a massive jump in urban infrastructure needs for local governments.
Farmland
Laying down track in Fresno County is like playing Operation. The goal is to carve out a 100-foot-wide corridor with minimal injury to the state’s most valuable agricultural land. Depending on the route from Fresno to Tulare, up to 300 acres of California’s best farmland will be disrupted. And parcels enrolled in the Williamson Act’s conservation program should be avoided altogether. Planners are scratching their heads over the issue now.
Mountains
Taking a bullet train over 4,000-foot-high mountains would feel more like a thrill ride than an office commute. So to navigate the Tehachapi range, rail planners initially sought to burrow through it. They soon realized that would require 23 miles of tunnels and negotiations with at least five major state parks, national forests, and recreation areas. The alternative: Lay an extra 35 miles of track to cross farther east, in Antelope Valley. The detour adds 10 minutes to the trip but would link Palmdale (population 139,000) to the greater LA metro area.
Car Culture
No city epitomizes the insane appeal of driving like Los Angeles, whose citizens cling to their steering wheels even as they face the worst congestion in the nation. Will high-speed rail persuade them to give up their autos? Maybe. Ridership on the local rail system has increased to 306,000 on weekdays, up from 265,000 in 2007. A faster, cheaper trip — the high-speed ride between Ontario and LA will save the average commuter at least 85 hours and as much as $6,400 a year in gas, parking, and lost productivity — might pry even the most dedicated motorist out of the driver’s seat.
Earthquakes
Since 1984, seismic activity has doubled in the area around San Diego (which suffered a magnitude 5.3 quake in 1986). But active faults are not necessarily deal breakers. Just look at Japan’s Shinkansen, which withstands some thousand tremors a year without any casualties. The trick is in the construction: Motion detectors are linked to a central control system that automatically shuts down trains during a significant rumble. Deep-reaching foundations resist an earthquake’s unsettling effects. And crossing fault lines at 90 degrees limits exposure to calamity.
Rail or Fail
The alternatives would cost more.
Getting California’s train up and running will be expensive. But doing nothing would cost two to three times more. Why? Currently, gridlocked lanes waste $20 billion in fuel and productivity annually. And it’s only going to get worse. The Golden State is growing — quickly. By 2030, another 12 million people could be calling it home. Without an infrastructure overhaul, drivers can expect a 10 percent congestion increase every year. To accommodate the billion trips between cities that residents and visitors will make annually, the state would need to build 3,000 more miles of freeway lanes, five more commercial airport runways, and 90 more airline departure gates. The price: at least $100 billion. Oh, and all that construction wouldn’t alleviate traffic; it would simply keep pace with it.
Speed Trials
San Francisco to L.A. in 2 hours, 40 minutes. Or else.
California’s bullet train system will need a steady flow of riders — lots of riders — to pay off. But studies show that when transportation times between major hubs exceed three hours, many travelers opt for planes. To address this dilemma, California’s high-speed-rail planners specify that trains must travel between San Francisco and Los Angeles in no more than two hours, 40 minutes, a feat that requires sustained intervals at 220 mph. The problem: Standard bullet trains don’t go that fast — yet. The state is gambling that technology will improve before it completes the planning process and starts laying track. Luckily, the tech doesn’t need to improve much: France’s new TGV already hits 200 mph, and Spain’s Alta Velocidad Española carries passengers at around 217 mph. Of course, the deadline also puts planners in a bind: Every route change that adds miles means the train needs to go that much faster. So be it. The target is necessary to ensure a fast ride and plentiful ridership.
Built for Speed
Forget diesel locomotives and human error. Modern bullet trains are high-voltage rockets with regenerative brakes, powered wheel sets, and centralized control systems.
Traffic Monitor
It’s easy to blow past a trackside signal, which is why dedicated high-speed corridors don’t use them. Instead, operators rely on a system known as automatic train control, in which traffic and speed information is monitored centrally and displayed on a screen in the driver’s cab. Trains are assigned a maximum speed, beyond which the brakes kick in automatically.
Aerodynamics
Designers must carefully taper the first car, not only for aerodynamic performance but also to eliminate the sonic boom that can occur when a train enters a tunnel at very high speed.
Auto-Shutdown
Sensors can be placed along the route to monitor for high winds, mud slides, flooding, earthquakes, or misaligned tracks — and can trigger alarms or tell the system to stop the train immediately.
Power Connection
A hinged arm called a pantograph connects the train to the power line. The trick is to keep the pantograph in contact at more than 200 mph. In addition to a pneumatic system that pushes upward, a small wing creates lift at high speed; the faster the train moves, the more force is applied. The arm can also be lowered to let the train coast between different electrical systems.
A.C. Inverter Car
A high-speed line’s inverter car looks like any other passenger car, but under the floor lurks the humming high-voltage heart of the train. In the case of Siemens’ Velaro, for example, the traction inverter turns 3,000-volt alternating current from the pantograph into direct current. The driver controls speed by changing the frequency of this current, throttling it up or down between 0 and 60 hertz.
Drivetrain
High-speed trains don’t have locomotives — they have powered axles paired into wheel sets called bogies. Rather than placing all the drive wheels at the front, state-of-the-art systems have bogies up and down the length of the train. This reduces axle load, maintenance costs, and possibly the risk of a catastrophic “accordion” effect in the event of an accident.
Regenerative Brakes
Regenerative brakes inside the bogies feed power back to the grid. They employ the same principle as a hybrid car, but instead of storing the energy in an onboard battery, the system shares the juice with other trains on the network.
Fail-Safe Systems
What happens if a train operator passes out at 150 mph? Hopefully nothing, thanks to a time-tested safety device: a dead man’s switch. On some lines, drivers must press a button with their foot every 30 seconds. Should they neglect this duty, an audible alarm sounds, and if it’s ignored, the train will initiate an emergency stop.
Close Posted by: Rybo | 01/30/10 | 7:31 pm |
Whatever happened to the idea of using really fast and safe Mag-Lev technology? As I understand it these trains cannot de-rail, and are extremely efficeint.
Posted by: greengestalt | 01/30/10 | 8:07 pm |
Wow!!!
I love that!
Frankly, I’d love to see such a full system, even though I’m in the more remote areas and would need to take a bus first. I’d LOVE to casually go to Seattle, for instance…
Posted by: methuselah | 01/30/10 | 8:22 pm |
I have wondered about all the problems with track movement, sabotage, weather, etc. But as to having to be really fast to beat out planes, all they have to do is not have to check in 2-3 hours before travel time to be faster. And if you don’t have to take off your shoes before riding, and can carry on a water bottle or soda, they’ve got air transport in the US beat. Of course, Amtrak is already losing oodles of money annually, so I suspect this will be also be subsidized for the rest of our lives.
Posted by: meelk | 01/30/10 | 8:29 pm |
acmartin9: you should look at facts and not propaganda regarding such claims. Conservatives oppose such measures because unlike liberals, we think often look at the facts, and do the math and research. For instance this article alone will explain some of the problems with alternate energy sources:
http://www.energytribune.com/articles.cfm?aid=2469
Posted by: dgroenier | 01/30/10 | 9:15 pm |
Anyone who thinks there will be no security lines or that they can show up five minutes before departure are fooling themselves. Not only would the trains be terror targets, but you would also need to scan for carry-on weapons and such things just to prevent regular ol’ American crime and ultra-violence. And if I’m a terrorist, I’m pinching myself–no need to committ suicide since I don’t need to be on-board the train. All I need to do is trespass onto any of the hundreds of farm fields the tracks will have to run through and detonate a trackside IED. But I guess you could create a special police patrol just to handle that security nightmare. That wouldn’t cost a lot…would it?
Posted by: citibob | 01/30/10 | 9:17 pm |
methuselah… Amtrak is profitable in the Northeast, where it is a popular, viable mid-speed train system. The Acela service is very profitable, for exactly the reasons you point out. It is expected that CA high-speed rail will be similarly profitable.
Amtrak loses money on pretty much all its operations OUTSIDE the Northeast. I mean, who wants to spend 24+ hours on a train that might come in 12 hours late, for no cheaper than an airplane that can do the same trip in 2 hours?
Posted by: Itzamna | 01/31/10 | 4:43 pm |
@ Rybo
The cost of MagLevs continue to be the main deterrent in adopting the plans. On top of that there are some worries about MagLevs in all conditions, such as deserts with dust and such.
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Considering that it costs more to build one small MagLev rail than the administration is putting into a national high speed rail plan I wouldn’t plan on seeing them here anytime soon, unless it’s privately funded. Obviously the $8 billion won’t completely fund a national system and there will be outside funds. But we’re not trying to build one train here.
Posted by: JackDuran | 01/31/10 | 4:44 pm |
Wow! That was an interesting read. I think we’ll have to get the trains running at 300+ mph. Absolute necessity, not just thrill for speed.
Posted by: wiredcommentguy | 01/31/10 | 6:27 pm |
Hydrogen Maglev Engineered in Michigan, Contract to be built in Java…
http://www.youtube.com/watch?v=yONyv–AIdQ
Posted by: JWMeritt | 01/31/10 | 7:23 pm |
And where will these superfast bullet trains travel? The current curvey tracks do not allow that speed.
Posted by: acmartin9 | 01/31/10 | 8:58 pm |
Meelk: Alternative energies may have their problems, but the reality is that oil will not last forever and still buy oil from all these unstable countries. This money in turn is used by terrorist to push their extremist agendas. Not investing in alternative energies will be more costly because at the end of the day, we have to invade countries in the Middle East is a useless effort to stabilize them (To date, $1.05 trillion dollars have been allocated to the wars in Iraq and Afghanistan). In addition, many technologies such as coal have been claimed to be clean, but this is not true and they end up being more expensive on the long run because of its toll on people’s health and the environment ($120 billion in the U.S. in 2005, this is not counting impact on the environment). Furthermore, even if you don’t believe in global warming I still think that we should not be pumping so much CO2 into the atmosphere, which alternative energies could ameliorate. I think that a conservative being fiscally responsible is an illusion. Let me remind that W was the first to start the stimulus package and Republicans have poured millions of dollars in to programs that they know don’t work, but make people feel good, a clear example of this is sex abstinence programs. The reality is that there are many special interests that politicians have to cater to, and simple solutions such as making a stronger public transportation system (which conservative oppose) can go a long way. This has a greater social impact and at the end will save way more money in ways your equations from the energy tribune do not account for… Peace and sell your Hummer…
Posted by: billstewart | 01/31/10 | 11:52 pm |
The California train proponents promised us that when enough free money fell out of the sky to build the system, we’d be able to get 1-way fares of $55 from SF to LA, i.e. about the price of flying most airlines with a week’s advance purchase. Yes, trains are nicer – I used to commute between New Jersey and DC by Metroliner, which was slightly slower and cheaper than flying – but when I did fly, pre-9/11, I could get to the airport 15 minutes before my flight because there’d be another one in an hour if I missed it. Now, of course, they’re admitting that the train fares will probably be higher than Southwest’s, and don’t expect the TSA not to mess up the previously friendly railroad experience.
Posted by: moktarama | 02/1/10 | 11:56 am |
A few corrections and explanations from a french point of view :
If the new-gen TVGs are actually cruising at 200 mph, they are theorically able to run at 220 mph during long times, and will in France in 2 to 3 years. Problems here are essentially the economic sustainbility of the repairing costs of infrastructure at that speed. So the engines are not a problem at all.
Putting freight trains on the same railways kills the whole point of high speed trains. That’s why these trains are so expensive to build : it needs a dedicated railway to be efficient.
In 15 years of time, the TGV took 95 % of a domestic market dominated by planes. Same for the line between Paris and London, or for the Thalys between Paris and Brussels/Cologne, and many more. But a major hint for that success is the crucial need for stations located downtown, and the big problem in the US is the very low urban concentration (ie very extended cities) .
Posted by: SpeedRacer | 02/1/10 | 12:23 pm |
acmartin9: This may shock your kool-aid drunk mind but a Hummer has less environmental impact that a Prius. Further, nobody is going to ride your expensive public transportation making “High-Speed” rail that clear cuts through hundreds of miles of undeveloped space a unnecessary rape of the land. People like myself who pay taxes to subsidize these boondoggles in the name of conservation must shine the light on your ignorance. It is not the ignorance of a retrofuturism dream, but the ignorance of cost benefit analysis. An ignorance of why people do not ride trains anymore. You can’t change that by doubling their speed or making them shiny. You want to help the environment? Start by putting your trash in a waste basket. I can’t tell you how many “environmentalist” wanabes I see tossing garbage right into the street.
Posted by: Phillip123 | 02/1/10 | 4:07 pm |
Trains are one of the most energy efficient means of moving people around. They can be much more enjoyable than either cars or planes when done right. High speed trains can replace a lot of car and air travel for trips up to 300 miles making both driving and flying less crowded more efficient and more enjoyable and finally once the infrastructure is in place they can run off diesel or electricity which provides some redundancy for essential freight, ie in an oil shock you rely on the trains in a electricity shock you rely on trucking. There has been an over emphasis in this country on interstate highways, its good they are done but the over reliance has decreased quality of life and made the nation overly dependent on cars and trucks. More rail, I’m all for it.
Posted by: AnaC | 02/1/10 | 6:11 pm |
Well, one way they’ve got planes beat is the terrorism thing can still be achieved, but terrorists can’t jack a train and crash it into a building…it’s got rails…so nothing drastic like 9/11’s gonna happen with those train things. (Not that I mean nothing drastic can possibly happen using those, just not anything as bad as that…or if something as bad as that or worse lol then it’s something that would require alot more time, effort, and money…this is just imo. So I think there might actually not be much terrorist activity with these things.) And personally I think it would be nice to be able to look out the window and see something familiar..not people looking like ants and such things like that that can make you barf :S
Posted by: kemolledog | 02/4/10 | 12:45 pm |
It seems to me that the biggest problem is not techical, put political. Security for a known line would be almost impossible. Aircraft are quickly out of reach of terrorists after takeoff, but land based rail lines are vulnerable for the whole route, all the time. High speed makes the attacks more catastrophic and worthy as a terrorist target.
What are the solutions to these potential problems?
Posted by: Ardent | 02/5/10 | 2:38 pm |
@AntonioMalcolm: you’ve never been to Texas, have you?
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Dallas to Austin is a haul. Out to Houston is even worse. Which is why everyone flies commuter hops everywhere. Which are substantially subsidized. To the point of the government losing money on them, since the airlines running the hops are paid regardless of the fact there’s only one or two people on the flight.
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The Acela is great, if expensive. If the pricetag is about what you can expect for the other systems, they’ll be competitive, particularly once people get on board with riding trains. Up in the northeast corridor, the system is ancient and still way better than, say, driving into NYC. You usually only add a half hour to your travel time, and you get to sit and work while you’re doing it.
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High-speed rail is probably the best bet for domestic mass transportation moving forward, particularly as airline domestic hops will become unsustainable and most carriers will probably shift to specifically international flights.
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This, of course, in no way answers the question of when we’re going to get a line extension from Boston to Montreal, which would be insanely awesome.
Posted by: izaacsetec | 02/9/10 | 6:20 pm |
I love rail, I really do. I’d sooner take Amtrak than fly. It’s a more pleasurable experience all around.
However.
High speed rail will not come to the United States anytime soon, for two big reasons:
First, the practical aspects. Rail is very much a doable thing — when your entire nation is about the size of Georgia. The urban densities in Europe have no comparison in the United States, excepting perhaps the Boston-New York-Philadelphia-Baltimore-Washington axis. As has been previously stated, this corridor is the only profitable line for Amtrak. And their attempt at high speed rail service through it has amounted to little more than express train between those identified cities. And this says nothing for the physics, cost, and ancillary infrastructure investments (trains don’t just drop people off at the outskirts of cities, you know) necessary to make it all work in the first place.
Second, if for some reason the above is solved, it will be dead politically. In 1971, the National Passenger Railroad Corporation was formed. You may know it affectionately as Amtrak. After decades of strangulating regulation and taxation in the early 20th century, passenger railroads were out of money and facing early competition from highways and a subsidized and price-fixed airline industry (remember the Civil Aeronautics Board in the 1970s?). The remaining railroads were basically abandoned by their investors and nationalized. The story is very interesting in its nuance, but the bottom line is that all we have is Amtrak. And Federal Railroad Administration regulations pretty much ensure that all we’ll have is Amtrak.
Second, Amtrak is a government controlled entity. As such, it is subject to the whims of Washington. And Washington is subject to the whims of lobbyists. And one of the most active lobbies is for the airlines. How many times over the past few decades has the airline industry been bailed out, propped up, or subsidized by concerned Congressmen? Do yo honestly believe that a functional competitor to the airline industry will be allowed to appear, let alone be swaddled by Congress? There is no chance whatever.
This leaves private construction and investment. And frankly, there’s no money in passenger rail. No, not even between Los Angeles and Las Vegas — Amtrak killed the Desert Wind in 1997.
The simple fact is that the United States is a grand and beautiful place, and travel among Her cities is best achieved by air.
Posted by: tvoimat | 02/20/10 | 8:25 pm |
I rode the TGV from Paris to Cannes years ago,it really moved. Looking out the window it seemed that the landscape was a blur.
Comment
My dad worked for the Seabord Coastline RR for over 40 years and said he never knew a train conductor during that time that didnt just put a hammer or a wrench on the "dead mand pedal" to avoid the aggravation of having to keep it pressed down manually.
U.S. Military Learns to Fight Deadliest Weapons
By James Glave and Rachel Swaby January 25, 2010 | 12:00 pm | Wired Feb 2010
Illustration: Paul Rogers
Believe it: Bullet trains are coming. After decades of false starts, planners are finally beginning to make headway on what could become the largest, most complicated infrastructure project ever attempted in the US. The Obama administration got on board with an $8 billion infusion, and more cash is likely en route from Congress. It’s enough for Florida and Texas to dust off some previously abandoned plans and for urban clusters in the Northeast and Midwest to pursue some long-overdue upgrades. The nation’s test bed will almost certainly be California, which already has voter-approved funding and planning under way. But getting up to speed requires more than just seed money. For trains to beat planes and automobiles, the hardware needs to really fly. Officials are pushing to deploy state-of-the-art rail rockets. Next stop: the future.
Fast Trains: A Brief History
When the first modern rail line connected Liverpool with Manchester in 1830, locals worried that flying sparks would set fire to buildings and that cows near the tracks would stop giving milk. That train couldn’t hit even 40 mph. Those British villagers would be downright terrified now. Here’s a quick trip through high-speed history.
1830 36 mph
Liverpool & Manchester Railway, England
A former member of Parliament was injured at the first modern rail line’s christening, and the Northumbrian train reached its top speed rushing him to a doctor. (He died soon after.)
1839 57 mph
Grand Junction Railway, England
Nine years after the Northumbrian’s emergency run, the high-speed record was broken in Staffordshire by an engine so powerful it was dubbed Lucifer.
1889 89.5 mph
Paris-Dijon line, France
France grabbed the speed title from England after a record run on the Paris-Dijon line. The engine that took the prize was designed by Thomas Crampton … of England.
1897 90 mph
Midland Railway, England
It took almost a decade for England to regain its dominance with a record-breaking run aboard an 8-foot-long, eight-wheeled locomotive from Melton Mowbray to Nottingham.
1903 126 mph
Military railway, Germany
Germany pulled ahead with this 12-wheel all-electric train between Marienfeld and Berlin, which would remain the country’s fastest for more than 70 years.
1932 92 mph Great Western Railway, England
The Cheltenham Spa Express became the Cheltenham Flyer after going 77 miles in just under 57 minutes — the first regular passenger service to achieve such speed.
1964 130 mph
Shinkansen, Japan
This new line between Tokyo and Osaka provided the first regular service operating at speeds above 100 mph. The Shinkansen’s aerodynamic design earned it the nickname “bullet train.”
1981 161.6 mph
TGV, France
When this high-speed rail opened, it became the fastest regularly running line in the world, shuttling passengers 264 miles between Paris and Lyon in just 2 hours, 40 minutes.
2004 267 mph
Shanghai Maglev, China
The fastest passenger train in the world, this line zips from Pudong International Airport to Shanghai via an electromagnetic reaction created between the cars and the tracks.
2007 357 mph
TGV, France
A souped-up, 25,000-hp TGV with oversize wheels holds the current record for non-maglev trains. Journalists on the title run reported dizziness at 300 mph and difficulty standing at around 335 mph.
Florida (roll over for detail) Texas (roll over for detail) Midwest (roll over for detail) California (roll over for detail) Northeast (roll over for detail) The Fast
Tracks
5 areas of the country have the population and geography to support high-speed rail now. But each route poses unique challenges.
California
First Phase
San Francisco
to Los Angeless
Ultimate Goal
Sacramento
to San Dieago
Estimated Completion Date
2025
Top Speed
220 mph
Final Tab
$45B
Conditions here are almost perfect. Not only does California possess a surplus of big-think, tech-whiz envirogeeks, it also boasts two major cities — San Francisco and Los Angeles — an ideal distance apart for bullet trains. In 2008, voters approved almost $10 billion to get started, and some of the environmental studies are already complete. But the biggest point in California’s favor? Ego. Governor Arnold Schwarzenegger wants the system to be his legacy.
Midwest
First Phase
Chicago to Madison, Detroit, and St. Louis.
Ultimate Goal
Hub-and-spoke network: 20 major cities using 3,000 miles of existing railway.
Estimated Completion Date
2025
Top Speed
110 mph
Final Tab
N/A
Nine Midwest states have teamed up to develop a regionwide network with Chicago as the hub. They will need to build atop a legacy freight system without a dedicated right-of-way — which means top speeds will be limited to 110 mph. Still, that should be fast enough to win over business travelers who currently brave three-hour-plus car trips between the region’s cities.
Texas
Ultimate Goal
“T-Bone” connecting Dallas/ Ft. Worth, San Antonio, and Houston
Estimated Completion Date
2020
Top Speed
220 mph
Final Tab
$12-22B
They think big down in Texas — as in a dedicated twin-track, 440-mile elevated corridor that will allow longhorns to wander underneath. The topography is forgiving, but the land-use patterns — miles of suburbs with scant public transit — are less than ideal. Lawyers for Southwest Airlines helped shoot down a proposal back in the 1990s, but with broad popular support this time, a Lone Star Shinkansen might happen.
Northeast
Ultimate Goal
Speed-boosting upgrades to existing lines to get Washington-to-Boston travel time down to five hours, 45 minutes.
Estimated Completion Date
2023
Top Speed
150 mph
Final Tab
$12B
On paper, the steel ribbon between Boston and DC is high-speed heaven: four large cities in close proximity, excellent transit connections, and overwhelmed airports. (The region already has the popular Amtrak Acela Express.) But on the ground, it’s stakeholder hell: eight commuter railroads with five owners, seven freight lines, and nine states — each with its own priorities and vision. And nobody seems to be coordinating the effort.
Florida
First Phase
Tampa
to Orlando
Ultimate Goal
Orlando
to Miami
Estimated Completion Date
2017
Top Speed
180 mph
Final Tab
$11.5+B
Florida has a checkered history with high-speed rail; its own voters nixed a bullet train in 2004. But now that there’s federal money on offer, the state has dusted off its plans and stands a good chance of becoming one of the first to start construction. The advantage: a 90-mile-long median along Interstate 4 that is government-owned and ready for trains. Plus, millions of Mouseketeers to ride the rails each year.
Fast or Superfast?
How rules and money limit speed.
Not all of the projects currently proposed are what many people think of as bullet trains. Turns out that while those 150-plus-mph rockets are insanely fast on the tracks, they’re slow to get off the ground. The first obstacle is regulatory: Federal rules demand environmental assessments, which require years of study and fieldwork by consultants, biologists, engineers, and planners. The second snag is cost: Superfast (or “express high-speed rail”) systems need new, exclusive lines, which are extremely expensive. That explains “emerging high-speed rail” projects, incremental improvements — new stations, bridges, and rolling stock — to existing infrastructure. These, like the Amtrak Acela Express in the Northeast, won’t have a dedicated right-of-way but will share tracks with freight and passenger trains and top out at around 110 mph.
The Bullet Decade
Can we have fast trains in 10 years? Yes we can.
The US hopes to have high-speed lines operational within the next decade. Sound impossible? It’s not. Other nations have shown the way. In 1990, Spain’s rail network was in even worse shape than America’s: Trains were slow and equipment dilapidated. Then the government made a commitment to modernize. Spain now has one of the most extensive high-speed systems in the world. Likewise, Taiwan built its entire infrastructure in just the past 10 years — despite a population density greater than that of the northeastern US. All it takes is planning: According to the island nation’s head of infrastructure construction, by threading the 60-foot-wide corridor carefully through the landscape, the builders had to knock down only about 1,000 homes over 214 miles. Finally, China plans to pour a staggering $300 billion into dedicated high-speed-rail corridors by 2020. Almost all of the first 60 trains will be manufactured in China under a technology-transfer agreement with bullet builder Siemens. In essence, Beijing intends to slash its costs by cloning the Siemens Velaro train, which could provide a model for a cheaper high-speed rollout in the US.
* Proposed by infrastructure-planning think tank America 2050
Illustration: Paul Rogers
The California
Challenge
The Golden State’s bullet train project will likely be a test bed for the nation. Here are some key hurdles.
Ridership
To be cost-efficient, any high-speed rail system needs an ample supply of riders. San Francisco hopes to deliver them through a new million-square-foot terminal. Dubbed the Transbay Transit Center, it will connect the new rail line with nine regional transportation systems, including the Caltrain commuter rail, Bay Area Rapid Transit, and Greyhound — once the thing finally is completed in a decade or so.
Nimbyism
The route across Pacheco Pass and up the San Francisco Peninsula — the California High-Speed Rail Authority’s preferred passage to San Francisco — is in peril. Menlo Park and Atherton have sued to stop construction from bisecting their posh towns. In August, a judge found in their favor. As an alternative, the train could run through the East Bay, but planners say the hurdles — 46 acres of wetlands, a San Francisco Bay crossing, and a little thing called the San Andreas Fault — are too great.
Instant Exurbs
High-speed rail will transform isolated and depressed Central Valley cities like Merced into commuter towns overnight, instantly cutting the hours-long odyssey to Sacramento to just 43 minutes. The resulting population boom (planners are already expecting an increase of more than 80 percent over the next 20 years) will mean higher employment rates and tax revenue but also a massive jump in urban infrastructure needs for local governments.
Farmland
Laying down track in Fresno County is like playing Operation. The goal is to carve out a 100-foot-wide corridor with minimal injury to the state’s most valuable agricultural land. Depending on the route from Fresno to Tulare, up to 300 acres of California’s best farmland will be disrupted. And parcels enrolled in the Williamson Act’s conservation program should be avoided altogether. Planners are scratching their heads over the issue now.
Mountains
Taking a bullet train over 4,000-foot-high mountains would feel more like a thrill ride than an office commute. So to navigate the Tehachapi range, rail planners initially sought to burrow through it. They soon realized that would require 23 miles of tunnels and negotiations with at least five major state parks, national forests, and recreation areas. The alternative: Lay an extra 35 miles of track to cross farther east, in Antelope Valley. The detour adds 10 minutes to the trip but would link Palmdale (population 139,000) to the greater LA metro area.
Car Culture
No city epitomizes the insane appeal of driving like Los Angeles, whose citizens cling to their steering wheels even as they face the worst congestion in the nation. Will high-speed rail persuade them to give up their autos? Maybe. Ridership on the local rail system has increased to 306,000 on weekdays, up from 265,000 in 2007. A faster, cheaper trip — the high-speed ride between Ontario and LA will save the average commuter at least 85 hours and as much as $6,400 a year in gas, parking, and lost productivity — might pry even the most dedicated motorist out of the driver’s seat.
Earthquakes
Since 1984, seismic activity has doubled in the area around San Diego (which suffered a magnitude 5.3 quake in 1986). But active faults are not necessarily deal breakers. Just look at Japan’s Shinkansen, which withstands some thousand tremors a year without any casualties. The trick is in the construction: Motion detectors are linked to a central control system that automatically shuts down trains during a significant rumble. Deep-reaching foundations resist an earthquake’s unsettling effects. And crossing fault lines at 90 degrees limits exposure to calamity.
Rail or Fail
The alternatives would cost more.
Getting California’s train up and running will be expensive. But doing nothing would cost two to three times more. Why? Currently, gridlocked lanes waste $20 billion in fuel and productivity annually. And it’s only going to get worse. The Golden State is growing — quickly. By 2030, another 12 million people could be calling it home. Without an infrastructure overhaul, drivers can expect a 10 percent congestion increase every year. To accommodate the billion trips between cities that residents and visitors will make annually, the state would need to build 3,000 more miles of freeway lanes, five more commercial airport runways, and 90 more airline departure gates. The price: at least $100 billion. Oh, and all that construction wouldn’t alleviate traffic; it would simply keep pace with it.
Speed Trials
San Francisco to L.A. in 2 hours, 40 minutes. Or else.
California’s bullet train system will need a steady flow of riders — lots of riders — to pay off. But studies show that when transportation times between major hubs exceed three hours, many travelers opt for planes. To address this dilemma, California’s high-speed-rail planners specify that trains must travel between San Francisco and Los Angeles in no more than two hours, 40 minutes, a feat that requires sustained intervals at 220 mph. The problem: Standard bullet trains don’t go that fast — yet. The state is gambling that technology will improve before it completes the planning process and starts laying track. Luckily, the tech doesn’t need to improve much: France’s new TGV already hits 200 mph, and Spain’s Alta Velocidad Española carries passengers at around 217 mph. Of course, the deadline also puts planners in a bind: Every route change that adds miles means the train needs to go that much faster. So be it. The target is necessary to ensure a fast ride and plentiful ridership.
Built for Speed
Forget diesel locomotives and human error. Modern bullet trains are high-voltage rockets with regenerative brakes, powered wheel sets, and centralized control systems.
Traffic Monitor
It’s easy to blow past a trackside signal, which is why dedicated high-speed corridors don’t use them. Instead, operators rely on a system known as automatic train control, in which traffic and speed information is monitored centrally and displayed on a screen in the driver’s cab. Trains are assigned a maximum speed, beyond which the brakes kick in automatically.
Aerodynamics
Designers must carefully taper the first car, not only for aerodynamic performance but also to eliminate the sonic boom that can occur when a train enters a tunnel at very high speed.
Auto-Shutdown
Sensors can be placed along the route to monitor for high winds, mud slides, flooding, earthquakes, or misaligned tracks — and can trigger alarms or tell the system to stop the train immediately.
Power Connection
A hinged arm called a pantograph connects the train to the power line. The trick is to keep the pantograph in contact at more than 200 mph. In addition to a pneumatic system that pushes upward, a small wing creates lift at high speed; the faster the train moves, the more force is applied. The arm can also be lowered to let the train coast between different electrical systems.
A.C. Inverter Car
A high-speed line’s inverter car looks like any other passenger car, but under the floor lurks the humming high-voltage heart of the train. In the case of Siemens’ Velaro, for example, the traction inverter turns 3,000-volt alternating current from the pantograph into direct current. The driver controls speed by changing the frequency of this current, throttling it up or down between 0 and 60 hertz.
Drivetrain
High-speed trains don’t have locomotives — they have powered axles paired into wheel sets called bogies. Rather than placing all the drive wheels at the front, state-of-the-art systems have bogies up and down the length of the train. This reduces axle load, maintenance costs, and possibly the risk of a catastrophic “accordion” effect in the event of an accident.
Regenerative Brakes
Regenerative brakes inside the bogies feed power back to the grid. They employ the same principle as a hybrid car, but instead of storing the energy in an onboard battery, the system shares the juice with other trains on the network.
Fail-Safe Systems
What happens if a train operator passes out at 150 mph? Hopefully nothing, thanks to a time-tested safety device: a dead man’s switch. On some lines, drivers must press a button with their foot every 30 seconds. Should they neglect this duty, an audible alarm sounds, and if it’s ignored, the train will initiate an emergency stop.
Close Posted by: Rybo | 01/30/10 | 7:31 pm |
Whatever happened to the idea of using really fast and safe Mag-Lev technology? As I understand it these trains cannot de-rail, and are extremely efficeint.
Posted by: greengestalt | 01/30/10 | 8:07 pm |
Wow!!!
I love that!
Frankly, I’d love to see such a full system, even though I’m in the more remote areas and would need to take a bus first. I’d LOVE to casually go to Seattle, for instance…
Posted by: methuselah | 01/30/10 | 8:22 pm |
I have wondered about all the problems with track movement, sabotage, weather, etc. But as to having to be really fast to beat out planes, all they have to do is not have to check in 2-3 hours before travel time to be faster. And if you don’t have to take off your shoes before riding, and can carry on a water bottle or soda, they’ve got air transport in the US beat. Of course, Amtrak is already losing oodles of money annually, so I suspect this will be also be subsidized for the rest of our lives.
Posted by: meelk | 01/30/10 | 8:29 pm |
acmartin9: you should look at facts and not propaganda regarding such claims. Conservatives oppose such measures because unlike liberals, we think often look at the facts, and do the math and research. For instance this article alone will explain some of the problems with alternate energy sources:
http://www.energytribune.com/articles.cfm?aid=2469
Posted by: dgroenier | 01/30/10 | 9:15 pm |
Anyone who thinks there will be no security lines or that they can show up five minutes before departure are fooling themselves. Not only would the trains be terror targets, but you would also need to scan for carry-on weapons and such things just to prevent regular ol’ American crime and ultra-violence. And if I’m a terrorist, I’m pinching myself–no need to committ suicide since I don’t need to be on-board the train. All I need to do is trespass onto any of the hundreds of farm fields the tracks will have to run through and detonate a trackside IED. But I guess you could create a special police patrol just to handle that security nightmare. That wouldn’t cost a lot…would it?
Posted by: citibob | 01/30/10 | 9:17 pm |
methuselah… Amtrak is profitable in the Northeast, where it is a popular, viable mid-speed train system. The Acela service is very profitable, for exactly the reasons you point out. It is expected that CA high-speed rail will be similarly profitable.
Amtrak loses money on pretty much all its operations OUTSIDE the Northeast. I mean, who wants to spend 24+ hours on a train that might come in 12 hours late, for no cheaper than an airplane that can do the same trip in 2 hours?
Posted by: Itzamna | 01/31/10 | 4:43 pm |
@ Rybo
The cost of MagLevs continue to be the main deterrent in adopting the plans. On top of that there are some worries about MagLevs in all conditions, such as deserts with dust and such.
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Considering that it costs more to build one small MagLev rail than the administration is putting into a national high speed rail plan I wouldn’t plan on seeing them here anytime soon, unless it’s privately funded. Obviously the $8 billion won’t completely fund a national system and there will be outside funds. But we’re not trying to build one train here.
Posted by: JackDuran | 01/31/10 | 4:44 pm |
Wow! That was an interesting read. I think we’ll have to get the trains running at 300+ mph. Absolute necessity, not just thrill for speed.
Posted by: wiredcommentguy | 01/31/10 | 6:27 pm |
Hydrogen Maglev Engineered in Michigan, Contract to be built in Java…
http://www.youtube.com/watch?v=yONyv–AIdQ
Posted by: JWMeritt | 01/31/10 | 7:23 pm |
And where will these superfast bullet trains travel? The current curvey tracks do not allow that speed.
Posted by: acmartin9 | 01/31/10 | 8:58 pm |
Meelk: Alternative energies may have their problems, but the reality is that oil will not last forever and still buy oil from all these unstable countries. This money in turn is used by terrorist to push their extremist agendas. Not investing in alternative energies will be more costly because at the end of the day, we have to invade countries in the Middle East is a useless effort to stabilize them (To date, $1.05 trillion dollars have been allocated to the wars in Iraq and Afghanistan). In addition, many technologies such as coal have been claimed to be clean, but this is not true and they end up being more expensive on the long run because of its toll on people’s health and the environment ($120 billion in the U.S. in 2005, this is not counting impact on the environment). Furthermore, even if you don’t believe in global warming I still think that we should not be pumping so much CO2 into the atmosphere, which alternative energies could ameliorate. I think that a conservative being fiscally responsible is an illusion. Let me remind that W was the first to start the stimulus package and Republicans have poured millions of dollars in to programs that they know don’t work, but make people feel good, a clear example of this is sex abstinence programs. The reality is that there are many special interests that politicians have to cater to, and simple solutions such as making a stronger public transportation system (which conservative oppose) can go a long way. This has a greater social impact and at the end will save way more money in ways your equations from the energy tribune do not account for… Peace and sell your Hummer…
Posted by: billstewart | 01/31/10 | 11:52 pm |
The California train proponents promised us that when enough free money fell out of the sky to build the system, we’d be able to get 1-way fares of $55 from SF to LA, i.e. about the price of flying most airlines with a week’s advance purchase. Yes, trains are nicer – I used to commute between New Jersey and DC by Metroliner, which was slightly slower and cheaper than flying – but when I did fly, pre-9/11, I could get to the airport 15 minutes before my flight because there’d be another one in an hour if I missed it. Now, of course, they’re admitting that the train fares will probably be higher than Southwest’s, and don’t expect the TSA not to mess up the previously friendly railroad experience.
Posted by: moktarama | 02/1/10 | 11:56 am |
A few corrections and explanations from a french point of view :
If the new-gen TVGs are actually cruising at 200 mph, they are theorically able to run at 220 mph during long times, and will in France in 2 to 3 years. Problems here are essentially the economic sustainbility of the repairing costs of infrastructure at that speed. So the engines are not a problem at all.
Putting freight trains on the same railways kills the whole point of high speed trains. That’s why these trains are so expensive to build : it needs a dedicated railway to be efficient.
In 15 years of time, the TGV took 95 % of a domestic market dominated by planes. Same for the line between Paris and London, or for the Thalys between Paris and Brussels/Cologne, and many more. But a major hint for that success is the crucial need for stations located downtown, and the big problem in the US is the very low urban concentration (ie very extended cities) .
Posted by: SpeedRacer | 02/1/10 | 12:23 pm |
acmartin9: This may shock your kool-aid drunk mind but a Hummer has less environmental impact that a Prius. Further, nobody is going to ride your expensive public transportation making “High-Speed” rail that clear cuts through hundreds of miles of undeveloped space a unnecessary rape of the land. People like myself who pay taxes to subsidize these boondoggles in the name of conservation must shine the light on your ignorance. It is not the ignorance of a retrofuturism dream, but the ignorance of cost benefit analysis. An ignorance of why people do not ride trains anymore. You can’t change that by doubling their speed or making them shiny. You want to help the environment? Start by putting your trash in a waste basket. I can’t tell you how many “environmentalist” wanabes I see tossing garbage right into the street.
Posted by: Phillip123 | 02/1/10 | 4:07 pm |
Trains are one of the most energy efficient means of moving people around. They can be much more enjoyable than either cars or planes when done right. High speed trains can replace a lot of car and air travel for trips up to 300 miles making both driving and flying less crowded more efficient and more enjoyable and finally once the infrastructure is in place they can run off diesel or electricity which provides some redundancy for essential freight, ie in an oil shock you rely on the trains in a electricity shock you rely on trucking. There has been an over emphasis in this country on interstate highways, its good they are done but the over reliance has decreased quality of life and made the nation overly dependent on cars and trucks. More rail, I’m all for it.
Posted by: AnaC | 02/1/10 | 6:11 pm |
Well, one way they’ve got planes beat is the terrorism thing can still be achieved, but terrorists can’t jack a train and crash it into a building…it’s got rails…so nothing drastic like 9/11’s gonna happen with those train things. (Not that I mean nothing drastic can possibly happen using those, just not anything as bad as that…or if something as bad as that or worse lol then it’s something that would require alot more time, effort, and money…this is just imo. So I think there might actually not be much terrorist activity with these things.) And personally I think it would be nice to be able to look out the window and see something familiar..not people looking like ants and such things like that that can make you barf :S
Posted by: kemolledog | 02/4/10 | 12:45 pm |
It seems to me that the biggest problem is not techical, put political. Security for a known line would be almost impossible. Aircraft are quickly out of reach of terrorists after takeoff, but land based rail lines are vulnerable for the whole route, all the time. High speed makes the attacks more catastrophic and worthy as a terrorist target.
What are the solutions to these potential problems?
Posted by: Ardent | 02/5/10 | 2:38 pm |
@AntonioMalcolm: you’ve never been to Texas, have you?
.
Dallas to Austin is a haul. Out to Houston is even worse. Which is why everyone flies commuter hops everywhere. Which are substantially subsidized. To the point of the government losing money on them, since the airlines running the hops are paid regardless of the fact there’s only one or two people on the flight.
.
The Acela is great, if expensive. If the pricetag is about what you can expect for the other systems, they’ll be competitive, particularly once people get on board with riding trains. Up in the northeast corridor, the system is ancient and still way better than, say, driving into NYC. You usually only add a half hour to your travel time, and you get to sit and work while you’re doing it.
.
High-speed rail is probably the best bet for domestic mass transportation moving forward, particularly as airline domestic hops will become unsustainable and most carriers will probably shift to specifically international flights.
.
This, of course, in no way answers the question of when we’re going to get a line extension from Boston to Montreal, which would be insanely awesome.
Posted by: izaacsetec | 02/9/10 | 6:20 pm |
I love rail, I really do. I’d sooner take Amtrak than fly. It’s a more pleasurable experience all around.
However.
High speed rail will not come to the United States anytime soon, for two big reasons:
First, the practical aspects. Rail is very much a doable thing — when your entire nation is about the size of Georgia. The urban densities in Europe have no comparison in the United States, excepting perhaps the Boston-New York-Philadelphia-Baltimore-Washington axis. As has been previously stated, this corridor is the only profitable line for Amtrak. And their attempt at high speed rail service through it has amounted to little more than express train between those identified cities. And this says nothing for the physics, cost, and ancillary infrastructure investments (trains don’t just drop people off at the outskirts of cities, you know) necessary to make it all work in the first place.
Second, if for some reason the above is solved, it will be dead politically. In 1971, the National Passenger Railroad Corporation was formed. You may know it affectionately as Amtrak. After decades of strangulating regulation and taxation in the early 20th century, passenger railroads were out of money and facing early competition from highways and a subsidized and price-fixed airline industry (remember the Civil Aeronautics Board in the 1970s?). The remaining railroads were basically abandoned by their investors and nationalized. The story is very interesting in its nuance, but the bottom line is that all we have is Amtrak. And Federal Railroad Administration regulations pretty much ensure that all we’ll have is Amtrak.
Second, Amtrak is a government controlled entity. As such, it is subject to the whims of Washington. And Washington is subject to the whims of lobbyists. And one of the most active lobbies is for the airlines. How many times over the past few decades has the airline industry been bailed out, propped up, or subsidized by concerned Congressmen? Do yo honestly believe that a functional competitor to the airline industry will be allowed to appear, let alone be swaddled by Congress? There is no chance whatever.
This leaves private construction and investment. And frankly, there’s no money in passenger rail. No, not even between Los Angeles and Las Vegas — Amtrak killed the Desert Wind in 1997.
The simple fact is that the United States is a grand and beautiful place, and travel among Her cities is best achieved by air.
Posted by: tvoimat | 02/20/10 | 8:25 pm |
I rode the TGV from Paris to Cannes years ago,it really moved. Looking out the window it seemed that the landscape was a blur.
Comment
My dad worked for the Seabord Coastline RR for over 40 years and said he never knew a train conductor during that time that didnt just put a hammer or a wrench on the "dead mand pedal" to avoid the aggravation of having to keep it pressed down manually.
Wednesday, July 28, 2010
Economists see tepid recovery deep into 2011
Economists see tepid recovery deep into 2011
Survey: Consumers will be tightfisted, unemployment will stay high
by JEANNINE AVERSA
updated 48 minutes ago
WASHINGTON — The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists.
The latest quarterly AP Economy Survey shows economists have turned gloomier in the past three months. They foresee weaker growth and higher unemployment than they did before. As a result, the economists think the Federal Reserve will keep interest rates near zero until at least next spring.
Yet despite their expectation of slower growth, a majority of the 42 economists surveyed believe the recovery remains on track, raising hopes that the economy can avoid falling back into a "double-dip" recession.
The AP survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation. Among their forecasts:
•Economic growth the rest of this year and early next year will weaken, to less than 3 percent. From January through May, the economy grew at roughly a 3.5 percent pace.
•The unemployment rate will be no lower at the end of the year than it is now — 9.5 percent. A majority think it will be 2015 or later before the rate falls to a historically normal 5 percent.
•State budget shortfalls pose a "significant" or "severe" risk to the national economy. The loss of tax revenue has forced state and local governments to cut services and lay off workers.
The weak economy leaves Democrats and Republicans on Capitol Hill vulnerable as they head into the November midterm elections. Democrats, who now control both chambers, have the most to lose. The gloomier outlook is also a liability for President Barack Obama.
The economists have turned more pessimistic since the recovery hit turbulence in May. Europe's debt crisis sent tremors through Wall Street, causing stocks to tumble and raising doubts about the durability of the rebound.
Since then, businesses have been slow to step up hiring. Americans' confidence in the economy has declined, leading shoppers to reduce spending. And the housing market has weakened further with the end of a homebuyer tax credit that had buoyed sales earlier this year.
Consumers aren't leading this rebound, as they usually do, despite ultra-low borrowing costs. Their spending growth will weaken in the second half of this year and strengthen only slightly next year, a majority of economists said. They think shoppers' reluctance to spend more money poses a "significant" or "severe" risk to the recovery.
"It seems like we hit an air pocket in consumer spending," said survey participant Richard DeKaser, president of Woodley Park Research.
Kasey Doshier, a graphic designer in Chicago, said the recession taught her to rein in her spending. The key moment came early last year, when her employer cut her pay 15 percent to avoid layoffs.
"I just lived paycheck to paycheck and had a good time," said Doshier, 32. "It's kind of scary to think that I am a paycheck away from being homeless."
Doshier's pay has been reinstated, but she's still watching her money. Dinner and drinks with friends are gone. Now she goes to free street festivals and the city pool. She explores Chicago neighborhoods by taking her dog on long "adventure walks."
The tight job market, scant pay raises and drooping home values are forcing others, too, to spend less and save more. Americans saved 4.2 percent of their disposable income last year. That was the highest level since 1998. Economists expect roughly the same level of saving this year and next.
That's why growth of less than 3 percent is forecast into 2011. And weak growth helps explain why unemployment is likely to stay high. It takes about 3 percent growth just to create enough jobs to keep pace with the population increase.
Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the economists in the AP survey nor the Obama administration expects that to happen.
The Fed's outlook has turned bleaker, too. It's why Chairman Ben Bernanke and his colleagues are weighing new steps to invigorate the economy if the recovery shows signs of backsliding. They are also expected to hold interest rates at record lows longer than economists thought three months ago.
A survey the Fed released Wednesday showed the economy facing a bumpy path back to health. The pace of economic activity remained modest in most of the country.
Most economists surveyed said the Fed would being raising short-term rates no sooner than next spring. In the last survey, most had thought it could happen as soon as late this year.
At the same time, state budget shortfalls have emerged as a major threat in the economists' view. State and local governments cut their spending in the first three months of this year at a 3.8 percent pace. That was the biggest cutback since the second quarter of 1981, just before the economy entered a severe recession.
When states and localities tighten spending by trimming services and jobs, the cutbacks ripple through the broader economy, causing individuals to spend less, too. The drop in state and local government spending shaved about half a percentage point off the U.S. gross domestic product in the first three months of this year.
Nearly two-thirds of the economists view the states' budget crises as a significant or severe threat to the rebound.
Despite such risks, 55 percent of the economists described the recovery as "on track" as of the middle of the year. The rest said it was "faltering."
"There's a risk that the loss of momentum will snowball and feed on itself, but I think in the end the recovery will stay on track," predicted another survey participant, James O'Sullivan, global chief economist at MF Global
Survey: Consumers will be tightfisted, unemployment will stay high
by JEANNINE AVERSA
updated 48 minutes ago
WASHINGTON — The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists.
The latest quarterly AP Economy Survey shows economists have turned gloomier in the past three months. They foresee weaker growth and higher unemployment than they did before. As a result, the economists think the Federal Reserve will keep interest rates near zero until at least next spring.
Yet despite their expectation of slower growth, a majority of the 42 economists surveyed believe the recovery remains on track, raising hopes that the economy can avoid falling back into a "double-dip" recession.
The AP survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation. Among their forecasts:
•Economic growth the rest of this year and early next year will weaken, to less than 3 percent. From January through May, the economy grew at roughly a 3.5 percent pace.
•The unemployment rate will be no lower at the end of the year than it is now — 9.5 percent. A majority think it will be 2015 or later before the rate falls to a historically normal 5 percent.
•State budget shortfalls pose a "significant" or "severe" risk to the national economy. The loss of tax revenue has forced state and local governments to cut services and lay off workers.
The weak economy leaves Democrats and Republicans on Capitol Hill vulnerable as they head into the November midterm elections. Democrats, who now control both chambers, have the most to lose. The gloomier outlook is also a liability for President Barack Obama.
The economists have turned more pessimistic since the recovery hit turbulence in May. Europe's debt crisis sent tremors through Wall Street, causing stocks to tumble and raising doubts about the durability of the rebound.
Since then, businesses have been slow to step up hiring. Americans' confidence in the economy has declined, leading shoppers to reduce spending. And the housing market has weakened further with the end of a homebuyer tax credit that had buoyed sales earlier this year.
Consumers aren't leading this rebound, as they usually do, despite ultra-low borrowing costs. Their spending growth will weaken in the second half of this year and strengthen only slightly next year, a majority of economists said. They think shoppers' reluctance to spend more money poses a "significant" or "severe" risk to the recovery.
"It seems like we hit an air pocket in consumer spending," said survey participant Richard DeKaser, president of Woodley Park Research.
Kasey Doshier, a graphic designer in Chicago, said the recession taught her to rein in her spending. The key moment came early last year, when her employer cut her pay 15 percent to avoid layoffs.
"I just lived paycheck to paycheck and had a good time," said Doshier, 32. "It's kind of scary to think that I am a paycheck away from being homeless."
Doshier's pay has been reinstated, but she's still watching her money. Dinner and drinks with friends are gone. Now she goes to free street festivals and the city pool. She explores Chicago neighborhoods by taking her dog on long "adventure walks."
The tight job market, scant pay raises and drooping home values are forcing others, too, to spend less and save more. Americans saved 4.2 percent of their disposable income last year. That was the highest level since 1998. Economists expect roughly the same level of saving this year and next.
That's why growth of less than 3 percent is forecast into 2011. And weak growth helps explain why unemployment is likely to stay high. It takes about 3 percent growth just to create enough jobs to keep pace with the population increase.
Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the economists in the AP survey nor the Obama administration expects that to happen.
The Fed's outlook has turned bleaker, too. It's why Chairman Ben Bernanke and his colleagues are weighing new steps to invigorate the economy if the recovery shows signs of backsliding. They are also expected to hold interest rates at record lows longer than economists thought three months ago.
A survey the Fed released Wednesday showed the economy facing a bumpy path back to health. The pace of economic activity remained modest in most of the country.
Most economists surveyed said the Fed would being raising short-term rates no sooner than next spring. In the last survey, most had thought it could happen as soon as late this year.
At the same time, state budget shortfalls have emerged as a major threat in the economists' view. State and local governments cut their spending in the first three months of this year at a 3.8 percent pace. That was the biggest cutback since the second quarter of 1981, just before the economy entered a severe recession.
When states and localities tighten spending by trimming services and jobs, the cutbacks ripple through the broader economy, causing individuals to spend less, too. The drop in state and local government spending shaved about half a percentage point off the U.S. gross domestic product in the first three months of this year.
Nearly two-thirds of the economists view the states' budget crises as a significant or severe threat to the rebound.
Despite such risks, 55 percent of the economists described the recovery as "on track" as of the middle of the year. The rest said it was "faltering."
"There's a risk that the loss of momentum will snowball and feed on itself, but I think in the end the recovery will stay on track," predicted another survey participant, James O'Sullivan, global chief economist at MF Global
Monday, July 26, 2010
Uncle Sam's unseen health care plan
If you're in the market for long-term-care insurance, take a look at what the government will offer soon. But should you wait for it or buy other coverage now?
[Related content: insurance, health insurance, long term care, insurance rates, Liz Pulliam Weston]
By Liz Pulliam Weston
MSN Money
Tucked inside the health care reform law is a new, little-noticed federal program that could revolutionize long-term-care insurance in the U.S., providing coverage for millions of people who don't have it and easing the strain on unpaid family caregivers.
What does long-term care cost?
It could do that. Or it could be a complete disaster.
First, some background on long-term care, which is the aid provided to people who can't perform some or all of the daily functions of life, such as eating, bathing, dressing or using a toilet:
Most of the 10 million people (.pdf file) who need long-term care in the U.S. are older than 65.
The median income for households headed by people 65 to 74 is $39,000, according to the Federal Reserve. For households headed by people 75 or older, median income drops to $22,800.Health care reform and your retirement
A year in a nursing home costs $72,270 for a semiprivate room, according to the MetLife Mature Market Institute. Help at home costs an average of $21 an hour, so a full-time caregiver would cost $43,680. If a person needed around-the-clock care, you could triple that figure.
These costs typically aren't covered by Medicare, the government health plan for people 65 and older. (Long-term-care costs can be covered by Medicaid, the government health plan for the poor, but usually only after the person's savings have been exhausted.)
You see the problem: The costs of long-term care can be catastrophic, quickly depleting a family's savings. If a disabled person is lucky enough to have a family member to help, there's still a hefty price to be paid. Many family caregivers see substantial drops in income because they work fewer hours or even quit their jobs to look after someone.
A disastrous start
Insurance would seem to be the answer, but the history of the private long-term-care insurance market has been troubling, to say the least. It's a relatively new product, launched in the 1980s, and many insurers initially priced their policies too low. That led to insolvencies and dramatic premium increases. Some people who paid into their policies for years saw their premiums double or even triple, making the coverage unaffordable just as they were most likely to need it.
Furthermore, most private policies won't pay if the care is provided by a family member. Plus there's no such thing as a standardized policy, and varying exclusions, definitions of disability, waiting periods and payout limits make it a confusing product to buy.
So it's not surprising that only about 8 million long-term-care policies are currently in force in the U.S. or that the federal government winds up paying about 60% of long-term-care costs, largely through Medicaid.
Enter the Community Living Assistance Services and Supports (CLASS) Act. CLASS, which was part of the health care reform bill signed into law in March, would provide at least $50 a day for people who needed help with custodial care. The program is required to pay for itself over 75 years; no taxpayer subsidies are allowed.
Have some CLASS
Here's how it will work when it launches in 2013:
Workers will have as-yet-undetermined premiums deducted from their paychecks if their employers choose to enroll in the plan. These employees could opt out of the program if they chose.
If an employer decided not to participate, workers could sign up and contribute on their own. The self-employed and military personnel will also be allowed to participate.
Premiums can be based on age but not health.
Workers will have to pay premiums for five years before becoming eligible for benefits. They will have to be employed for at least three of those years, although they can continue to contribute after leaving their jobs.
By law, caregivers who are family members can't be excluded from payments. That means a spouse, child or other relative who provides care at home can be compensated for it.
There's no provision for coverage for people who are not employed; that was intended to keep people who are already disabled from overwhelming the system. But the disabled who can run their own small businesses could contribute, which could increase the program's costs. Low participation among workers also could doom the program.
"That's a concern everyone has," said Bonnie Burns, a long-term-care insurance expert for California Health Advocates who has written about CLASS. "There can't be any taxpayer funds, and it has to be financially stable."
If healthy people opted out and only at-risk people participated, the program could descend into a "death spiral" in which premiums had to be jacked up to ultimately unaffordable levels.
Buy your own -- or trust the government?
At this point, too much of the program is unknown to determine whether it will be a boon or a bust. If premiums are low enough, the program could offer cheap insurance against catastrophic risk for millions of workers. If the program fails to pay for itself, though, participants risk paying into a system for years with no guarantee the benefit will be there if they need it.
If you're under 40, you're probably not in the market yet for long-term-care insurance and may want to see how CLASS plays out. If you're much older, though, you shouldn't wait to get insurance if you need it -- and you can afford it.
Premiums for coverage are lower the earlier you buy, Burns noted, and you can reduce your non-CLASS coverage later if CLASS proves to be a success. (The average premium for someone who's 50 is about $1,700 annually, compared with $5,700 for someone who starts coverage at 70.)
What you need to know:
Check it out before you decide. The rule of thumb is that unless you're poor or rich, you should at least consider buying long-term-care insurance. (People who don't have much will likely be covered by Medicaid, while people with assets of $2 million and up can probably pay for care on their own, although they may opt to buy long-term-care insurance anyway, to preserve assets for a spouse or other heirs.)
Don't go for the cheapest option. A policy that's significantly cheaper than others either skimps on coverage or is at risk for big premium hikes later, Burns said.
Be prepared to carry some of the costs. A policy that covers all of your long-term-care costs without limits is likely to be prohibitively expensive. You can make the premiums more manageable by agreeing to longer waiting periods, lower daily payments or a limited payout period. Most nursing home stays are two years or less, for example, so you're unlikely to exhaust the benefits if you opt for a three-year plan.
But get the inflation protection. Don't agree to a policy that doesn't increase your benefit over time to match rising costs, Burns said. Remember, you may not use the benefits for decades, and a payout that seems adequate today could fall woefully short in 2030.
Make sure you can afford the premiums now and in the future. The idea with buying long-term-care insurance early is that you "lock in" a low premium -- insurers can't raise your rate as you get older or if your health deteriorates. But insurers can and likely will raise rates for whole classes of customers if it turns out they haven't adequately estimated future costs, Burns said. If your premium is barely affordable now, a single rate increase could force you to drop it, so you would have paid in a lot of money only to ultimately lose coverage.
Get second and third opinions before you buy. Ask competing agents to offer you policies, then carefully read each one and ask questions to clarify anything you don't understand. Take the policies to a neutral third party, such as a financial planner or an elder-law attorney with experience in long-term-care insurance, to get yet another opinion. "This is not a product that you can change, like homeowners or auto insurance," Burns said. "It's a contract for both you and the company, and it could be decades before you find out whether you made a good decision."
Comment
This sounds like a good program, but is hard to envision at this point in time. If it comes down to looking ten years down the road or eating ten days down the road, the choice is obvious.
[Related content: insurance, health insurance, long term care, insurance rates, Liz Pulliam Weston]
By Liz Pulliam Weston
MSN Money
Tucked inside the health care reform law is a new, little-noticed federal program that could revolutionize long-term-care insurance in the U.S., providing coverage for millions of people who don't have it and easing the strain on unpaid family caregivers.
What does long-term care cost?
It could do that. Or it could be a complete disaster.
First, some background on long-term care, which is the aid provided to people who can't perform some or all of the daily functions of life, such as eating, bathing, dressing or using a toilet:
Most of the 10 million people (.pdf file) who need long-term care in the U.S. are older than 65.
The median income for households headed by people 65 to 74 is $39,000, according to the Federal Reserve. For households headed by people 75 or older, median income drops to $22,800.Health care reform and your retirement
A year in a nursing home costs $72,270 for a semiprivate room, according to the MetLife Mature Market Institute. Help at home costs an average of $21 an hour, so a full-time caregiver would cost $43,680. If a person needed around-the-clock care, you could triple that figure.
These costs typically aren't covered by Medicare, the government health plan for people 65 and older. (Long-term-care costs can be covered by Medicaid, the government health plan for the poor, but usually only after the person's savings have been exhausted.)
You see the problem: The costs of long-term care can be catastrophic, quickly depleting a family's savings. If a disabled person is lucky enough to have a family member to help, there's still a hefty price to be paid. Many family caregivers see substantial drops in income because they work fewer hours or even quit their jobs to look after someone.
A disastrous start
Insurance would seem to be the answer, but the history of the private long-term-care insurance market has been troubling, to say the least. It's a relatively new product, launched in the 1980s, and many insurers initially priced their policies too low. That led to insolvencies and dramatic premium increases. Some people who paid into their policies for years saw their premiums double or even triple, making the coverage unaffordable just as they were most likely to need it.
Furthermore, most private policies won't pay if the care is provided by a family member. Plus there's no such thing as a standardized policy, and varying exclusions, definitions of disability, waiting periods and payout limits make it a confusing product to buy.
So it's not surprising that only about 8 million long-term-care policies are currently in force in the U.S. or that the federal government winds up paying about 60% of long-term-care costs, largely through Medicaid.
Enter the Community Living Assistance Services and Supports (CLASS) Act. CLASS, which was part of the health care reform bill signed into law in March, would provide at least $50 a day for people who needed help with custodial care. The program is required to pay for itself over 75 years; no taxpayer subsidies are allowed.
Have some CLASS
Here's how it will work when it launches in 2013:
Workers will have as-yet-undetermined premiums deducted from their paychecks if their employers choose to enroll in the plan. These employees could opt out of the program if they chose.
If an employer decided not to participate, workers could sign up and contribute on their own. The self-employed and military personnel will also be allowed to participate.
Premiums can be based on age but not health.
Workers will have to pay premiums for five years before becoming eligible for benefits. They will have to be employed for at least three of those years, although they can continue to contribute after leaving their jobs.
By law, caregivers who are family members can't be excluded from payments. That means a spouse, child or other relative who provides care at home can be compensated for it.
There's no provision for coverage for people who are not employed; that was intended to keep people who are already disabled from overwhelming the system. But the disabled who can run their own small businesses could contribute, which could increase the program's costs. Low participation among workers also could doom the program.
"That's a concern everyone has," said Bonnie Burns, a long-term-care insurance expert for California Health Advocates who has written about CLASS. "There can't be any taxpayer funds, and it has to be financially stable."
If healthy people opted out and only at-risk people participated, the program could descend into a "death spiral" in which premiums had to be jacked up to ultimately unaffordable levels.
Buy your own -- or trust the government?
At this point, too much of the program is unknown to determine whether it will be a boon or a bust. If premiums are low enough, the program could offer cheap insurance against catastrophic risk for millions of workers. If the program fails to pay for itself, though, participants risk paying into a system for years with no guarantee the benefit will be there if they need it.
If you're under 40, you're probably not in the market yet for long-term-care insurance and may want to see how CLASS plays out. If you're much older, though, you shouldn't wait to get insurance if you need it -- and you can afford it.
Premiums for coverage are lower the earlier you buy, Burns noted, and you can reduce your non-CLASS coverage later if CLASS proves to be a success. (The average premium for someone who's 50 is about $1,700 annually, compared with $5,700 for someone who starts coverage at 70.)
What you need to know:
Check it out before you decide. The rule of thumb is that unless you're poor or rich, you should at least consider buying long-term-care insurance. (People who don't have much will likely be covered by Medicaid, while people with assets of $2 million and up can probably pay for care on their own, although they may opt to buy long-term-care insurance anyway, to preserve assets for a spouse or other heirs.)
Don't go for the cheapest option. A policy that's significantly cheaper than others either skimps on coverage or is at risk for big premium hikes later, Burns said.
Be prepared to carry some of the costs. A policy that covers all of your long-term-care costs without limits is likely to be prohibitively expensive. You can make the premiums more manageable by agreeing to longer waiting periods, lower daily payments or a limited payout period. Most nursing home stays are two years or less, for example, so you're unlikely to exhaust the benefits if you opt for a three-year plan.
But get the inflation protection. Don't agree to a policy that doesn't increase your benefit over time to match rising costs, Burns said. Remember, you may not use the benefits for decades, and a payout that seems adequate today could fall woefully short in 2030.
Make sure you can afford the premiums now and in the future. The idea with buying long-term-care insurance early is that you "lock in" a low premium -- insurers can't raise your rate as you get older or if your health deteriorates. But insurers can and likely will raise rates for whole classes of customers if it turns out they haven't adequately estimated future costs, Burns said. If your premium is barely affordable now, a single rate increase could force you to drop it, so you would have paid in a lot of money only to ultimately lose coverage.
Get second and third opinions before you buy. Ask competing agents to offer you policies, then carefully read each one and ask questions to clarify anything you don't understand. Take the policies to a neutral third party, such as a financial planner or an elder-law attorney with experience in long-term-care insurance, to get yet another opinion. "This is not a product that you can change, like homeowners or auto insurance," Burns said. "It's a contract for both you and the company, and it could be decades before you find out whether you made a good decision."
Comment
This sounds like a good program, but is hard to envision at this point in time. If it comes down to looking ten years down the road or eating ten days down the road, the choice is obvious.
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