It's been a good year so far for rail haters.
New governors in Wisconsin and Ohio made good on their campaign promise to kill passenger train projects in their states. Florida's new governor soon followed.
In the wake of the deepest recession since the Great Depression, all three governors rejected billions of dollars in federal funding that would have created thousands of new jobs building, operating and maintaining high-speed trains.
Not everyone scoffs at rail investment, though.
Billionaire investor Warren Buffett paid $26.5 billion in 2009 for the Burlington Northern Santa Fe Railway — or more precisely, for the 80 percent of BNSF he didn't already own.
In a letter to shareholders last week, Buffett noted that "over time, the movement of goods in the United States will increase, and BNSF should get its full share of the gain. The railroad will need to invest massively to bring about this growth."
Some of the nation's newest governors may be rail haters, but Buffett isn't.
Granted, BNSF is a freight carrier with 32,000 miles of track blanketing mostly the western two-thirds of the U.S. It has 38,000 employees and generated operating revenue of nearly $15 billion in 2010. It's also a subsidiary of Buffett's company, Berkshire Hathaway.
Buffett, a legendarily savvy investor, isn't someone who throws money away. Buffett expects BNSF to increase his company's earning power by 30 percent.
As new census data shows more growth in the West than in any other part of the country, BNSF, based in Fort Worth, Texas, is in the right place at the right time.
Some of the railroad's strongest assets include its access to Pacific Coast ports at Long Beach, Calif., and Tacoma, Wash., fast routes between the West Coast and Chicago and the Southeast, and coal lines that tap the vast reserves of the Powder River Basin in Wyoming.
Despite these considerable advantages, some business journalists still treat Buffett's move as a nostalgic journey into the days before "sexy" investments.
In a Feb. 28 column, Slate's Annie Lowrey asked, "Are trains really the way to win the future?" Lowrey also referred to railroads' "clunky machinery and crumbling infrastructure." But that image is at least 30 years out of date.
Thanks to deregulation, industry consolidation and economic growth, railroads have shed their old skin — the bankrupt carriers with broken down track and broken down locomotives of the 1970s have given way to lean, profitable, competitive companies.
They abandoned unprofitable routes and upgraded their best infrastructure to handle new business. Of all the old-economy industries — think steel and autos — railroads have thrived like none other, even during the deep recession of 2007-2009.
To be sure, the economic crisis hurt railroads along with everyone else. Like other big rail carriers, BNSF parked hundreds of locomotives, furloughed thousands of workers and postponed major track expansions during the recession.
But this year, the company plans to spend $3.5 billion this year on new track, locomotives and freight cars. Those furloughed workers are back on the job.
If that isn't a sign of confidence, what is?
"We are a major and essential part of the American economy's circulatory system," Buffett said in his letter. "In carrying out this job, we must anticipate society's needs, not merely react to them."
Buffett isn't the only believer in rail investment.
China, now the world's second-largest economy behind the U.S., now has the world's fastest trains and is well on its way to having a 10,000-mile network of high-speed rail by the end of the decade. Stateside, President Barack Obama has allocated billions of dollars for high-speed rail projects from coast to coast.
While some states have turned away money — and jobs — to build high-speed rail, others will gladly accept the unused funds for their own projects. California plans a network that will connect its largest cities, starting with a San Francisco-Los Angeles route. Assuming it overcomes local political roadblocks, it may be the first true high-speed rail line in the country.
There is considerable resistance to rail investment, but that's largely rooted in lack of familiarity. Pundits claim that Amtrak has received billions in federal subsidies since its inception in 1971 and that it's never been profitable.
But were it not for massive federal investment in highways, trucking companies, homebuilders and fast-food chains wouldn't have been profitable, either. Creating the Interstate highway system in the 1950s changed the American economy.
No one today would seriously argue that such investment needed to prove itself to get funding, but imagine what would have happened if anyone did. The roads wouldn't have been built.
The Warren Buffetts of the world have a pretty good track record, so to speak, in predicting what lies ahead. Would you rather listen to them, or to the rail haters?
ABOUT THE WRITER
Curtis Tate is an editor in McClatchy's Washington Bureau. He can be reached by e-mail at ctate@mcclatchydc.com
McClatchy Newspapers did not subsidize the writing of this column; the opinions are those of the writer and do not necessarily represent the views of McClatchy Newspapers or its editors.
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