By 2020, China will be blanketed by high-speed rail.  The Asian giant is investing $1T USD to create 16,000 miles of high-speed rail track -- roughly a third of the total length of the U.S. interstate highway system.  Trains will zip along at 200+ miles per hour, opening inter-city opportunities for businessmen and engineers that were formerly only available to the wealthy elite who own private jets.  Meanwhile, much of the U.S. is stuck in the slow lane, something that may have a dire impact on the nation's competitiveness.

In response to a difficult recovery and growing conservative movement many states have abandoned plans to deploy high-speed rail, despite President Obama promising as much as $53B USD in matching federal grants for state rail projects over the next six years.

I. U.S. States Opt Out of Advancing U.S. Transportation

Some states like Michigan have effectively rejected projects by simply falling silent.  Michigan governor Rick Snyder has simply stopped talking about the state's former project and has refused calls or discussions on the topic.

Other states like Florida are taking a more active stance.  Last month Florida Governor Rick Scott -- also a Republican -- killed his state's high-speed rail project.  The proposed line would have connected Tampa to Orlando -- two of Florida's top metropolitan areas.  Governor Scott cites a 2009 study that stated that the line's first operation year -- 2015 -- would only have 2.4 million riders and would be operating at a deficit, as a factor in his decision.  He also cites advice from the libertarian Reason Foundation and the Heritage Foundation, a conservative think tank.

This week the U.S. Department of Energy released a new study, saying that the initial estimates were incorrect and the line would likely generate a $10.2M USD surplus on its very first year of operation and have 3.3 million riders.  The new study cost $2.4M USD in federal funding and was conducted by Wilbur Smith Associates and Steer Davies Gleave.

The governor responded to this study, saying that "burdening" taxpayers with the $2.4B USD project was unacceptable.  He states, "I had been briefed on their ridership study and I looked at other ridership studies and I’m still very comfortable with the decision I made that I don’t want the taxpayers of the state on the hook for the cost overruns of building it, the operating costs or giving the money back if it’s shut down."

A spokesperson for the governor said he questioned the study's accuracy, stating, "The governor has said all along he believes ridership projections for this and other rail projects are overestimated. Numerous studies support this conclusion."

The governor's opinions may not be backed by many of his constituents, though.  A recent poll showed that 59 percent of residents of Florida's Hillsborough County supported the project.

But it may be too late for Governor Scott to change his mind -- on Friday U.S. Transportation Department Secretary Ray LaHood announced that the $2.4B USD in matching funds that Florida would have received were going to be redirected to California.

II. Federal-backed Semicenturial Transportation Refresh has Historically Been Vital

The issue of high-speed rail projects is sharply dividing the U.S.  Traditionally liberal west coast states like California, Oregon, and Washington have embraced the initiative and have planned a vast interconnect rail network.  Meanwhile conservative and moderate Southeast and Midwest states such as Florida, Michigan, Wisconsin, and Ohio appear on the verge of rejecting rail plans.

Ultimately, history tells us that much of the U.S.'s modern economic golden age is thanks to transportation pushes that mixed federal funding (land, grants, etc.) with private sector investment.  Examples include the push for steam rail in the late 1800s and the push for an interstate highway system in the aftermath of World War II.  These dramatic transportations pushes typically come ever 50 years or so.

Approximately 50 years have passed since the expansion of the interstate highway system, but this time around not everyone is supporting the latest push.  History shows that the economy is intimately linked to transportation.  Thus, whatever the upfront costs of intercity rail, states rejecting it may face a much higher cost as businesses and professionals flee to more technologically advanced states.

But while the states may be among the losers economically, ultimately it's the nation as a whole that will likely be the biggest loser.  If the U.S. can't keep up with China in terms of transportation it will be at a tremendous handicap economically.  And financial trends tell world observers that the U.S. has little margin for error in its bid to stay ahead of a surging China.