News Release

October 19, 2001

Reform committee should pull the plug on Amtrak, study says
No end in sight for 30 years of red ink, privatization a solution

WASHINGTON—The Amtrak Reform Council, charged with executing a congressional mandate to reorganize the government-owned rail system if it doesn't turn a profit by 2002, may vote as early as today to find whether the ailing train service will meet its goal.

In the new Cato Institute study, "Help Passenger Rail by Privatizing Amtrak," former council member Joseph Vranich and Edward L. Hudgins, director of regulatory studies at Cato, argue that Amtrak will not meet the deadline. "It is time for the council to make this finding official and begin the mandated process of restructuring and liquidation," they say.

Amtrak has always run at a loss since its creation 30 years ago, collecting more than $25 billion in taxpayer subsidies, the authors write. And if it is not reorganized, the authors say, it will continue to hemorrhage. For example, following the Sept. 11 attacks trains reported a spike in ridership, but perversely, some in Congress proposed a $15-billion "emergency" aid package because of the increase.

"One reason for Amtrak's abysmal showing is that the trains run late," the authors say. "Some Amtrak trains are slower than the trains our great-grandparents rode in the early 1900s."

Although Amtrak has reported that its punctuality has improved, Vranich and Hudgins charge that they have tinkered with schedules, artificially padding time at the end of a line, to give the appearance of on-time performance.

Such padding is part of a series of Amtrak "credibility crises" that the authors outline, including broken promises about its new Acela Express, exaggerated ridership gains, and its use of stealth subsidies.

"A government-owned Amtrak whose debt is at record levels and whose costs continue to rise will never be solvent," Vranich and Hudgins argue. They explore the routes to an Amtrak alternative and explain how no fewer than 40 countries around the world are replacing government railways with more efficient franchised private operators.

"Help Passenger Rail by Privatizing Amtrak"