Commentary

Amtrak Subsidies: This is no Way to Run a Railroad

By Stephen Moore
May 22, 1997

Last year Amtrak celebrated its silver anniversary. After a quarter-century, we still haven’t learned what should have been evident when Richard Nixon launched this ill-begotten experiment: Uncle Sam doesn’t have a clue as to how to run a railroad.

Since 1972 Amtrak has received more than $13 billion of federal subsidies. Twenty-five years later, Amtrak appears no closer to financial independence than the day taxpayer assistance began. Worse, Amtrak has no apparent plan to become self-sufficient. In fact, it is now pressing for a half-cent of the federal gasoline tax in order to have a permanent umbilical cord to the federal treasury. That hardly seems fair, since people who pay the gasoline tax — that is, people who drive their cars — aren’t using Amtrak.

A recent Cato Institute study which I coauthored with Wendell Cox and Jean Love shows that virtually every stated justification for continued Amtrak subsidies is based on myth, not reality. Examples:Amtrak makes a negligible contribution to the nation’s transportation system. Amtrak represents just .007 percent of all daily commuter trips and just 0.4 percent of all intercity trips.

Amtrak’s typical riders are not low-income Americans. The poor are less likely to travel by Amtrak than by most other travel options. Only 13 percent of Amtrak passengers have incomes below $20,000. The average Amtrak rider has a higher household income than the average taxpayer. In fact, the clientele for Amtrak Metroliner service between Washington and New York consists largely of Wall Street traders, K Street lobbyists and other affluent business travelers. These folks aren’t poor.

But it’s a myth that Amtrak simply could not survive under private ownership and operation. There is no law of nature or economics that says that trains must lose money. Because of government control, however, Amtrak costs are far higher than necessary. Amtrak provides especially unprofit-able services for political reasons, and it is hamstrung by archaic work rule provisions that make it more expensive than other travel options. For example, federal law requires Amtrak to pay up to six years of severance pay to workers who are laid off.

If Amtrak could shed some of its worst money-losing routes, reorganize its management and reform its Byzantine work rules, it could save hundreds of millions of dollars. Competitively contracting food service could also save millions of dollars (and might improve meal service) on the trains.

Freed of excessive federal regulation and political control, Amtrak would be capable of earning profits on some services, especially in the Northeast Corridor. The Metro-liner, which serves the Northeast Corridor, already covers 90 percent of its fully allocated costs already and could be profitable in the absence of federal regulation and ownership. Some services, especially long-distance routes, could be operated at higher fares as “land cruises” with costs paid in full by users.

Amtrak has virtually no impact on reducing traffic congestion, pollution or energy use. Even a doubling of train ridership would reduce energy consumption and traffic congestion by less than 0.1 percent. Amtrak is by far the most highly subsidized form of intercity transportation. The average taxpayer subsidy per Amtrak rider is $100, or 40 percent of the total per-passenger cost. Even this figure doesn’t adequately express how hugely inefficient some long-distance routes are today. For example, the average subsidy to a New York-Los Angeles rider exceeds $1,000. The estimated round trip subsidy per passenger for a Denver-Chicago trip is $650. It would be cheaper for taxpayers to shut down routes like these and purchase discount round-trip airfare for all Amtrak riders.

Most Americans do not want to see rail passenger service disappear in the United States. Taking a train trip is fun, exciting and often memorable. Many routes go through breathtaking scenery, such as those running through Glacier National Park. Trains are a wonderful way to see America.

For hopelessly unprofitable routes, service should be canceled, just as cruise line service from Florida to the Caribbean would be canceled if it were unable to operate in The black. Services that lose money routinely fail. There is no more reason for taxpayers to subsidize Amtrak than to subsidize United Airlines, Greyhound Bus Company or Carnival Cruise Lines.

Amtrak can be profitable. But only if Congress puts it back on track by weaning the railroad from federal subsidies. For 20 years, Amtrak supporters have promised that self-sufficiency is “just around the corner.” Now is the time for Amtrak to turn that corner.

Stephen Moore is director of fiscal policy studies at the Cato Institute.