Commentary

Stop the New Amtrak Bailouts

By Joseph Vranich and Edward L. Hudgins
October 29, 2001
Amtrak ridership surged upward in the aftermath of the Sept. 11 terrorist attacks, and a lingering fear of flying gives the government-subsidized railroad a chance to retain some new customers. As travelers add extra hours for airport security, it can be faster to take the train between New York and Washington and on a few other short-distance routes.

But this opportunity comes at a time when Amtrak is fighting for its life. The railroad has lost money in each of the 30 years since its creation, collecting more than $25 billion in federal subsidies. Today, Amtrak’s debt is at record levels and signs are that Amtrak’s financial hemorrhaging will continue.

Congress has required Amtrak to break even by 2002, and established the Amtrak Reform Council to monitor the railroad’s finances. It’s time for the council to declare that Amtrak is unable to survive without continued federal operating subsidies, an action that could spark a reorganization, privatization or liquidation.

Perversely, under the guise of patriotism, some lawmakers want to lavish record-high subsidies on Amtrak. One bill would give Amtrak $3.2 billion in “emergency” aid because its ridership increased. (Ironically, the airlines are receiving $15 billion because ridership decreased.)

Other proposals would give deficit-ridden Amtrak access to government-backed bonds, which would cost taxpayers $19 billion, and $71 billion in loans to states for rail projects, allowing Amtrak to feed at another public trough. These handouts will only paper over Amtrak’s wasteful ways. As if subsidies and pleas for handouts are not bad enough, Amtrak wants to abandon the generally accepted accounting principles, which are used by private businesses, so it can disguise — temporarily — its poor financial condition.

Amtrak has been unable to tap into a burgeoning travel market over the past three decades. Americans took about 660 million airline trips last year compared with only 22.5 million trips on Amtrak, just a hair over Amtrak’s ridership a decade ago. Amtrak accounts for only three-tenths of 1 percent of intercity trips; even private aircraft carry twice as many passengers.

One reason for Amtrak’s abysmal showing is that many of its trains run late. Worse, the railroad obscures poor performance by measuring on-time arrivals only at selected “checkpoints.” And just before those points, Amtrak builds lots of extra time in schedules so trains can officially arrive “on time” even though the trains were late at many stations along the line.

In addition, some Amtrak trains are slower than trains our great-grandparents rode in the early 1900s. One train pulled by a steam locomotive in 1926 took 8 hours and 40 minutes to travel from Jeffersonville, Ind., to Chicago — 4 hours faster than Amtrak today. Amtrak averaged only 10 passengers daily on a slow Wisconsin train. When earlier this year Amtrak learned the empty seats were to be shown on NBC’s “The Fleecing of America,” bureaucrats suspended the route.

In a “Three Stooges” approach to the future, Amtrak proposes to build so-called high-speed train routes more than a thousand miles long. But not even the fastest train can compete with aviation for more than a 300-mile trip. Such absurd projects are guaranteed to become astounding burdens on public treasuries.

Even Amtrak at its best is disappointing. Amtrak’s fresh-out-of-the-factory Acela Express between Washington and Boston is slower than high-speed trains that have been running for many years in Europe and Japan.

Rail travel could have a bright future, but only if Congress examines ways to sell or franchise Amtrak to private interests. Private companies do a more efficient job than government delivering commercial rail services. Britain privatized its system and the passenger increase alone exceeds Amtrak’s total annual traffic. The privatized Japanese railroad is nine times more efficient than Amtrak. Several years go Massachusetts-based Guilford Rail System offered to purchase Amtrak’s Northeast Corridor routes.

Amtrak legislation now before Congress is delusional. Policy makers should first decide on the type of organizations needed to replace Amtrak and which markets can sustain rail passenger service before spending more taxpayers dollars propping up Amtrak’s hopelessly dysfunctional system.

Joseph Vranich, a former spokesman for Amtrak, served on the Amtrak Reform Council from 1998-2000. Edward L. Hudgins is the director of regulatory studies at the Cato Institute.