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 t's
official: Amtrak, the monopoly provider of the nation's intercity
rail passenger service, is rolling straight toward a financial train
wreck. The Amtrak Reform Council announced this week that unless
major management changes are adopted and unless private-sector options
are implemented, the train service will have to cease operations
within the next year or two. Amtrak's own management team acknowledges
that without more congressional handouts, train service will have
to be discontinued for the long distance routes.
John Norquist,
the Democratic mayor of Milwaukee and a commission member says that
Amtrak has been lying about its financial situation for years. Another
commission member, Wendell
Cox, a transportation consultant urges the privatization option.
"Only the private option can prevent billions of dollars of
future losses," Cox writes.
He is right.
This is at lest the sixth time in the last 25 years that the railroad
has run critically short of funds. Under one plan in the Senate,
Amtrak would receive some $50 billion in loans and grants over the
next decade to head off insolvency. When does this madness end?
Five years
ago the Republicans in Congress commanded Amtrak management to wean
itself off federal operating subsidies once and for all. The congressional
plan required Amtrak to reach financial self-sufficiency by 2002.
Amtrak is in worse financial shape today than it was when the new
legislative plan was enacted back in 1997. Amtrak makes Enron seem
like a well-run firm by comparison.
Amtrak was
formed in 1970 when the Nixon administration agreed to federalize
passenger trains in the wake of the Penn Central ("PC")
bankruptcy. The subsidies were to be temporary. But nothing in Washington
is ever temporary (except for tax cuts). So some $50 billion (in
today's dollars) has been burned by Amtrak locomotives already and
the subsidies are getting fatter every year.
It cost taxpayers
nearly $100 for every Amtrak rider. On some routes the subsidies
can reach $300 a passenger. It would be cheaper for taxpayers to
get these folks roundtrip tickets on Southwest Airlines.
Amtrak has
invested billions of dollars in high-speed rail along the Northeast
corridor. That's been a colossal waste of money. The high-speed
trains are only running at about 50% capacity. Some of these "super
expresses" have carried as few as 40 passengers — one
busload — in a 304 seat, 12,000 horsepower, 8-employee train.
Despite all
the money losses and broken promises of "financial solvency
right around the corner," Congress is likely to ignore the
council's recommendations and instead approve a "more of the
same" option for Amtrak. Amtrak's management will interpret
this copout as a sign that Congress was never really serious about
requiring the railroad to shed hopelessly unprofitable routes, to
find ways to replace tax subsidies with ticket revenues, to tighten
its belt for cost-cutting purposes, and to slash layers upon layers
of redundant managerial positions.
Only private
ownership will force these cost-cutting reforms. Congress must understand
that it is precisely the existing federal monopoly-management structure
of Amtrak that is ruining rail-passenger service in America.
There is no
law of economics that says that Amtrak has to lose money. It has
been Amtrak's ready access to tax dollars that has impeded financial
progress and service improvements.
Privatization
would not mean the end of rail-passenger service. Under one viable
plan, proposed by the United Rail Passenger Association, the government
would retain control of ownership and maintenance of the tracks
and the rest of the physical infrastructure, just as the government
builds and repairs the roads. But operational costs would be covered
by private for-profit railroad entities. Congress should immediately
lift the monopoly protection of Amtrak, which prohibits private
operators from running rail service on government tracks. Amtrak
says it needs this blanket of legal protection to keep out competitors
who might "skim the cream" and take away passengers on
the most profitable routes. Since none of its routes make money,
Amtrak has no cream to skim. Private operators could demonstrate
that rail
Passenger service,
if operated efficiently, can indeed make money. Amtrak is a $50
billion lesson in economics learned the hard way-and at the taxpayers'
expense. Monopolies provide lousy service, with few consumer choices,
and ever-rising costs. The new Amtrak report confirms this and warns
Congress not to throw another $50 billion away. Only the privatization
option can save the railroads.
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