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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.
— Stephen Moore is president of the Club for Growth. |
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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. 
