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June 25, 2002, 10:15 a.m. Blackmail Strategy Amtrak’s shutdown is a manufactured crisis. By Wendell Cox

mtrak's David Gunn has done Bill Clinton one better. When the Republican led Congress did not pass appropriations bills on time, forcing a federal government closure, the Clinton administration invoked the tried and true "Washington Monument Syndrome." This involved closing first the tourist attractions that were calculated to create an immediate outcry that would force Congress to act. It worked. Now Dave Gunn has invoked what might be called "Louvre Syndrome," threatening not only to close Amtrak services but to force closure of commuter rail services that are not even administered by Amtrak. Amtrak has this "hostage taking" tactic available because many of the nation's commuter-rail systems depend upon Amtrak for support or operations.

In Boston, Baltimore, and Washington, Amtrak provides commuter-rail services under contract to transit authorities. These are not Amtrak services, they are Massachusetts Bay Transportation Authority, Maryland Transportation Authority, and Virginia Rail Express services. In each case, Amtrak makes a commercial profit, yet Amtrak has indicated that these services may close.

Similarly, there is a threat to commuter-rail services in the Philadelphia and New York areas, where transit authorities operate over Amtrak tracks. Again, Amtrak makes a profit on both track access and dispatch, so there is no reason that these services should be shut down.

Then there is the matter of Amtrak's own high-speed Acela service, which operates from Boston to New York and Washington. Amtrak has claimed to be making money on this service, and, as a result, there is no reason to shut it down. Then again, with the Enronic accounting shenanigans of deception and surprise, it is possible that Acela is yet to make a profit.

All of this points out the necessity of bringing Amtrak to an end. For more than 30 years, this bulbous government monopoly has been providing service at much higher than competitive costs, while consuming more than $25 billion in subsidies. Today, the average Amtrak passenger pays a higher fare per mile than the average airline or bus passenger. The taxpayers pick up even more. Around the world, passenger rail is being reformed and improved, but not in the United States. Large general subsidies are being replaced by smaller subsidies in return for accomplishing particular performance targets. Contrary to the rail-fan mantra, some passenger-rail operations are now profitable and paying taxes, such as the three railroads on the main Japanese island of Honshu, which carry more than double the number of passengers that are carried by the French and German systems combined.

The administration's plan for separating infrastructure and subjecting passenger rail to competition mirrors the plan that we adopted at the Amtrak Reform Council. The present manufactured crisis speaks volumes as to its need. If infrastructure were separated, there would be no issue with respect to Northeastern commuter-rail services. If Amtrak were operated in a competitive environment, it would either fail or perform, but in either event passenger services would continue. Indeed, the most promising strategy appears to be bankruptcy. Like in the case of Kmart, where the lights barely flickered at bankruptcy, a trustee would continue to operate the Amtrak services that make sense.

But a more immediate political deal is likely. Any Amtrak bailout needs to carry conditions that ensure more responsive future operation of the railroad.

1. The board of directors who presided over Amtrak's failure should be removed and congressional-oversight hearings should be held. This organization has been both mismanaged and misdirected, and it has systematically mislead both the American people and the Congress with respect to its financial affairs.

2. All future borrowings should be subject to approval by a competent federal financial authority, such as the Department of the Treasury or the Office of Management and Budget. In the last five years Amtrak has increased its debt from $1.7 billion to $4.4 billion.

3. Ownership of stations that are also used by commuter-rail authorities should be temporarily transferred to the federal government, for eventual privatization or sale to state or local governments.

4. Serious labor concessions and administrative efficiencies should be required. Amtrak is the only intercity mode of transport that receives subsidies and the only one that has not materially improved productivity in recent years. Today, the profitable railroads of Japan move more than three times as many passengers per employee as Amtrak. And, Amtrak employees are paid, on average, 20 percent more than employees in the airline industry.

The administration needs to muster the resolve to stand up to Amtrak's blatant strategy of blackmail. There are alternatives, virtually none of which require a continuation of the present failed approach. The real question comes down to whether or not the Bush administration, which has shown no reluctance to face down challenges, will call Mr. Gunn's bluff.

— Wendell Cox is a member of the Amtrak Reform Council.