Posted by Warren Beatty on 27 September, 2011 at 5:00 am. 10 comments already!


President Barack Obama wants to “stimulate” the economy through infrastructure spending. High on his list is “high speed rail.” (HSR) He has even compared this country to China regarding lack of high speed rail. So, with Obama’s desire in mind, I thought a look at AMTRAK and the subsidies it receives might be in order. It can be argued that AMTRAK was not designed to be high speed rail, and that is true. However, I think that it can serve as a good model of how the government will manage high speed rail.

HSR and Stimulus Spending

Obama’s first “stimulus” (the 2009 one) called for $13 billion on HSR projects. Infrastructure spending decisions are best made at the lowest, most local level possible. When they are made at the federal level, politics, not cost-benefit analysis, dictates what gets funded. When the governors of Florida, Ohio, and Wisconsin determined that their states’ HSR projects were not worth state taxpayer dollars, Obama rejected the governors’ pleas to let them keep the federal funding for other infrastructure spending. Instead, Obama reaffirmed his faith in HSR and sent all the money to California. After California experienced massive cost overruns, Obama proposed his second “stimulus” (the American Jobs Act), which has in it an “Infrastructure Bank” and calls for $53 billion to be spent on HSR. Considering Obama’s obsession with HSR, how much of the infrastructure bank’s “grants, loans, or a blend of both” will be wasted on projects like California’s HSR project? How much of that money will taxpayers ever see again?

AMTRAK “Management”

First, a few observations about AMTRAK. The National Railroad Passenger Corporation, or AMTRAK, is the federal organization that operates passenger rail service in the United States. It was created by the Rail Passenger Service Act of 1970. AMTRAK has been providing very poor service for over forty years, while receiving almost $40 billion in federal subsidies. The system has never earned a profit, and 41 of its 44 routes lose money, with the average of $32 lost per passenger. AMTRAK accounts for 0.1 percent of America’s passenger travel. AMTRAK’s load factor (percentage of seats occupied) is below 50 percent, which compares to a typical 80-percent load factor on airlines.

The Northeast Corridor has the highest passenger volume of any AMTRAK route, carrying nearly 10.9 million people in 2008, and its high-speed Acela Express made a profit of about $41 per passenger. But the more heavily utilized Northeast Regional, with more than twice as many riders as the Acela, lost almost $5 per passenger. The Sunset Limited, which runs from New Orleans to Los Angeles, lost $462 per passenger. AMTRAK operates 44 routes on over 22,000 miles of track in 46 states, the District of Columbia, and three Canadian provinces. AMTRAK owns the trains, but 97 percent of the track is owned by freight rail companies, who had to buy the right-of-ways and who maintains the tracks. How much more in subsidies would AMTRAK need if it had to buy its own right-of-ways and maintain its own tracks?

AMTRAK management deals with is an expensive workforce, with about 19,000 employees, about 86 percent of whom are covered by collective bargaining. Compensation represents almost half of AMTRAK’s total operating costs. The average AMTRAK employee earns more than $91,000 a year in wages and benefits.

Transportation Subsidies

Defenders of AMTRAK argue that most of the nation’s transportation industry is subsidized. AMTRAK’s subsidy is by far the most generous. AMTRAK subsidies totaled $237.53 per 1,000 passenger-miles, while commercial aviation’s was $4.23. These subsidies fail to make train travel more affordable. Randal O’Toole of the Cato Institute observes a one-way ticket between Washington, D.C., and New York City on AMTRAK’s high-speed Acela costs $139, while bus service costs less than $15.

Specific AMTRAK Subsidies

The discussion above outlines the subsidies AMTRAK receives or has received. Now let’s turn our attention to the specific subsidies received by AMTRAK, such as retaining many unprofitable routes.

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.  BTW these dollar amounts are in 1997 dollars.

In 2010, taxpayers spent more than $110 million subsidizing AMTRAK’s Florida trains. The round-trip subsidy to each New York-to-Orlando train passenger is close to $500.

We taxpayers liberally subsidize first-class AMTRAK travel between Chicago and St. Louis.

AMTRAK is trying to go green by switching one of its lines, the Heartland Flyer, which runs between Oklahoma City and Fort Worth, to run on a special biodiesel blend that includes beef byproducts.

According to AMTRAK’s Facebook page, it will introduce four new P-42 diesel-electric trains, each with an “historic paint scheme,” and an “exhibit train” that will travel the country for a year carrying educational exhibits, publish a book called “AMTRAK: An American Story,” release a DVD on its history, and launch an anniversary website. Gladys Knight is acting as National Train Day spokesperson in 2011. BTW, did you know that National Train Day, established by V.P. Joe Biden, is celebrated each year on the Saturday closest to May 10th, the anniversary of the pounding of the Golden Spike in Promontory, Utah.

Is AMTRAK a Failure or a Success?

Nothing succeeds in Washington DC like repeated and costly failure. The federal government doesn’t have a clue about running a railroad. AMTRAK’s monopoly over intercity passenger rail travel provides little incentive to provide high-quality and efficient service. The threat of potential budget cuts or elimination has been repeatedly undermined by Washington’s willingness to bail AMTRAK out. So I guess that we taxpayers are stuck with forever subsidizing AMTRAK. And if HSR is foisted upon us, we can expect the same “management” of it.

But that’s just my opinion.

0 0 votes
Article Rating
Would love your thoughts, please comment.x