The Road Show
Once again, Amtrak -- the passenger rail service primarily operating in the northeastern corridor of the USA -- is in financial trouble. Amtrak provides much needed and desired transit service between and within the big cities of the Northeast, but is a money-losing enterprise.
Congress passed the 1997 Amtrak Reform and Accountability Act, which prohibited Amtrak from using any federal funds for operating expenses after fiscal 2002. In other words, Amtrak was to be completely self-sufficient this year. Amtrak's ridership level has been consistently around 22.5 million passengers annually.
Their financial situation is regularly described as "dire". Amtrak has required over $34 billion in government subsidies since it was formed in 1971, and has requested another $1.82 billion to continue to operate at its present levels through 2004. Is this a sinkhole or what?
What are the problems and why can't it turn a profit? The primary reason is that when Congress voted to cut it loose, it also failed to provide it with adequate financing to operate as an independent company. You can't just "spin off" a business without giving it a way to finance its future and cash reserves to fund both maintenance and expansion.
Conservatives outside the northeast look at Amtrak and say, "Let's kill it, because it's too expensive to operate and we don't need it". That view of Amtrak misses several points:
(1) Amtrak competes with roads, airlines, and regional bus systems, all of which receive or are financed by tax money.
(2) Traffic in the northeast corridor is already terrible; removing Amtrak from the mix won't help and will require more tax dollars to improve the roads (for driving) or increase the runways (for flights). Yelling "kill it" without having a viable alternative is just stupid.
(3) The view is based on the premise that if it's something that people want, then private enterprise will fill the void. That's nice, but why hasn't a competing service been started or even proposed? See (1) above; without government subsidies, roads, airports, and trains wouldn't even exist, let alone be viable for general use.
So what's to be done?
First of all, let's stop thinking of this as an Amtrak-only problem. Airlines are not exactly free from government bail-outs (e.g., the $2.50 per flight tax that the airlines collected over this past summer, but that the government told the airlines to keep it instead of passing it along) and roads are definitely not free of government tax money. From these facts, you can only reasonably conclude that government is needed to create, organize, and subsidize general forms of transportation within and between cities in the USA. If there's an alternative conclusion, it's based on supposition and not reality.
Next, let's let Amtrak define a future for itself that best serves its riders. Does it really need to provide rail service between the two coasts or between New York and Florida or is the demand so light on those routes that airlines can provide a more cost-effective solution? Airlines do not provide a more cost-effective solution for short-duration trips (under 2 hours by rail) and cars are not efficient once the number of people using a particular route increases beyond a certain number. Let Amtrak focus on these routes in the corridors that need them.
Next, pass some -- not all, but some -- of the costs of Amtrak back to the states in which they operate. That way, if a state wants Amtrak to provide service within or between that state and another, Amtrak will have the financing to do this. The reason you don't want to pass all the costs back to the states is that the states cannot afford it right now.
Finally, provide Amtrak with $3 billion right now (that's 3 weeks in Iraq, by the way) to provide some needed maintenance to its tracks and equipment. Let it sell assets and shut down low-ridership routes immediately. Allow it to raise rates on certain routes. Make sure it gets its financial house in order.
22.5 million passengers need Amtrak. Ignoring the reality that most transit systems are publicly financed doesn't solve the problem. Giving Amtrak just enough money to continue operations also doesn't solve the problem. It's time to stop with the yearly teeth gnashing and put Amtrak back to work.
Congress passed the 1997 Amtrak Reform and Accountability Act, which prohibited Amtrak from using any federal funds for operating expenses after fiscal 2002. In other words, Amtrak was to be completely self-sufficient this year. Amtrak's ridership level has been consistently around 22.5 million passengers annually.
Their financial situation is regularly described as "dire". Amtrak has required over $34 billion in government subsidies since it was formed in 1971, and has requested another $1.82 billion to continue to operate at its present levels through 2004. Is this a sinkhole or what?
What are the problems and why can't it turn a profit? The primary reason is that when Congress voted to cut it loose, it also failed to provide it with adequate financing to operate as an independent company. You can't just "spin off" a business without giving it a way to finance its future and cash reserves to fund both maintenance and expansion.
Conservatives outside the northeast look at Amtrak and say, "Let's kill it, because it's too expensive to operate and we don't need it". That view of Amtrak misses several points:
(1) Amtrak competes with roads, airlines, and regional bus systems, all of which receive or are financed by tax money.
(2) Traffic in the northeast corridor is already terrible; removing Amtrak from the mix won't help and will require more tax dollars to improve the roads (for driving) or increase the runways (for flights). Yelling "kill it" without having a viable alternative is just stupid.
(3) The view is based on the premise that if it's something that people want, then private enterprise will fill the void. That's nice, but why hasn't a competing service been started or even proposed? See (1) above; without government subsidies, roads, airports, and trains wouldn't even exist, let alone be viable for general use.
So what's to be done?
First of all, let's stop thinking of this as an Amtrak-only problem. Airlines are not exactly free from government bail-outs (e.g., the $2.50 per flight tax that the airlines collected over this past summer, but that the government told the airlines to keep it instead of passing it along) and roads are definitely not free of government tax money. From these facts, you can only reasonably conclude that government is needed to create, organize, and subsidize general forms of transportation within and between cities in the USA. If there's an alternative conclusion, it's based on supposition and not reality.
Next, let's let Amtrak define a future for itself that best serves its riders. Does it really need to provide rail service between the two coasts or between New York and Florida or is the demand so light on those routes that airlines can provide a more cost-effective solution? Airlines do not provide a more cost-effective solution for short-duration trips (under 2 hours by rail) and cars are not efficient once the number of people using a particular route increases beyond a certain number. Let Amtrak focus on these routes in the corridors that need them.
Next, pass some -- not all, but some -- of the costs of Amtrak back to the states in which they operate. That way, if a state wants Amtrak to provide service within or between that state and another, Amtrak will have the financing to do this. The reason you don't want to pass all the costs back to the states is that the states cannot afford it right now.
Finally, provide Amtrak with $3 billion right now (that's 3 weeks in Iraq, by the way) to provide some needed maintenance to its tracks and equipment. Let it sell assets and shut down low-ridership routes immediately. Allow it to raise rates on certain routes. Make sure it gets its financial house in order.
22.5 million passengers need Amtrak. Ignoring the reality that most transit systems are publicly financed doesn't solve the problem. Giving Amtrak just enough money to continue operations also doesn't solve the problem. It's time to stop with the yearly teeth gnashing and put Amtrak back to work.
posted by Andy @ 7:15 PM
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