TCS Daily

There's Something About a Train Subsidy That's Magic...

By James K. Glassman - March 3, 2005 12:00 AM

Right after the November 1994 election, I wrote that "the way to tell how serious Republicans are about cutting federal spending is to watch...the Big Four programs: farm subsidies, Amtrak, public television, and arts funding."

The four are big, not in dollars, but in symbolic value: "It's impossible for a party that professes to believe in limited government to justify the use of taxpayer dollars for any of the Big Four, yet each has a powerful constituency."

A decade later, the record is not encouraging. All four programs have survived. NEA has been cut considerably, and the Corporation for Public Broadcasting's appropriation has risen at about the rate of inflation. (I should note that I have softened on both of these over the past 10 years; at a total of $500 million a year, they're probably worth the price.)

Farm subsidies are a more complicated story. They seemed on the way out, then made a comeback, and now President Bush proposes reductions for 2006.

Amtrak has been the biggest disappointment because the case for elimination is so clear. Instead, subsidies have risen by one-third since the Republicans took the House.

But, now, the administration wants to slash Amtrak's federal funding from $1.2 billion to $900 million. Some say that spells doom for the national passenger railroad as we know it.

"The president's number is a shutdown number," says David Gunn, Amtrak's CEO. Amtrak's advocates claim a reduced subsidy will plunge the railroad into bankruptcy. In reorganization, a reasonable scenario would be for Amtrak to sell its Northeast Corridor routes and shut down everything else -- unless local governments pick up the slack.

This is precisely the right approach. Why has it taken so long?

The answer, as Gunn once said in a moment of too much candor, is that politicians "don't have the intestinal fortitude to stand up and get rid of passenger rail service."

In 1970, Washington created Amtrak as a way to rescue passenger rail service, which hadn't made a profit since the end of World War II, thanks to the unleashing of air and auto travel. Since its advent, Amtrak has never made money. Subsidies total $30 billion.

Amtrak's audited statement for fiscal 2003 (the most recent figures) show a loss of $1.3 billion, up from $1.1 billion in 2002. Amtrak's payroll alone exceeds its ticket revenues.

So why not get rid of it? It would be cheaper, on some routes, for the government simply to buy plane tickets for train travelers.

The brilliance of Amtrak is that it creates a constituency in the 45 states in which its trains roll. Typical was a comment I heard at a congressional hearing a while back. Sen. Ron Wyden (D-Ore) sternly admonished Amtrak's CEO that "sharp pencil budgeting was required," but in the next breath, the Senator reminded, "It's not a national rail system if you leave Pendleton, Ore., behind."

At the same hearing, the chair, Sen. Kay Bailey Hutchinson (R-Texas), told the CEO she was giving Amtrak "one last chance." That was in 1997. Between 1998 and 2003, Joseph Vranich shows in his excellent book, "End of the Line," Amtrak received 29 official warnings about its financial condition from the GAO, CBO, etc., etc. Yet the trains still roll.

So far, 38 Senators -- among them, legislators who portray themselves as fiscal conservatives, like Sen. Evan Bayh (D-Ind) -- have signed a letter opposing the budget cuts. But my guess is that, this time around, Amtrak will get chopped.

I'm as sentimental about trains as the next guy, but Amtrak is tiny and creaky. While management crows about a ridership record, Amtrak carried just 24 million people nationwide -- fewer than emplaned at the Seattle airport alone. California is the number-one Amtrak state, with 4 million riders -- compared with 87 million air passengers.

The irony is that, while the United States preaches free-market economics, it runs a retrograde socialist-style rail system while the rest of the world -- Argentina, Poland, South Korea, Germany are just a few of the nations cited by Vranich -- is privatizing. Meanwhile, service deteriorates, and, as Vranich shows, Amtrak is vulnerable to horrific terrorist attacks.

The latest auditor's report from KPMG that Amtrak "has a history of substantial operating losses and is highly dependent upon substantial Federal government subsidies to sustain its operations."

It's time for those subsidies to end.


TCS Daily Archives