Amtrak And The Progressive Sleight Of Hand

by Charles Katebi on April 19, 2013 · 7 comments

in Bailout Watch, Mobility, Politics as Usual, Zeitgeist

Progressives have always assumed that if something is good, it must be provided through coercive force by a central government. This is illustrated in progressive support for continuing large Amtrak subsidies. Various liberal policy outfits including the Brookings Institution and the Center for American Progress have been recently celebrating the mild uptick in the government-subsidized passenger railroad’s ridership levels. The train served a record 32.1 million passengers in 2012, a 55-percent increase since 1997. In earlier times, liberal advocates would have congratulated themselves on the success of a government program’s drive to self-sufficiency and move to let it fend for itself in the private sector, in the same way federally controlled Conrail was privatized and later sold off to CSX and Norfolk Southern. But this doesn’t cut it for today’s progressives, who appear to believe Amtrak’s recent uptick in ridership is reason for increasing federal subsidies. This is because they are well aware that Amtrak’s supposed success is largely a mirage.

The rise in ridership appears impressive, until one realizes that 1997 was a severe low-point for train travel. If measuring Amtrak’s total passenger miles starting in 1991, its increase over the past 22 years is a pathetic 8 percent. Its condition looks even worse when considering that population growth has increased over this period by 25 percent, pushing Amtrak’s share of intercity passenger travel down from 0.45 to 0.36 percent. Passenger rail is alone in the dismal state of its ridership. Despite the airline industry’s financial instability, not to mention the costs incurred due to the September 11 attacks and the TSA, airline ridership increased by 68 percent. Even intercity buses carry three times more passenger miles than Amtrak does, while the vast majority of intercity travel is made by private automobile.

Supporters of Amtrak disregard the railroad’s low ridership rates by emphasizing the pittance the federal government annually pays to it as evidence of its fiscal sustainability. While the Department of Transportation’s 2012 budget appropriated $70 billion for the Highway Trust Fund and $18.7 billion for the Federal Aviation Administration, DOT spent a mere $1.5 billion on Amtrak. Under closer scrutiny, however, Amtrak’s low cost is illusory. Highways and airports absorb greater federal subsidies because their networks are vastly greater than Amtrak’s and carry far more passengers (not to mention highway and air freight service). It would be misleading to compare Amtrak’s absolute direct subsidies of 6.5 billion passenger miles annually with other modes—highways, which account for 4.1 trillion passenger miles, and the airline industry, which accounts for 500 billion passenger miles. A more accurate comparison of federal subsidies would be to break down the value of these subsidies for each passenger mile travelled. Amtrak’s subsidies including state grants average 25 cents per passenger mile.  Per passenger mile subsidies for airlines are only 2.8 cents and the highway subsidy is an even smaller 1.1 cents.

Despite these lavish subsidies, the government-funded railroad’s operational inefficiencies require it to raise the fares it has charged passengers again and again. Under decades of sclerotic management, Amtrak average fares have risen from 17 cents to 32 cents per passenger mile. During the same period, efficiency gains have lowered the average fare per passenger mile for bus and air travel to 13 cents.

The deficit in what Amtrak collects in revenue and what it spends every year cannot even be taken at face value. Unlike most firms, Amtrak does not count maintenance as an operating cost and instead considers it a capital cost. This allows it to treat routine maintenance like long-term investments in new rail and carrier capacity, pushing these costs off its balance sheet. In addition to ticket sales, the government railroad also counts state grants and subsidies that total $225 million as revenue. If all these costs are correctly take into account, even Amtrak’s often praised Northeast Corridor runs an annual loss if, as Cato’s Randal O’Toole notes, the true costs were properly apportioned across routes.

Healthy public debate is essential if America is to ultimately tackle its dire and growing transportation challenges. You may not be in favor of privatizing passenger rail service, but pretending that Amtrak is a model of efficiency is simply intellectually dishonest.

Bill Hutchison April 19, 2013 at 10:29 pm

“Lavish subsidies?” Surely you jest. You must be positively apoplectic over the humongous subsidies for other modes. Highway users only account for about 51% of the total cost of highways. Where are you on that?

Marc Scribner April 23, 2013 at 4:28 pm

You mean “roads” broadly, not just highways. Most local roads are paid for with property taxes by the abutting homeowners. Highways do better, especially when you factor in all the highway-user generated revenue that is diverted to non-highway uses, mainly mass transit. At the federal level, about 1/3 of highway user funds are diverted to non-highway projects, largely thanks to political horsetrading.

Charles Katebi May 3, 2013 at 1:16 pm

Nominally airports and highways receive more funding because their facilitate so much more travel than passenger rail . Highway users also dont account for the full cost of highways because so a third of the Highway Trust Fund’s capital is syphoned to non highway projects like bike paths and local transit. Yet for some reason, the users of these modes of transportation think they shouldn’t have to pay for these less efficient and less used modes of transportation.

BinhT April 20, 2013 at 9:49 am

Amtrak covers 88% of its costs. The socialist highway system only covers 51% of its costs.

Marc Scribner April 23, 2013 at 4:34 pm

Amtrak fare box recovery covers 88% of operating costs, which don’t include expensive maintenance and capital costs. It’s an accounting trick they use to hide their dismal position. And you mean “roads” broadly, not just highways. Most local roads are paid for with property taxes by the abutting homeowners. Highways do better, especially when you factor in all the highway-user generated revenue that is diverted to non-highway uses, mainly mass transit. At the federal level, about 1/3 of highway user funds are diverted to non-highway projects, largely thanks to political horsetrading. Roads handle the vast majority of passenger travel AND move more than $10 trillion worth of freight every year. Amtrak, as a railroad executive remarked in the early 1970s when the railroads happily transferred money-losing passenger service Amtrak, primarily serves as “a sentimental excursion into the past for legislators over 50.” That’s still true today.

Charles Turek April 20, 2013 at 6:22 pm

In which case it is hard to see why America doesn’t double, or even quadruple it’s yearly passenger rail investment, with a large initial capital outlay proportion to double or quadruple the network. With the certain knowledge that passenger rail will continue to grow while highway and rail will become as moribund and unworkable as was passenger rail of the 1960s, I just don’t see the justification in not spreading our subsidies equally among the various modes until they all amount to about 6 cents per passenger mile. Then all modes would be on an equal footing and, at that point, “let the buyer make the choice.”

Henry Porter April 21, 2013 at 10:29 pm

Excellent article. Thanks for writing it….

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