A Stitch in Haste

A small baby-step victory toward ending the disgrace known as Amtrak:

An effort in the Senate to increase federal subsidies for the beleaguered Amtrak system failed to pass Wednesday.

The amendment, offered by Sen. Robert Byrd, D-W.Va., would have added $1.04 billion to government financial assistance for the system. It failed on a 52-46 vote. The amendment was cosponsored by 23 senators, mostly Democrats. Two Republican senators from the Northeast - Arlen Specter of Pennsylvania and Lincoln Chafee of Rhode Island - also voted for it.

In his 2006 budget, President Bush proposed eliminating Amtrak's operating subsidy and setting aside $360 million to run trains along the Northeast Corridor if the railroad ceased operating. In the current budget year that ends Sept. 30, Amtrak is getting $1.2 billion in operating subsidies and capital investment.

The bait-and-switch maneuvering around Amtrak has been both consistent and constant. It goes something like this: "We can't afford to lose the Northeast corridor, so Amtrak must continue to be subsidized." But of course the Northeast corridor is the one part of Amtrak that actually runs a profit and therefore would not need a subsidy in the first place! It's precisely the routes that nobody rides that lose money (go figure).

Similar to my update earlier today with municipal wi-fi, passenger rail service is simply not a public good (a natural monopoly perhaps, but not a public good). Where there is a market for it, there, is, well, a market for it and therefore no need for subsidies. When there is no market (i.e., insufficient need), one must ask why, since no one uses the route, should it be propped up via a subsidy. This is wise fiscal policy -- spend money where it's not wanted?

And as for those who long for the days of it taking, um, days to travel cross-country: Is your nostalgic yearning for the "golden age of rail" a sufficient claim on taxpayers who prefer the Twenty-First Century?

I think not. Fortunately, neither did 52 senators. Perhaps this will truly be the beginning of the end for the pathetic boondoggle.

Related Post (With Archive):
Transportation Secretary Defends Proposed Amtrak "Cut" (Sorta Kinda)

One of the issues that slipped through my fingers last week was a quick Amtrak update, but today’s op-ed from John Tierney reminded me to chime in briefly.

As you may recall, the Bush Administration originally called for eliminating Amtrak’s roughly $1 billion annual subsidy entirely.

“See Kip, these Republicans can be libertarians when they want to be...”

Then the tax-and-spend Republican Congress nixed that idea.

“Um, you were saying?”

So as a compromise (because, of course, when you have Republicans dealing with other Republicans, compromise is obviously required), they decided, not to compromise between spending zero and spending a lot, but to compromise between spending a lot on Amtrak directly and spending a lot on the states, which can then spend a lot on Amtrak.

Ah, the glory of federalism — not.

Meanwhile, Tierney focuses on the specific boondoggle known as Acela (“See, we have bullet trains too!”) Except that they’re not so bullety:

Aside from the latest problem with the brakes, the Acela has been plagued by cracks in its suspension system (which shut down the service in 2002) and goofs ranging from bathroom doors that don't work to cars that were built, oops, four inches too wide for the train to take curves at high speeds. It's a slowpoke by international standards even when it arrives on schedule, but it's on time on only three-quarters of its trips. Amtrak officials no longer pretend that Acela is the future — they've vowed not to buy any more of the trains...

So we see that it’s not just a question of propping up unprofitable routes (which, remember, are unprofitable because people don’t use them). Even the one route that could unequivocally make money — high-speed service between New York and Washington — has been completely botched by the Amtrak bureaucracy. (Note: The latest wire reports are that Acela trains will not run this week until summer, after being shut down most of last week.)

So, bottom line, even if you can’t go quite as libertarian as “it shouldn’t be subsidized at all,” can you at least go as libertarian as “it shouldn’t be subsidized moronically”?

And, more importantly, can Congress?

Long-time readers of my blog know that I'm no...fan...of...Amtrak (what libertarian would be)?

My favorite statistic regarding this ultimate boondoggle is that the per-passenger-mile government subsidy is so high that it would be actually cheaper for the government to give people free plane tickets from New York to California than to underwrite their train ticket.

But even I was stunned to read this:

Riders on Amtrak may think that the $3.25 hot dog and the $1.50 bag of chips in the cafe car are no bargain. Neither does Amtrak. It is spending just over $2 for each dollar of food it sells on its trains, according to auditors.
...
Expenses for labor and food run about $83 million more than the food service brings in, according to the railroad's inspector general. That sum, twice Amtrak's food and beverage revenues, is without the cost of maintaining the dining cars on long-distance trains and the cafe cars used on short-haul routes like the Northeast Corridor; if those expenses are included, the losses come to about $130 million.
...
"Food and beverage is a key part of what the customer is paying for," [Amtrak Senior Vice President William] Crosbie said. "It's part of the amenities you need to offer when a customer wants to travel on our service."

This is, of course, utter nonsense.

People ride the train for the same reason they fly or drive: to get from Point A to Point B. Cheap hot dogs aren't going to coax anyone to switch from air to rail -- lower fares might, or greater convenience (e.g., between New York City and Washington). And, if the government subsidy is fixed, then of course scrapping the money-losing cafe car would only mean still lower prices. Stated differently, subsidizing the travel is bad enough -- do we real need to subsidize lunch too?

Why should eating and drinking on passenger rail be any different than it is for air travel, or the subway, or a movie theater? Either pay the (higher) price that allows the vendor to break even, if not make a profit, or bring your own. The idea of "snacks as a loss leader" is so unjustifiable as to question the fundamental business competence of its proponents (or its advocates in Congress).

So the next time you hear about Amtrak "needing" its subsidies, remember what that means: that someone, somewhere, is munching on a hot dog paid in part by your tax dollars. All in the name of "keeping rail alive."

I say kill it and pay for your own damn hot dog.

A House subcommittee has approved a roughly 50% cut in Amtrak's taxpayer subsidy, focusing on eliminating unprofitable (i.e., unused) long-distance routes:

The cuts, which would require House and Senate approval, would not apply to most Amtrak service in the Northeast corridor and shorter corridor routes in the Midwest and California.

The subcommittee chairman, Rep. Joe Knollenberg, said those routes account for 80 percent of Amtrak's ridership. He said some money-losing routes, such as the Sunset Limited between Los Angeles and Orlando, require federal subsidies of more than $400 per passenger.

The proposal would cap the subsidy to no more than $30 per passenger per ride. That's $30 too much, but certainly better than $400.

The pork barrel response?

The plan drew protests from subcommittee Democrats who said it would unfairly punish rural residents. "There will be 31 states who lose all passenger rail service completely," said Rep. John Olver, D-Mass.

Knollenberg said the measure would not mandate the closure of any routes and that state and local governments could decide to subsidize them.

It seems to me that the protestations regarding Amtrak funding generally, and closing individual routes specifically, are reminiscent of the military base closing conundrum after the Cold War ended. Most everyone wanted reductions, yet the Politics of Pull made it almost impossible, as each base had its own defender in Washington.

The solution was the Base Realignment and Closure Commission. Congress, admitting its own incompetence, shackled itself and left the decisions to a nonpartisan group of experts to make the decisions almost completely outside the political arena. The process has been relatively successful and continues to this day.

So why not try the same thing with Amtrak? Appoint an independent commission (i.e., independent not only from Congress but from the self-interested and therefore biased Amtrak bureaucrats, not to mention any labor union contamination) to objectively review the traffic statistics and budgets of the assorted routes and decide which routes should be closed and which can perhaps be reworked to operate at little or — dare we hope? — no taxpayer subsidy.

One person I would try to draft to head such a commission would be retired General Electric Chairman Jack Welch — he knows something about turning around large enterprises. In fact I seem to recall that GE is in the locomotive manufacturing business.

To review: Amtrak loses money on certain routes because nobody uses them. Its profitable routes are profitable precisely because there is demand for them. Any private business would simply reduce the unwanted routes, emphasize the desired ones and, um, make money.

But of course Amtrak is not a business, it's a warm fuzzy feeling induced by taxpayer handouts.

An independent "route closing commission" could reduce or even eliminate the obscene Amtrak subsidy once and for all. The Administration should immediately call for the creation of one.

Back in June I noted an embarrassing report about how Amtrak was not only losing money (about $1 billion per year) on its basic rail operations, but was even losing money on its food and beverage operations.

Now comes word that one Amtrak line is flip-flopping and trying to lure more passengers by -- get this -- charging higher fares:

Travel on Amtrak's northernmost line is getting an upgrade -- including complimentary sparkling wine and cookies on passengers' pillows -- with the goal of attracting riders willing to pay a bit more for a different level of service.

The "Empire Builder" -- a route that travels between Illinois and Washington state -- faces many critics in Congress and the administration who see it as a money-loser in tight fiscal times. So Amtrak officials are working to save the line by charging customers for a new set of amenities.

"Our plan is to measure what economists call the elasticity of the demand," said Marc Magliari, a Chicago-based Amtrak spokesman. "That is, we improve the service and raise the fares, thereby improving the performance of the train."

First, an Econ. 101 moment. When you change the price and the quality of a product or service, you are not measuring the "[price] elasticity of demand." By definition you must keep the product the same, in fact you must keep every other variable fixed except price. The Amtrak bureaucrat may be measuring something, but it isn't an elasticity.

Moving on, notice the bait-and-switch in the maneuver regarding the Empire Builder. The idea is that Amtrak wants to entice higher-end travelers to choose Amtrak because of its new and improved luxury service, with emphasis on the word "choose."

But remind us again why the system needs a $1 billion annual taxpayer subsidy in the first place?

Sen. Conrad Burns, R-Mont., a member of the Senate Appropriations Committee, praised the improvements Tuesday and said he would work to maintain Amtrak funding in his chamber. "We are talking about a transportation system folks depend on in areas where they have no other options," he said.

So we need (taxpayer-subsidized) Amtrak because people have no options, but we also want to tweak the service (and charge more for it), because people, um, have options. Go figure.

POST SCRIPT: Did you notice that Senator Burns is a Republican? Pork is bipartisan.

Could it be that President Bush's first veto could be a symbolic libertarian gesture?

President Bush's plans to close down Amtrak's money-losing long distance routes were dealt another setback Tuesday as a Senate panel approved a sizable boost to the budget for the ailing railroad. The move earned an immediate veto threat from the Bush administration.

The latest development in the struggle over Amtrak's future came as a Senate Appropriations Committee panel unanimously approved a $136 billion bill for the fiscal year beginning Oct. 1 for transportation and housing programs and Treasury Department agencies like the IRS.
...
Amtrak received a $1.2 billion subsidy for the current year but the Senate measure would boost that to $1.4 billion for next year.

Given this president's manic phobia of the veto pen, I tend to doubt that he will sink a $136 billion appropriation bill over a $0.2 billion squabble with his own tax-and-spend Republican Senate.

On the other hand, perhaps there's enough additional pork in the bill such that Amtrak is merely the "poster child" for lambasting Congress' fiscal irreponsibility.

In any case, it's nice to see the very un-libertarian White House paying some nominal and symbolic lip service to what used to be a major Republican premise.

In a flood (pun intended) of pomp and circumstance, the first Amtrak train has arrived in New Orleans since the levees broke.

The train carried 29 passengers.

But on the bright side, Amtrak officials expect that number to increase tomorrow -- to 30 passengers.

How much of Amtrak's billion-dollar annual taxpayer subsidy is going to this propaganda exercise?

Is restoring a perpetually unprofitable, government-run railroad's barely-used service to a disaster-stricken area really a priority? Was Michael Brown secretly appointed Amtrak's new chief?

Actually, Amtrak was probably the only government agency he couldn't have made any worse than it already was.

A decades-long failed experiment in American socialism may be one step closer to termination:

The Amtrak board has approved an essential step in the Bush administration plan to break up the railroad, voting to carve out the Northeast Corridor, the tracks between Boston and Washington, as a separate division.

The board, made up entirely of Mr. Bush's appointees, voted in a meeting on Sept. 22 to create a new subsidiary to own and manage the corridor, which includes nearly all the track that Amtrak owns.
...
The plan, which would require action by Congress, is to transfer the corridor to a consortium including the federal government and the governments of the states in the region that would share the costs to maintain it.

The plan is, predictably, being opposed by everybody (i.e., Amtrak's labor unions and some ridiculous "National Association of Railroad Passengers") who believes that those who do not use Amtrak should subsidize those who do.

Recall why the Northeast Corridor is unlike Amtrak's other lines: people actually use it. It can therefore be operated profitably. It can therefore be operated privately. Separating it from Amtrak's other operations would therefore show Congress, and taxpayers, just how worthless the rest of Amtrak truly is.

Excluding the Northeast Corridor, Amtrak loses money because people don't use it. If people don't use it, then how can its apologists claim with a straight face that it is a "critical" part of our transportation infrastructure? Since when is something that people don't use "critical"?

And remember, we're talking about an annual subsidy in excess of $1 billion. With calls for even more money from pork-loving politicians growing ever more shrill with each passing year.

Amtrak is the most brazen example of the socialist illogic that the less people want something, the more the government should provide it. Congress should approve the segmentation of Amtrak's operations and follow through with a complete breakup and eventual dismantling of this perpetual embarrassment.

The directors of Amtrak, all of whom were appointed by President Bush, favor reducing and eventually ending taxpayer subsidies for the great American experiment in naked socialism.

Amtrak president David Gunn, meanwhile, did not favor reform.

Of course, a business' board of directors outranks its president.

Don't let the door hit you on the way out, Mr. Gunn.

As I've blogged repeatedly, a business makes money by giving customers what they want, need and are willing to pay for. A business that loses money is not. Therefore, the notion that Amtrak "needs" or "deserves" a billion dollar annual taxpayer subsidy because the railroad is "too important" is an insolent contradiction in terms. Amtrak loses money because people don't use it. If they don't use it, then it's not needed. If it's not needed, then it does not deserve taxpayer subsidies.

By contrast, the very fact that the Northeast Corridor can be profitably spun off is proof that it should be spun off. The remaining lines should either be forced to operate without subsidies or be shut down.

Yet Congress, in its pork-laden mania, continues to assert that Amtrak is somehow "vital" and that their districts will "suffer" without Amtrak or that their states "deserve" publicly underwritten routes running through them. Not to mention the mawkish "public interest" types who can't understand why people prefer a four-hour plane ride to a three-day railroad excursion.

In the end, Amtrak serves as a microcosm of the entire government tax-and-spend phenomenon: Crass politics versus basic economics. Common carrier versus common sense.

Which means that the odds aren't good, even with the Amtrak deck stacked in favor of those seeking reform.

More thoughts at An Inclination to Criticize.

Just a quick reminder that the equipment that failed along the Northeast Corridor, stranding thousands of commuters from New York to Baltimore, is owned, operated and taxpayer-subsidized by Amtrak, even if some of the actual trains (e.g., New Jersey Transit) are not.

This is what your billion dollar per year subsidy is getting you. Enjoy the ride -- or the stall, as the case may be.

If this had been a private railroad, the class actions would soon be piling up in courthouses everywhere.

Of course, if this had been a private railroad, the failure probably never would have happened in the first place.

---

I was planning to take the train to Newark Airport tomorrow. Now I need to engage in a little game theory and decide which will win out: my risk aversion or my cheapskatedness. I'm thinking the former will win out.

The more things change...

Amtrak's new president said Thursday that the U.S. should embrace rail travel at a time of growing transportation needs and high oil prices, but he gave no details of his plans for fixing the indebted passenger service.

Speaking publicly for the first time since he began his job Sept. 12, Alexander Kummant said two of his goals were finding the most effective and efficient ways to run long-distance routes and beefing up the infrastructure of the heavily used Northeast Corridor.

But Kummant did not say how he would do those things, to the frustration of some lawmakers.

...the more they stay the same:

Amtrak has debt of more than $3.5 billion and its operating loss for 2005 topped $550 million. It has never made a profit in its 35 years of operation.
...
Under a Senate bill, Amtrak would see its federal subsidy increased by 8 percent to $1.4 billion for the budget year beginning Oct. 1. Amtrak received a $1.3 billion subsidy for the current year.

Of course, the best way of "finding the most effective and efficient ways to run long-distance routes" would be to run trains where there is a demand for trains, and not to run trains where there is no demand for trains. But Amtrak has never -- never -- been about being "effective and efficient." Its locomotive has always been the Politics of the Warm Fuzzy Feeling (with the Politics of Pull for a dining car).

Similarly, "beefing up the infrastructure of the heavily used Northeast Corridor" would be trivial if a market-clearing price were charged for its "heavy use" and if the revenue from it were not diverted to other less-used (i.e., unwanted) lines. Every true businessperson understands this -- too bad Amtrak is not a true business.

As for the subsidies, we have a Republican president and a Republican Congress, so of course the subsidies are going to increase -- All aboard!

The more things change...

"We cannot depend entirely on airplanes and roads."

--Senator Frank Lautenberg (D-NJ) in calling for even more subsidies for Amtrak.

Here's the thing: we most certainly can rely entirely on airplanes and roads. We do it every single day.

How much more remedial can one make it: Amtrak loses money because people don't use it. People don't use it because people neither need nor want to use it. People are -- gasp! -- relying entirely on airplanes and roads.

(I don't know whether Lautenberg was being slick or stupid, but I find it interesting that he said "airplanes and roads" rather than "airplanes and cars." The response to the lament that "poor people can't afford to fly" is, of course, Greyhound and its competitors -- which, to my knowledge, receive no direct federal subsidies.)

So when Lautenberg says, "We cannot depend entirely on airplanes and roads," what he really means is "I get a warm fuzzy feeling from the thought of having Amtrak, and that's more important than any other use that you might have for your tax dollars."

Oh, and speaking of warm fuzzy feelings, I'm sure Lautenberg, the "selfless public servant," is getting all tingly over the new Secaucus transit hub that was recently named after him. "Selfless" indeed.

The bureaucrats at Amtrak seem to think so:

Beginning this fall, travelers with an extra few days and money to spare will be able to climb aboard seven richly equipped vintage Pullman cars attached to Amtrak trains on three routes.

The promotion is a test of a partnership between District-based Amtrak and GrandLuxe Rail Journeys, an Evergreen, Colo., company formerly known as the American Orient Express.
...
The trips' prices will range from $789 to $2,000 per person for one- to two-night journeys.

This is, of course, utter nonsense. No rational consumer would pay more for a multi-day, not-at-all-scenic train ride than for first-class domestic airfare. That's not a question of subjective tastes and preferences; it's a question of objective "paying more for less" irrationality. And while there may be a handful of rich but irrational consumers (e.g., those with a fear of flying), there will certainly not be enough to make this a viable enterprise. The service will flop, and flop badly.

And besides, isn't the standard bromide of Amtrak's apologists the (no less absurd) postulate that government should underwrite affordable passenger rail? That (non-rich) Americans need, for some reason, an alternative to cars, buses and planes? How, exactly, is "expensive luxury train travel" a public good?

To review: The parts of Amtrak that lose money (i.e., almost all of it) lose money because few use it (i.e., few "need" it). Meanwhile, the tiny sliver of Amtrak that does make money (i.e., the Northeast Corridor) by definition needs neither a $1 billion annual subsidy nor, for that matter, to be run by the government in the first place. Amtrak is its own best argument for its abolition.

Yet instead of acknowledging this basic syllogism, Amtrak's managers and political protectors actually retrogress and sink deeper into the illogical muck of providing a service that nobody wants or that the government has no business being in the business of in the first place.

The mind reels.

To review: Amtrak receives approximately one billion dollars in taxpayer money each year, every year. Because passenger rail is "necessary" — especially the lines that people don't actually use enough (i.e., don't actually need enough) for the railroad to turn a profit.

Yesterday I met a friend at Foxwoods Casino. My plan had been to take a commuter train (also taxpayer subsidized, of course) from New York City to New Haven, Connecticut, then connect by Greyhound Bus to the casino.

My friend, who was on a schedule, instead suggested that I take Amtrak to New London, Connecticut, one station stop past New Haven (Amtrak and the commuter line run on the same track). That way, he could pick me up at the train station and we could drive together to Foxwoods, giving us a bit more time based on the train schedules.

But that extra hour or so came with a price:


There was a bizarrely long line at Penn Station for 8am on a Sunday morning. No concern to me, however: I had reserved my ticket online days earlier and just needed to make my way to a ticket kiosk.


Amtrak's entire computer system was down. Had been for two days.

So, with no guidance being offered by any Amtrak representatives, I did what everyone else did: got on the line.


Is having three trains leave at exactly the same time, with or without working computers, a public good?

After the minutes passed faster than people through the line, as 9am approached, word finally spread (but not by any initiative from Amtrak employees), that folks like me, with a reservation (and a computer printout to prove it), could in fact just board the train. Thirty minutes on a line for nothing. Is that a public good? Is that a "vital national asset"?

One more detail: The conductor indicated that this same phenomenon occurs almost every weekend, and that Amtrak's computer system cost $40 million. Must be from Diebold.

---

Incidentally:

New York to New Haven by commuter rail:
70 miles, $14, 20 cents per mile.

New York to New London by Amtrak:
109 miles, $66, 60 cents per mile.

Or, if you prefer,

New Haven to New London by Amtrak:
39 miles, $52, 133 cents per mile.

(Of course, both services are taxpayer-subsidized, so the math is a bit fuzzy. But the point remains: Amtrak is "vital" — why?)

---

Irony:


In strictly meaningless terms, Amtrak is indeed a "private" entity (but with its own police force?), and its facilities are indeed "private property." All the more reason for indignation over its one billion dollar annual taxpayer subsidy. (See also, "Corporation for Public Broadcasting.")

---

Red alert!


I was afraid to stay too long, lest I be declared a public use and seized by eminent domain.