Congress Rails Against Common Sense
By Howard Gleckman
When it comes to Amtrak, Congress is on a train to nowhere. For more than 30 years, lawmakers have fooled themselves into believing that the troubled passenger railroad was about to turn the corner and become a profitable operation. Just one more cash infusion, just a little more time....
It's all a fantasy. Amtrak is never going to turn a profit -- at least not according to any accounting you or I understand. Saddled with huge capital costs, massive pension liabilities, and grossly unprofitable -- but politically popular -- routes, Amtrak will remain a financial loser. Even if it can somehow renegotiate labor contracts, find managers who can maximize its limited resources, and restructure routes, Amtrak will still lose money.
And despite what you might have heard, even if Amtrak operated only its highly touted Northeast Corridor service, it would still be deeply in the red. The truth is, no regional or national rail system in the world operates in the black. Not in France. Not in Japan. Not anywhere.
In the real world, Washington has one of two choices. It can run Amtrak as a heavily subsidized transit system, much like local governments run their buses and subways and the way most of the rest of the world runs its railroads. Or it can shut the whole thing down and forget about having intercity passenger railroads.
What it can't do is continue to write Amtrak a check for $100 million here and $100 million there, keeping the system in financial limbo while denying it the resources to fully modernize. But Transportation Secretary Norman Mineta and Congress still don't seem to understand that. Just before lawmakers left town for the 4th of July, they promised to write Amtrak a check for $100 million and made some vague demands about improving management.
About the only person in Washington prepared to confront the mess is David Gunn, Amtrak's own CEO. The hard-headed Gunn, who has decades of experience running big-city transit systems, has little patience with political fantasy. That's why he forced Washington to snap out of its reverie by loudly reminding Congress and President Bush that the railroad was out of cash and ready to shut it down.
Gunn keeps saying that a temporary fix is no answer. But Congress and the Bush Administration won't listen. They need to acknowledge a few economic realities.
The first is that the overwhelming majority of long-distance trains make no sense. I can fly from Washington, D.C., to San Antonio in five hours and seven minutes. A seven-day advance fare is about $387. Or I can take the train. It will take three days and cost $496, says the Amtrak Web site. And even at that price, Amtrak will lose $445 on each ticket it sells, according to the General Accounting Office.
Amtrak is running those long-distance trains -- Chicago to San Antonio, for instance -- for one reason: Lawmakers score political points by forcing Amtrak to run unprofitable routes to and through their home cities and states. The same pols who insist that the railroad be run like a business also try to force it to operate wacky cross-country routes.
The Northeast Corridor is another matter. On an operating basis, at least, Amtrak can turn a modest profit providing service between Washington and Boston. It also may be able to do this in the Chicago area and parts of the West Coast. But running a railroad takes more than operating cash. It also requires a staggering amount of capital expense -- investment in new cars and track, to upgrade stations, and the like. Add in those costs, and Amtrak does not now, nor ever will, make money. If society decides that running a Northeast Corridor railroad makes sense, government is going to have to pay for it.
PLANES, TRAINS, AND AUTOMOBILES.
Some say the better routes should be privatized. And a case can made for that -- private companies could well run the trains more efficiently than Amtrak has managed to do. But they wouldn't be truly private. And who's comfortable with a system that lets investors turn a profit even as the government keeps pouring billions of taxpayer dollars into capital subsidies? Not me.
Let's not kid ourselves. The government subsidizes all other forms of transportation. Airlines get airports, runways, an air-traffic control system and, in the past year, billions of dollars in direct government aid. Drivers get the interstate highway system -- funded in part by gas taxes, but also by general revenues. And, of course, Amtrak has been getting taxpayer dollars for 30 years.
This isn't hard to fix. The feds, with the help of states that benefit from intercity train service, should spend what it takes to run a railroad right. They should close down hopelessly unprofitable long-distance routes, beef up those that turn an operating profit, and pay the cost of upgrading tracks and the like. Or, they should scrap the whole system. But as it is, Washington is doing nothing more than throwing away billions of dollars on an economic train wreck.
Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BusinessWeek Online
Edited by Douglas Harbrecht