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Fifth Anniversary of a Loser

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Randal O’Toole

Fifty years ago last Saturday, May 1, Amtrak operated its first passenger trains, a fact that President Biden celebrated a day early. Biden wants people to think that Amtrak is enough of a success that it deserves $80 billion in additional funding. But the reality is it is just a big loser.

Rail fans remember May 1, 1971, as the day America lost more than half of its passenger trains. On April 30, ten trains left the Midwest for the West Coast: the Empire Builder, Western Star, North Coast Limited, and Mainstreeter (all of which went to Seattle with sections to Portland), City of Portland, Portland Rose, City of San Francisco, San Francisco Chief, City of Los Angeles, and Super Chief. The next day, Amtrak killed all of them except the Empire Builder (and it killed the leg to Portland), Super Chief, and City of San Francisco (which was cut to three days a week). That’s a loss that’s hard to forgive.

Business analysts remember that the idea of a national passenger railroad was sold to Congress as a profitable enterprise, but it turned out to be a big money loser. Rather than a normal government agency, Amtrak was created as a for‐​profit corporation with stockholders and, potentially, investors. The railroads were supposed to give it seed money based on the amount of money they claimed they had lost in the previous three years. After spending that to get started, Amtrak was supposed to make money.

In fact, after quickly burning through its start‐​up cash, Amtrak went deep into debt and needed $1.5 to $2.0 billion a year (in today’s money) in federal support to keep going. Anthony Haswell, sometimes known as the “father of Amtrak,” admitted 30 years later that he was “personally embarrassed” by the railroad’s continuing demand for subsidies.

Transportation analysts know that, under Amtrak, passenger trains have lost market share of U.S. travel despite billions in subsidies. In 1970, the private railroads carried a trivial 0.29 percent of U.S. passenger travel. By cutting so many passenger trains, Amtrak immediately dropped to around 0.16 percent. By 1991, Amtrak ridership had recovered to 1970’s levels, but other modes of passenger travel also increased, so Amtrak’s share was still 0.16 percent. After that, it declined to 0.10 percent in 2005, which is about where it remained in 2019.

Followers of the coronavirus know that Amtrak has lost more than 70 percent of its riders during the pandemic, and it may never get all of them back. Thanks to even more federal subsidies, it keeps running trains, but they are nearly empty.

Amtrak is trying to sell itself as a solution to global climate change. How can it be a solution when it carries less than 0.1 percent of passenger travel and 0.0 percent of freight? Amtrak’s nearly empty Diesel‐​powered trains generate tons of greenhouse gases per hour without saving any anywhere else. Even before the pandemic, intercity buses emitted fewer greenhouse gases per passenger mile than Amtrak’s Diesel trains, and they aren’t getting any of Biden’s proposed transportation funds.

Amtrak’s electric trains may generate fewer greenhouse gases than its Diesels, but as economist Charles Lave pointed out more than 40 years ago, if you want to save energy, “the biggest components matter most.” This applies to greenhouse gases as well, and it means that making automobiles and planes more energy efficient will do far more to reduce greenhouse gas emissions than increasing Amtrak’s share of travel from 0.10 percent to 0.11 percent, which is probably more than Biden’s plan would do.

Most of the $80 billion Biden would allocate to Amtrak will be spent digging tunnels, building bridges, replacing ties and rail, and other rehabilitation work in the Northeast Corridor, which has at least $52 billion in capital replacement needs. This will do little do little more than maintain the status quo, so it would not increase Amtrak ridership. But it would generate huge amounts of greenhouse gases.

Amtrak does propose to use some of the Biden dollars to add a few new routes, but as I’ve previously shown these would attract few riders because Amtrak would face intense competition from airlines and buses. Ultimately, the question is: why should a transportation agency that carries 0.1 percent of passenger travel and no freight get 26 percent of the transportation dollars in Biden’s infrastructure plan?

So Amtrak is a loser several times over. It lost most of the nation’s passenger trains; it lost market share of U.S. travel; it lost tens of billions of dollars; it lost most of its passengers during the pandemic; and it loses credibility when it claims to save greenhouse gases. It’s time to recognize that Amtrak is a loser and stop subsidizing it.



Source: https://www.cato.org/blog/fifth-anniversary-loser


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