Monday, February 07, 2005

Cutting Amtrak's Subsidy: It's About Time

In a rare display of a politician being true to his word, President Bush today proposed a budget that cuts more than a hundred programs. Among the programs to be cut is Amtrak. As reported in the Oakland Tribune:

President Bush is set to unveil his budget Monday, one which would eliminate the entire government subsidy for Amtrak. Without naming the publicly funded rail corporation, Bush made his intentions clear in his State of Union address last week.

"My budget substantially reduces or eliminates more than 150 government programs that are not getting results ... or do not fulfill essential priorities," the president said. "The principle here is clear: Taxpayer dollars must be spent wisely or not at all."

Bush's proposal will not be politically popular. Some powerful Senators and Representatives from the Northeast corridor, the only part of the country where Amtrak is useful and economical, will fight it tooth and nail.

But it's about time that a president offered to cut the Amtrak subsidy. If any use of taxpayer's money puts a greater burden on the poor and working class to benefit the affluent, this one does.

Eight years ago, I wrote an article that reported on a Cato Institute study, "Amtrak at Twenty-Five: End of the Line for Taxpayer Subsidies," which made this point precisely.

For the benefit of my readers and legislators who need the case spelled out for them, here's what I wrote for The Metro Herald and other newspapers in January 1997:
Amtrak: Burden on the Poor, Benefit to the Rich
Richard E. Sincere, Jr.

Is there anything more scandalous than learning that rich corporate executives have their business and leisure activities subsidized by poor and working-class taxpayers? It is indeed a scandal when the government empties the pockets of the poor to fill the wallets of the rich. And that is precisely what our government does in its growing subsidy of Amtrak, the quarter- century-old national passenger railway.

According to a recent report from the Washington-based Cato Institute, supporters of Amtrak in Congress and the bureaucracy assert that Amtrak's heavy subsidy -- more than $1 billion last year -- is needed to provide the poor with intercity and commuter transportation. This assertion is demonstrably false. Only 13 percent of Amtrak's riders have annual incomes under $20,000.

Nearly three-quarters have incomes over $40,000, while about 33 percent have household incomes exceeding $75,000, and 20 percent earn over $100,000 per year. The Cato study observes: "For intercity travel, low-income Americans are much more likely to ride buses, which serve more communities, are cheaper, and are operated privately by profit-making, tax-paying firms."

Passenger subsidies on Amtrak are shocking. In fact, the Cato report notes, "Amtrak's subsidies are so large that they would be more than enough to pay the fares of all intercity bus riders with less than $20,000 annual income." Some examples of the individual subsidies: taxpayers provide $1,270 for every Amtrak round-trip between New York and Los Angeles, although discount airfares between those two cities are usually around $400. Similarly, the taxpayer subsidy for Amtrak passengers between Chicago and St. Louis is $113, while Chicago-to-St. Louis airfares fall below $100. Between Chicago and New Orleans, typical airfares are $175, but the per-passenger Amtrak subsidy is $370. For the Denver-Chicago route, discount airfares are under $300; the Amtrak subsidy is $650 per passenger.

No wonder the authors of this report -- Cato fiscal analyst Stephen Moore and independent transportation consultants Wendell Cox and Jean Love -- suggest that "it would be cheaper for taxpayers to close down expensive [passenger rail] lines and purchase discount round-trip airfares for all the Amtrak riders."

As it is, Amtrak makes a negligible contribution to the nation's transportation network. It accounts for just 0.007 percent of daily commuter trips (that's seven-one-thousandths of a percentage point) and just four- tenths of one percent of all passengers making trips between cities. Amtrak serves only three-quarters of the country's 100 largest urban centers. There are one and a half times as many airports as there are Amtrak stations, and nearly 10 times as many bus stations. Cities as large as Dallas and Houston receive Amtrak service fewer than three days a week. Notes the Cato report: "The smallest of the nation's 10 major airlines, for example, has double the intercity market share of Amtrak."

Given Amtrak's minuscule role in U.S. transportation, it is only natural to point out that closing down Amtrak entirely would have no impact on either pollution or energy usage. Moore, Cox, and Love write that "even a doubling of train ridership would reduce energy consumption and traffic congestion by less than 0.1 percent." They add that "because transportation-related pollution is closely correlated with energy intensiveness, Amtrak provides little or no benefit in reducing air pollution."

Between 1970 and 1995, Amtrak received more than $13 billion in federal tax subsidies. In addition, 36 states routinely provide public funding to Amtrak. This is a tremendous waste of the hard-earned dollars of working people, who pay for but do not benefit from Amtrak's meager services.

The Cato Institute has performed a sterling service by analyzing Amtrak's inputs and outputs so thoroughly. Its report, "Amtrak at Twenty-Five: End of the Line for Taxpayer Subsidies," is available for examination on line. Anyone who has doubts about Amtrak's feeble contribution to American transportation should read it.

The time has come to end taxpayer funding of Amtrak and either eliminate this rathole of a railroad completely or sell it off to the private sector, perhaps by first offering its managers and employees a chance to purchase it, much as privatized industries in the former Soviet bloc have been sold to their workers, who are now authentic owners. The new Congress should put ending Amtrak's huge subsidy high on its agenda, so that workers in America's inner cities no longer pay the fares of suburban elites.

If Amtrak is to succeed and provide safe, efficient, and economical services to railroad passengers, it must do so in a competitive environment, freed of the shackles of both taxpayer subsidy and heavy government regulations. If bus lines, airways, and other private transportation networks can succeed without massive government transfusions of taxpayer money, why couldn't passenger rail?

* * * * * * * * * * * * *

Richard Sincere is author of Sowing the Seeds of Free Enterprise and other books.

Let me make a comparison: the taxpayer subsidy for Amtrak is the equivalent of housing subsidies that go toward luxury townhomes in exclusive urban or suburban neighborhoods at the expense of "affordable housing" for the poor and working class. (Don't get me wrong: I oppose housing subsidies and requirements for "affordable housing," too. I'm just trying to put the inequity in terms that liberals will understand.)

A more recent Cato Institute publication, The Cato Handbook on Policy (published earlier this year), has this to say about Amtrak:
Passenger Rail: Subsidies to Amtrak were supposed to be temporary after the passenger rail agency was created in 1970. That has not occurred, and Amtrak has provided second-rate passenger rail service for 30 years while consuming more than $25 billion in federal subsidies. Reforms elsewhere show that private passenger rail can work. Full or partial rail privatization has occurred in Argentina, Australia, Britain, Germany, Japan, New Zealand, and other countries.

Cutting subsidies is a good start. Full privatization is the goal we should seek.


Anonymous said...

You make an interesting case, but you, along with everyone else that supports "starting over" for intercity passenger rail service, haven't put the Amtrak subsidies into perspective alongside other federal subsidies.

Some questions to ask yourself... How much money did our federal government provide to the airline industry in the wake of the 2001 terrorist attacks? Who pays for the airports that "profitable" airlines have to use? You contend it would be cheaper just to give Amtrak passengers tickets on discount airlines; does JetBlue, AirTran, or SouthWest offer service out of Lynchburg, VA? Gastonia, NC? Meridian, MS? Rugby, ND? Obviously, I could go on ad nauseum. How much does the federal government put toward highways? (Hint: it's a LOT more than $1B.)

I support our President, but destroying our national rail passenger service is a wrong move. David Gunn has overseen real improvements in the time he's been in charge of Amtrak. Let's not kid ourselves with talk of private long distance intercity rail transport companies springing up to replace Amtrak.

By the way, I've ridden the bus from Virginia to Colorado. NEVER again.

Anonymous said...

I have some great ideas :) Nevermind. Next time.