Ok. So Sen. Micha (R-FL) has tabled the idea of privitization of Amtrak at this time. But, my question is, isn’t the privatization of Amtrak a betrayal of the original legislation to relieve private companies of bearing the burden? I know it is not like any of the 1970 companies are around today, at least not in the same forms as then, but wasn’t the inferred promise that new private enterprise would not show up freight private enterprise in relieving them of the passenger burden? That even though none of those companies are around to come forward to explore operating today’s passenger services, looking for private owner/operators is not in the spirit of the law if not in fact in violation of the law? So, wouldn’t the Amtrak legislation have to be rescinded, amended, or abandoned in favor of new legislation? The ensuing debates will be between government intervention, oversight, funding, planning, chartering, etc. and private enterprise; the arguements will be if it can’t make a profit, should it be done at all? and should society and economic growth be sacraficed for the lack of private profit?
Oh, yeah, I can count. So there are really many questions. But are there any real answers?
Well, I don´t know whether there are any answers, as long as US politics and politicians seem to have a somewhat distorted view on passenger rail services. Most of them keep on crying about how much tax money Amtrak is eating up, yet no one seems to have questioned the billions of $$$ of hidden subsidies that went into air transport (and trucking, if you like).
Privatization is not the answer. The British had to learn that the hard way, and Germany still has to learn it. It finally boils down to what a society wishes to have and is prepared to pay for. In most European countries, this means a well functioning train network
The so-called hidden subsidies that went into air transport and highways have been repaid or are being paid by the users, although in some instances the repayment mechanism has been indirect, and wealthy motorists frequently subsidize less well off motorists.
Those who highlight the subsidies for airways, highways, waterways, etc. seemingly overlook the significant subsidies granted to railroads for their construction. In fact, it may be that the present value of the subsidies granted to the railroads trumps those granted to the airways, highways, and waterways because of the time frame. Moreover, under the American Reinvestment and Recover Act (ARRA), the freight railroads have received hundreds of millions of dollars to improve their plant.
Those who point to European train networks seem to overlook the financial consequences of building passenger rail systems that do not cover their costs. If the current debt crisis sweeping Europe is not a hint, I don’t know what it would take to get the attention of those who espouse using Europe as a model.
By the late 60s it was clear that continuation of passenger rail by America’s railroads was unsustainable. The non-refutable economic trend lines indicated that the carriers could not afford to continue running passenger trains that American’s for the most part had deserted for the car and airplane.
Apparently the Nixon Administration was persuaded that a skeleton passenger train network had to be retained. Passenger trains were an American icon. So emotion trumped economics and reason. And Amtrak was born, which in retrospect was a mistake.
The railroads were going to get out of the passenger business. Most of them had scaled back their passenger services, whilst others had dropped the trains altogether. Had Amtrak not been formed, the railroads would have gone through the courts to eliminate the trains. It probably would have been a long, ugly process, but in the long run they would have succeeded. Accordingly, to argue that the railroads were relieved of their obligation to operate passenger trains seems a bit of a stretch.
The government got into the passenger railroad business for political reasons. As a result, American taxpayers have lost more than $27 billion on a system that was supposed to at least break even. On an opportunity cost basis, the price tag has been in the neighborhood of $80 billion.
At the end of the day, however, it does not make any difference. The central question is how and where does passenger rail make sense?
I would beg to differ…It took Britain a while to figure out how and what to privatize. Germany’s split up of DB and privatization of the operation of some regional service seems to be going pretty well.
Are there lessons for us to learn from this? Certainly. The chiefly revolve around whether Amtrak can ever learn to be a lean, mean, people totin’, train-runnin’ machine, or if they are ever to be stuck as a self-serving, go-along, get-along, gov’t bureaucracy.
If they can’t improve, and they have plenty of history that shows they only budge when shoved by an external force, then it’s time to try something, or someone different.
I don’t know why the German regional privatization model wouldn’t work for Amtrak.
I have my doubts that railroads play an important part in Europe´s debt situation. The countries with the worst debt situation, i.e. Greece has not much of a rail network. If you compare the debt situation of the US with, say, Germany, Germany sports “only” about 60 % of the per capita debt of the US, yet still continues to cash out significant amounts of subsidies for rail traffic, both commuter and long distance.
I agree that Europe cannot act as a model for the US. Distances are much shorter, making train rides more feasible. A flight from Hamburg to Frankfurt, just as an example, requires even more traveling time than a journey by train, Hamburg to Munich or Stuttgart is on par.
Spain. Spain’s debt problems are related to construction of high speed rail lines. They’ve put a much larger chunk of their GDP into it than other countries.
The model that would is bidding out the operations like the British do with intercity routes and freight and the Germans do with the regional service. (and the US does with some commuter rail and bus operations). The trick is preserving a customer focus through specific performance measures and/or baking in some sort of profit motive based on revenue generation into the contract.
Obviously, some parts of Amtrak’s operation would require greater contract payment. LD trains, for example.
What we as a society need to look at is what future does passenger rail play in the US given the political
and budgetary realities we face. In this light, passenger rail makes sense in three regions: Eastern seaboard from Maine to North Carolina centered around the NEC, upper midwest/ great lakes corridors
radiating from Chicago, and the west coast. Except for Auto Train and perhaps one or two others, LD
trains are not viable. Air travel is simply more efficient. Given the regional nature laid out here, the states
should band together for greater input and support of this service. There should be one representative
from each region on Amtrak’s board, as well as representation from the AAR. The board should be free
from political cronys and micromanagement from Congress and the White House. While Amtrak needs
to function more businesslike, passenger rail will always need to be subsidized. The question is will
the benefits out weigh the cost and will revenues lessen the amount of subsidy needed.
One thing that seems to be overlooked regarding the privatization of rail services in Europe and by various proponents of open access is that the infrastructure continues to be owned and maintained by the state. How much of a hidden subsidy is implied in this arrangement may be difficult to calculate.
I recall reading in a somewhat recent Trains about how the French infrastructure company is now under pressure to show a “profit” and is raising the rent on the users to the point where expansion of the high speed system, and even the continuation of some high speed routes is in jeopardy.
It’s always important to know what the goal is when you are doing something. Sometimes companies act as if their goal is to keep on keepin’ on.
There are too many factual inconsistencies in Sam’s post to ignore.
“The so-called hidden subsidies that went into air transport and highways have been repaid or are being paid by the users”
That is incorrect. Highways receive 51% of their funding from user fees. The rest comes from state and federal budgets. On the issues of aviation, I can’t seem to find many statistics.
" although in some instances the repayment mechanism has been indirect, and wealthy motorists frequently subsidize less well off motorists. "
I really fail to see what you’re referring to by indirect subsidies.
" Those who highlight the subsidies for airways, highways, waterways, etc. seemingly overlook the significant subsidies granted to railroads for their construction."
This has been stated over and over again. Railroads in the United States were almost entirely paid for and run privately and financed by European or Eastern U.S. investors (source:http://www.jstor.org/pss/3111573)
The only subsidies used to build railroads I recall were part of the Land-Grant act for transcontinental railroads. However, this is a subsidy which really didn’t have much value within the construction of a railroad. Not to mention that The Milwaukee Road was built with zero subsidies whatsoever. None received operation subsidies as well.
“In fact, it may be that the present value of the subsidies granted to the railroads trumps those granted to the airways, highways, and waterways because of the time frame.”
“the quality of preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true” (American Dialect Society, January 2006)
One key fact which the sponsor of this idea seems to have overlooked:
Before a governmental entity can be privatized, somebody in the private sector has to be willing to buy it.
I dare say that, were the United States to put Amtrak on the auction block, the only bidders would be scrappers. If the sale includes a requirement to continue operations, the only bidders would be morons.
Rep. Mica knows better than what he is trying to doll out to the public on pasgr rail. The fiction coming from him is once govt is out of the psgr business that private industry will step up and run the service as a profit business. This concept has not worked anywhere. If money were to be made in this the freight carriers would have never exited the business 40 yrs ago. Be carefull on what one wishes for. Even if Amtrak were to become a private operation–many routes would be closed down, fares would increase a large percentage. Amtrak is not perfect by any means but like it or not tranpportation, like education health and defense of the country are all responsibility of government. Our country needs a general across the board transportation policy of which the day that happens is when the Red Sea will part.
There are too many factual inconsistencies in Sam’s post to ignore.
“The so-called hidden subsidies that went into air transport and highways have been repaid or are being paid by the users”
That is incorrect. Highways receive 51% of their funding from user fees. The rest comes from state and federal budgets. On the issues of aviation, I can’t seem to find many statistics.
" although in some instances the repayment mechanism has been indirect, and wealthy motorists frequently subsidize less well off motorists. "
I really fail to see what you’re referring to by indirect subsidies.
" Those who highlight the subsidies for airways, highways, waterways, etc. seemingly overlook the significant subsidies granted to railroads for their construction."
This has been stated over and over again. Railroads in the United States were almost entirely paid for and run privately and financed by European or Eastern U.S. investors (source:http://www.jstor.org/pss/3111573)
The only subsidies used to build railroads I recall were part of the Land-Grant act for transcontinental railroads. However, this is a subsidy which really didn’t have much value within the construction of a railroad. Not to mention that The Milwaukee Road was built with zero subsidies whatsoever. None received operation subsidies as well.
"In fact, it may be that the present value of the subsidies granted to the railroads trumps those granted to the airways, highways, and waterways because of the tim
Why does the country need an intercity passenger rail system? Especially a skeleton long distance system that is used by approximately one per cent of those who travel between the cities served by the long distance trains.
The U.S. should develop passenger rail in relatively high density, short corridors, where the cost to expand the airways and highways is prohibitive. But to equate passenger rail with defense, education, health, etc. is a bit over the top.
"You can find support for my views in the primary source documentation, i.e. DOT budgets and performance reports for the Highway Trust Fund (HTF) and the Federal Aviation Administration (FAA) amongst others. They contain the primary data for my conclusions. Or you can read some of my previous posts on the subject of subsidies. I place little trust in news accounts. They tend to be cobbled together by reporters who simply don’t understand the issue or even where to find the information. "
None of the sources I gave you were news accounts.
“It is true that user fees pay for a shrinking portion of the federal highway system for a variety of reasons. The biggest is the unwillingness of the Congress to raise the federal fuel taxes to compensate for increased highway growth and maintenance requirements. As a result in FY10 the federal government transferred $14.7 billion from the general fund to the HTF. Who pays the money into the general fund. Taxpayers with a federal income tax liability as well as those who buy the goods and services of corporations and businesses with a tax liability.”
So the cost of highways and highways alone is not being repaid by the users.
"In FY10 46 per cent of those filing a federal income tax return paid no federal income tax. In fact, it was entirely possible for a family of four with an adjusted gross income of $50,000 to not only not pay any federal income tax but receive back a small check from the federal government. Accordingly, the taxes were paid for the most part by filers with median incomes of more than $50,000 per year, with more than 75% of the federal income taxes paid by those with adjusted gross incomes of $100,000 or more. You can find this information in the IRS statistical tables. If you know how slice and dice the numbers you will be able to verify my numbers. "
That’s a lovely little statistic. However, those who p