The Public Purpose
Number 24 September 1998

Amtrak, Passenger Rail and Federal Policy:
A Return to Basics

Presentation to:

Heritage Foundation Forum
28 April 1998

By: Wendell Cox
Wendell Cox Consultancy

It is a pleasure to participate in this Heritage Foundation forum on Amtrak and the future of passenger rail service in the United States. I intend to bring a genuine "outside the beltway" perspective to this discussion, by questioning the very proposition of subsidizing intercity passenger rail service.

There are two potential arguments for subsidizing passenger rail service in the United States.

Amtrak Subsidies: Negligible Reduction of Congestion: The first potential rationale is reduction of highway traffic or air congestion. The fact is, however, that Amtrak's contribution is negligible. Neither Amtrak nor passenger rail are crucial to the nation's transportation, in any corridor. Amtrak is the nation's 13th largest intercity transportation system. Eleven airlines and Greyhound Bus Lines provide more passenger miles of service. And, of course, all of these systems combined are small compared to the automobile based mobility system on which the nation largely relies.

Amtrak's disappearance would add only infinitesimal traffic counts to the nation's intercity highways, except in the Northeast Corridor. At the most, Amtrak trains remove one out of every one hundred automobiles from freeways along these routes. In most cases, much fewer automobiles are removed.

But even in the Northeast Corridor, Amtrak is a relatively "small player." Amtrak estimates of the automobiles it removes from the tollways between New York and Washington convert to barely three percent of roadway capacity. There are more than enough empty airline seats between Washington and New York to accommodate Amtrak passengers on that route. And, there is capacity for addition airline operations in this corridor --- larger airplanes can be used, and improvements to the air traffic control system that will increase airway capacity.

Finally, it is not unreasonable to have only limited sympathy for the transportation problems that exist between Washington and New York. In the early 1980s, the state of New Jersey became the only state to cancel an intercity segment of interstate highway. Unfortunately, this was the Trenton to New Brunswick section of Interstate 95, which left the nation's busiest travel corridor short of capacity. Today, as a result, there only six lanes of limited access highway exist for many miles between Philadelphia and New York. By contrast, there is at least as much limited access highway capacity between Greensboro and Raleigh --- a similar length corridor with fewer than three million population, compared to the 25 million in the Philadelphia and New York metropolitan areas. It is likely that a single lane could be added to the New Jersey Turnpike in each direction for less than the annual Amtrak Northeast Corridor subsidy. Such a lane would provide many times the mobility, in terms of people moved, than Amtrak service.

None of this is to suggest that Amtrak or passenger rail service should be canceled --- only that it ought to be paid for by the people who ride it.

A note about high speed rail is appropriate here. There are a number of proposals around the nation to build high speed rail lines similar to the 200 mile per hour trains that operate in France and Japan. The proposal that has advanced the farthest is the Tampa-Orlando-Miami project in Florida. The planning documents indicate that, at most, this line would remove 10 percent of the traffic from adjacent roadways.

Amtrak Subsidies: No Help for the Poor: Another possible reason for subsidizing passenger rail service would be to provide mobility to the poor. However survey data indicates that Amtrak riders are not less affluent than average. Airline deregulation and its reduced fares have made airlines the mode of choice for many below average income people. Intercity buses have a much higher percentage of low income riders than Amtrak.

Subsidies: No Role in Intercity Passenger Transport: A fundamental principle of a free market economy is that government should not subsidize functions that the private sector is capable of performing. That principal is violated every day with respect to Amtrak, and the very considerable financial support provided through federal taxes. Intercity passenger transport is essentially unsubsidized, except for intercity rail.

Users of the nation's street and highway system pay more in highway user fees than is spent by the various levels of government on construction, maintenance, administration and patrol, despite what you may have heard to the contrary.

The nation's airports and air traffic control system are overwhelmingly supported by user fees collected through the airline passenger ticket tax and local facility charges. Indeed, if federal law permitted privatization of major airports, there is no doubt in my mind that the present funding sources would produce a sizable annual surplus.

The nation's intercity buses are virtually unsubsidized.

This is the absurdity --- that it might be less expensive to buy every Amtrak rider a discount air ticket, instead of subsidizing Amtrak --- airline fare revenues per passenger mile are less than Amtrak subsidies per passenger mile.


There are alternatives. You have already heard that there is at least one company prepared to buy the Northeast Corridor and operate service without subsidy. I have no doubt that this service could be operated commercially if it were provided by an entrepreneurial company driven by a commitment to serve customers and operated with an market rate labor contract. With respect to services outside the Northeast Corridor, it is time to recognize, as Joseph Vranich has pointed out in his excellent book, Derailed, that long distance train travel is a luxury, not a necessity. As such, it is inappropriate to subsidize it. Amtrak, it successor, or others should operate "land cruise" trains that are fully commercial --- paid for by the fares of users. There are already companies providing similar services in both the United States and Canada.

The market is prepared to provide passenger train service --- but it must be passenger train service that responds to the needs of the 21st century, not the 19th. I suppose we should be thankful that the US Congress was not so swayed by nostalgia in the last century as today. Otherwise, we would, no doubt be subsidizing Amcart --- a government owned monopoly continuing to provide oxcart (covered wagon) service along the Oregon Trail.

You will hear in a moment about the progress that has been made to improve rail performance in other nations. Many developed nations are finding ways to reduce the cost of passenger rail services and improve their quality through various forms of privatization. These approaches should be adopted in the United States as well. If we must, even in the absence of any demonstrable public purpose, subsidize passenger rail services, then it would be preferable to competitively contract the services through franchises awarded for specific periods. The privatization revolution that has taken much of the rest of the world by storm has created a number of companies that are prepared to compete for the right to operate passenger trains in the United States.

A civilized nation without passenger rail?: Perhaps the least convincing argument for subsidizing passenger rail service is the old saw about the possibility that the US could become the only developed nation without a passenger rail system. The fact is that in many developed nations, passenger rail service is at least as politically driven as it is in the United States. A French government official recently characterized virtually all of the new high speed rail lines under construction in Europe as being politically motivated. Passenger rail market shares are dropping in Europe and Japan, as those nations, like the United States, rely more and more on the automobile and implement airline deregulation. And, again, the removal of public subsidy would not mean the end of US passenger rail service. This has been the case in Japan.

First Principles: Perhaps it is too much to hope for in the Washington of 1998, but it would be useful to return to first principles. The appropriate question is not how shall we subsidize intercity --- it is rather why do we subsidize intercity rail. There is no public purpose that justifies subsidies to Amtrak or to passenger rail service. Without public subsidy, no virtually one in the nation would be denied mobility, because there is a wide array of transport alternatives. Subsidies are for providing necessities, not preferences. It is time for the federal government, as well as state government, to get out of the business of intercity passenger transport.

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