The Public Purpose
Number 48 - November 2001

Amtrak Subsidies in Context

I was pleased to be among the 6-5 bi-partisan majority on the Amtrak Reform Council who voted to find that Amtrak will not achieve its congressionally mandated goal of self sufficiency. The inevitableness of this finding had been clear for many months, and if there was a timing problem it was that the finding came too late.

It is useful to consider the matter of Amtrak subsidies in the context of intercity passenger transport.

Intercity passenger transport is virtually unsubsidized. Intercity highways are paid for by highway user fees and tolls (there is general fund subsidy of local city streets). Intercity buses are largely unsubsidized. The airline industry is largely unsubsidized, relying on passenger ticket taxes and airport facility fees. To the extent that there is any subsidy, it makes public policy sense to remove it. The exception, of course, is Amtrak, which is heavily subsidized. Intercity subsidies are not required and ought to be eliminated. There is no public policy justification for massively subsidizing one mode of travel when there are others that provide equal or better service with little or no subsidy.

The argument has been advanced that the recent "airline" bailout represents a subsidy that would justify further subsidy of Amtrak. It is certainly arguable that the airline bailout cost too much. But to suggest that it represents a subsidy to the airlines is to completely misrepresent its background. The airline bailout occurred due to an act of war. The external terrorist attack on the nation and the subsequent government required close-down of the system cut heavily into airline revenues, and the impact is still being felt. The airline bailout is justified to the extent that it represents compensation for damages that were proximately caused by the act of War. The New York subway system and the PATH rail systems are also receiving federal compensation for losses due to the same act of war. Had Amtrak's Northeast Corridor been damaged, an Amtrak bailout for that purpose would be justified.

Further, the extent of Amtrak subsidies is out of all proportion to rationality. For example, if the same level of subsidy per passenger mile were provided to airlines as Amtrak received in 2000, the annual cost would be $45 billion --- three times the gross value of the airline bailout, of which only $5 billion was actual cash assistance (the balance was loan guarantees). If we were to subsidize automobile travel at the same rate as we subsidize Amtrak, the annual subsidy would be approximately $400 billion --- $100 billion more than we spent on defense in 2001. More than one of of every five federal dollars would be spent on Amtrak.

Its time to consider things in context. Amtrak is very heavily subsidized, and does not need to be.

(c) 2001 --- Wendell Cox Consultancy --- Permission granted to use with attribution.
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