When the United States Congress established the "for profit" National Railroad Passenger Corporation Amtrak in 1971, it was with the intent that it would soon be self-sufficient. More than 25 years later and after billions in taxpayer subsidies, Amtrak is again before Congress. Legislation passed by the Senate last June would allow states to transfer their federal highway funds to Amtrak, and Amtrak is also pleading for a direct subsidy from the federal Highway Trust Fund. The basis for these new claims on the taxpayer is the erroneous belief that Amtrak alleviates traffic congestion and, therefore, benefits highway users. Senate rail supporters declare that highway and air traffic in the Northeast corridor Amtrak's busiest route would grind to a halt under increased gridlock should Amtrak be forced to cease operations.

Justifications for Public Subsidy

There are two justifications for taxpayer subsidies: Market failure where the competitive market fails to provide (or provide enough of) an essential service and social equity where the competitive market does not supply sufficient amounts of an essential service to low income and other disadvantaged people. Our research shows that subsidies for Amtrak cannot be justified on the basis of either market failure or social equity.

The Competitive Market Provides Most US Transport

The competitive market currently provides three modes of intercity travel: private vehicles, airlines, and buses. Users of private vehicles and airline passengers pay user fees (motorists pay gas taxes, fliers pay a ticket tax) that go back into the system to keep it running; and none of the three modes receive net taxpayer subsidies. More than 90 percent of intercity trips are made by cars and other private vehicles. Airlines contribute more than one-quarter of intercity trip mileage, while two-thirds of intercity mileage is provided by private vehicles. Intercity buses provide more than one percent of trips but constitute less than one percent of the mileage. Amtrak's share of intercity trips is the smallest of any mode 0.4 percent measured by person trips and less than one percent if measured by person miles.

Amtrak's Impact Upon Mobility is Negligible

Let's examine the arguments for an Amtrak subsidy based on congestion mitigation. It has been claimed that, in the absence of Amtrak, new interstate highways would have to be constructed. It has further been claimed that Amtrak diverts such a significant number of passengers from airlines that the air traffic system could not accommodate them.

Based upon national intercity travel data and current market shares, Amtrak reduces traffic by a maximum of 46.6 private vehicles per hour per freeway or toll road lane hour (between Philadelphia and New York) a reduction of one vehicle every 1.3 minutes (this calculation is based upon U.S. Department of Transportation vehicle occupancy data).. Amtrak's own more optimistic estimate is only 80 private vehicles per lane hour --- still an insignificant number. Between Boston and New York, Amtrak reduces traffic by 5.7 vehicles per hour per lane or one vehicle every 10.5 minutes. The greatest diversion occurs between New York and Philadelphia, where a long section of the New Jersey Turnpike has only six traffic lanes. Even so, this diversion of traffic accounts for barely two percent of lane capacity or six percent of a single lane's capacity in each direction far below the threshold required for construction of a new lane, much less a new freeway or toll road.

Assuming a greater market share for the airlines, the impact upon Northeast Corridor highways is estimated to range from 4.7 to 39.8 private vehicles diverted per hour per lane. The corresponding reduction ranges from one vehicle every 1.5 minutes to 12.8 minutes. The potential impact on airline traffic is within the capacity of presently operating air services. In the Boston to New York corridor, Amtrak diverts an average of 291 passengers per day or 93,000 passengers per year. This passenger volume would consume only six percent of the unused capacity of existing flights in the Boston-New York corridor. In the New York to Washington corridor, an average of 1,112 passengers per day are estimated to be diverted from airlines, or 356,000 passengers per year. This passenger volume would consume 25 percent of the unused capacity of existing flights in the New York to Washington corridor.

Amtrak's subsidy cannot be justified on the basis of market failure, because the market has not failed. Likewise, Amtrak's subsidy cannot be justified on the basis of social equity. The poor are less likely to travel by Amtrak than by most other modes. Lower income persons are nearly four times more likely to travel by bus as on Amtrak, and they are just as likely to travel by private vehicles and airlines. And Amtrak passengers are far more likely to be affluent that patrons of other modes. Persons with incomes above $40,000 travelled 1.4 times more miles on Amtrak than on buses and 40 times more miles on airlines.

Amtrak is Burdened by Politics

And finally, there is the matter of political interference. Amtrak is required to operate under expensive federal mandates that do not apply to other carriers. Amtrak workers, for example, are guaranteed up to six years severance pay if laid off. This expensive requirement is paid for by average American workers, virtually none of whom enjoy such privileges. And then there is the matter of political pork. Political pressure forces Amtrak to operate very unprofitable routes It is beyond comprehension that a nation borrowing from future generations to pay its current operating expenditures should be paying to subsidize passenger rail services whose discontinuation would leave no-one without mobility.

Freeing Amtrak to Compete

There is no market-based economic or social justification for subsidizing Amtrak either through general revenues or the Highway Trust Fund. But there is also no reason for Amtrak to operate under arcane laws that dictate how it must do business or according to a politically-driven service system, both of which inflate its costs. Amtrak should be freed from the yoke of taxpayer subsidies and rules and be allowed to compete with the airlines and the highways.