Discussion: (0 comments)
There are no comments available.
View related content: Public Economics
Amtrak triumphantly proclaimed 2012 to be a success. The reason? It posted a loss of only $361 million for the year. That’s its smallest operating loss since 1975, amid growing ridership along the Northeast Corridor between Washington and Boston. Although this represents progress in the right direction, Amtrak is still not worth what it costs American taxpayers.
Amtrak has never been profitable. From its outset in 1971, it has been backed by taxpayers with billions of dollars in direct aid and loans. Over the past three years alone, Amtrak has received more than $4.4 billion in federal aid, and it still was not able to finish any of those years in the black.
“Over the past three years alone, Amtrak has received more than $4.4 billion in federal aid, and it still was not able to finish any of those years in the black.” -Daniel HansonThe principal argument in favor of government funding for Amtrak is that the company provides a transportation service to Americans that constitutes an invaluable public good. Proponents argue that passenger rail, popular in Europe and Asia, ought to be an integral part of America’s transportation future and that government funding is necessary to make this ideal a reality.
But after more than 40 years of government funding, $4.4 billion in aid over the past three years should be particularly disconcerting. Rail transportation is not becoming cheaper because of government investment in the market; to the contrary, the price has gone up, especially as compared with other major public works projects.
In 2011, passengers took about 30 million trips on Amtrak. More than 10 million of them were on Amtrak’s Northeast Corridor, where tickets run from $49 to more than $300. Most riders pay about $150 to get from Washington to Boston — a route that cost $125 in 1997 — but today’s real cost is much higher than it seems. Through subsidies, the federal government kicks in almost $50 for every Amtrak ticket, putting the average real fare of an Amtrak ticket close to $200.
And the much-ballyhooed Northeast Corridor isn’t any faster than the same train route was 40 years and $50 billion in federal subsidies ago. Between 1997 and 2004, Amtrak built its high-speed Acela system from Washington to Boston on the premise that it would get riders between major cities faster. Today, the Acela can get from Washington to New York in 2 hours 45 minutes at its fastest — or 15 minutes slower than the Penn Central Railroad could get a rider there in 1969 for an inflation-adjusted $102 per ticket.
Since just 2010, Uncle Sam has given Amtrak $6.1 million for each of the 730 miles of track it owns and must maintain. By contrast, the Transcontinental Railroad, built across the untamed American West without modern equipment, cost $1.2 million per mile for each of its 1,800 miles. Three years of maintaining Amtrak’s infrastructure costs six times as much on a per-mile basis as building the Transcontinental Railroad from scratch.
Likewise, the Eisenhower Interstate Highway System cost $475 billion to construct 47,182 miles of interstate, a cost of about $10 million per mile. Every day, the interstate system carries more than 60 times as many people-miles as all passenger rail services in the U.S. combined. Even when the additional $0.9 million per-mile in annual maintenance costs is added in, that’s a steal compared with Amtrak’s costs.
But the real problem with Amtrak is not that it costs taxpayers so much money — federal Amtrak funding is only one-tenth of 1 percent of the annual deficit, and four-hundredths of 1 percent of the federal budget. The real problem is that after four decades of federal funding, Amtrak has only stagnation and inefficiency to show for it. Rather than successfully spurring on American business, Amtrak provides slower trains at higher prices. It is a symbol of government waste because it fails to make any progress toward self-sufficiency and fails to innovate.
It is time to admit this train has left the station. Amtrak cannot and will not be run efficiently with the backstop of government funding behind it. Someday, a public-private partnership on railroads could be in the American interest, as it has been in the past. But for Amtrak, the government should shut off the spigot.
There are no comments available.
1150 17th Street, N.W. Washington, D.C. 20036
© 2014 American Enterprise Institute for Public Policy Research