During the 1970s, if I remember correctly, a proposal was made to have the federal government buy the U. S. railway infrastructure. It was during a period when the railroads were struggling. The idea was to make the rights-of-way available to any operator that could meet the operating standards, much like a public highway. The railroad companies and unions pushed back hard. They did not want to compete with other common rail carriers. The proposal was a nonstarter.
Amtrak is a government owned railroad. It owns the railway from Washington to Spuyten Duyve and New Rochelle, as well as from New Haven to Pawtucket and New Haven to Springfield. It also owns the line from Philadelphia to Harrisburg and several small segments in other parts of the country. The whole line from Washington to Boston is owned by a government or government entity and leased to the operators. On its segments of the NEC Amtrak leases operating rights to freight carriers and commuter operators.
Amtrak owns 46 of its 525 stations. Many of the others are owned by a local government, which acquired them with tax free municipal financing like that used to fund most of the nation's commercial airports.
Amtrak carries nearly 50 per cent of the commercial passengers between Washington and New York on its government railroad. But it only totes six per cent of the passengers going from Washington to Boston.
The lowest one way weekday air fares from Washington to New York range from $84 to $114, compared to $146 to $188 on the Acela and $69 to $98 on a regional train.
The air fares are $79 to $301 from Washington to Boston compared to $166 to $211 on the Acela and $83 to $118 for a regional train.
New York to Boston airfares range from $94 to $114 compared to $102 on the Acela and $59 to $84 on the regional train.
In 2007 the NEC trains covered their avoidable costs and contributed $258.3 million toward the interest and depreciation associated with the NEC. It still had a $185.3 million deficit, assuming 80 per cent of the interest and depreciation is chargeable to the NEC. If Amtrak was required to cover all of its costs, it would have to raise its NEC fares by an average of $18.50 per ticket. And it would have to raise them further if it was expected to provide a return on equity.
According to Alex Kummant, it would take approximately $7 billion of capital investments to make the NEC a truly high speed railroad. Doing so would lop an estimated 25 minutes off the running time from Washington to New York and allow an average speed of 96.9 mph. If it attracted the same number of riders as in 2007, this would add another $55.25 to the average ticket price, assuming that the capital investments were depreciation over a 30 life, and the government owned railroad was able to borrow the funds at the Treasury long bond interest rate.
With the exception of the highest airfare, traveling on the Acela is more expensive than flying. However, traveling on a regional train can be less expensive than taking the plane. If Amtrak was required to recover its current costs, adding an average of $18.50 to the ticket prices shown above would close the regional train - plane price gap significantly. And the cost of a true high speed railroad would push the fares even higher.
The train is time competitive for downtown Washington to downtown New York traffic, but it is not competitive for time sensitive Washington to Boston traffic. It is, of course, competitive for many intermediate city pairs.
These numbers tell us is that government ownership of the railroad is not a magic bullet. They also tell us that passenger trains, no matter where they are found, have a tough time competing with other forms of transportation because of their capital intensive nature. This is especially true in the case of a high speed railroad like the TGV that was built from scratch.
The amount of subsidy an economic activity needs to help cover its costs may seem like a red herring, but it is not for those who have to add up the pesky numbers and pay the bills. Nor is it for the taxpayer who has to write a check to cover the subsidy.
The subsidies required by each mode of transport - air, highway, pipeline, rail, waterway - indicate its economic worth and financial viability. Comparisons indicate the social value of each mode. If people will not pay the full cost of an economic activity, its social value is presumed to be lower than the value of an activity that people will cover. If all modes are subsidized, then the one that requires the greatest subsidy is presumed to have a lower social value than the competing modes.
Gross numbers, especially for comparison purposes, can be misleading. For example, many people hear that a corporation earned billions of dollars and may say that it has earned obscene profits. But net profits are not a good indicator of profitability. The key number is return on invested capital.
The historical return for publicly held U.S. corporations has averaged approximately 9.5 per cent per year, as reflected in the S&P 500 over many decades. During the same period an individual who bought AAA bonds would have had a return of approximately 6.5 per cent. Understanding the profitability of a business requires a slicing and dicing of the numbers. The same applies to the subsidies required by various forms of transport.
The gross amount of subsidy received by a transport mode is meaningless until it is understood on a unit basis. The unit for passenger transport is the passengers or passenger seat miles. To note, for example, that airlines received a subsidy of $5.5 billion and compare it to Amtrak's $1.3 billion subsidy doesn't tell the reader about how many people benefited from the subsidy or its social value.
Airlines carry many times more passengers than are carried by Amtrak; they create greater economic worth and social value. Therefore, to get a meaningful comparison, the subsidy per passenger or passenger seat mile is the best way to do it.
Capacity utilization is a measure of operating efficiency and is an indicator of how well the mode is being managed. If a unit of activity is operating below its optimum capacity, it is relatively inefficient. One way to increase the efficiency is to increase capacity turnover. That is to say, increase the number of users without expanding capacity. The best way to do this is to reduce the price - Amtrak's current long distance sale - to a point where the variable costs are covered and something is left over for the fixed costs. The key in the business world, of course, is to ensure that the fixed costs are covered and the shareholders receive a return on their investment. If capacity has been optimized, adding more capacity may be warranted. In Amtrak's case, with the exception of the NEC, the system is not anywhere near optimum capacity.
The airline vs. Amtrak subsidies that I showed were taken from figures presented by NARP. They are preliminary. I intended to dig into them when I have the time. I am suspect of NARP's numbers. They put a favorable spin on them to support their argument for more trains; they overlook numbers that detract from their position.
I did not claim that NARP represents all railway interests.
The subsidies shown are per passenger averages. I suspect that if they were calculated on passenger seat mile, the train would come off worse than it does by comparing the subsidy for passengers. Airplanes run a lot more seat miles than trains. So do personal vehicles, although the seat miles are difficult to calculate because no one knows for sure how many people occupy a private vehicle.
Southwest Airlines is owned 100 per cent by its shareholders. One can argue that it gets a subsidy in that the airports that it flies out of were built with tax free municipal bonds, but the amount of the subsidy is marginal, especially in the case of the older airports, which were paid for long ago. One can also argue that Southwest, as well as the other commercial air carriers, doesn't pay its fair share of the air traffic control system, but the point is arguable. A forceful argument has been made that in fact commercial air carriers pay more than their fare share and are in turn subsidizing the general aviation operators. But Southwest is not owned by the government.
Another big difference I believe we should take into account is difference in priorities.
The biggest expenditures this country has made have all been "Defense" related. Not neccessarily so in Europe. I don't want to open up a can of worms or political anger, but simply put, the money for design, funding, and operating an HST has to do a lot with priorities Americans see fit to employ.
The reason the Interstates were built was Defense related. Eisenhower had personally led a convoy coast to coast in a vehicle, plus he had also seen the Autobahns in Germany. The Interstates were built to facilitate rapid movement of military vehicles over terrain. (In fact, I have heard that one of the specifications of an Interstate highway is that they had to have straight sections built in, to act as emergency runways for fighter aircraft.)
That kind of engineering costs a lot of money- to the point of excluding other means of transportation.
You don't have to worry about ancilliary costs of purchasing real estate, or environmental protection, if your country is laid flat to start with. A theory I have is that the reasons Germany, France, and continental Europe are so "modern" is because they literally had to start over from scratch. They didn't need to worry about large standing armies, the latest technology for aircraft, or whether running the railroad through John Gotbuck's back yard might be a concern. John Gotbucks was probably dead, and his mansion was flattened.
If you bomb a country back into the Stone Age, you should not be surprised when that country takes the technology you have unleashed on them and improves on it. Especially when you tell them that you will guarantee their safety, at your own expense. While you are busily and happily cranking out billion dollar bombers, your "protectorate" is taking the same money they would have spent on a Luftwaffe, an Imperial Navy, or a hundred division Army, and building up a balanced infrastructure.
You won't get an HST in the United States until a couple of things happen. First, you will have to empower the government far beyond what it is now. The governments of Germany, France, and even the UK are much more willing to run over civil "entitlements" if they see a positive, lasting impact on the country as a whole. So, to build an HST corridor implies, in my mind, granting the Federal, State, or even local governments the power to confiscate land under "emminent domain". That won't happen- in fact, the current feeling of most Americans is that the government has too much power to do that already.
The second point is that you have to take away choices. That's another kind of emminent domain. Oltmann, living here just south of you, I know what driving through Atlanta is like. What do you suppose would happen if the state government said, "We aren't going to build a highway into Atlanta. Instead, you must use a train."
I would suspect the rail system, from MARTA to AMTRAK, would improve dramatically in terms of capacity- not neccesarily comfort. I've been on regular commuter trains in Japan that were fast, clean, efficient, and run on time. They still required rail employees to herd the crowds onto the train, and made the ride as comfortable as a hot, steamy summer day on the New York subway.
To build ridership, you have to take away the choices of a self indulgent society that believes it's neccessary to get into their SUV and drive 45 minutes into work 18 miles away. Not going to happen in this country.
We have the technology to build an HST network. We just haven't been forced into doing it... Europe has, and so has Japan.
Dave
Lackawanna Route of the Phoebe Snow
Whether people are aware of the subsidies received by all or nearly all forms of transport in the U.S. does not change the subsidy. It is still a payment that is not covered by the user fees. It is, in a sense, a hidden tax.
The question in my mind is who received the subsidies and what economic and social value goals are achieved as a result.
Samantha, the question should not be "who received the subsidies"- that's a matter of public record. The question should be, "What did they do with them when they got them?" Did they get an HST or a boondoggle bridge to nowhere? When you ask what goals or values resulted from those subsidies, I would add the question- did those goals and values reach an appropriate base of people? To illustrate the question, what effect does an ACELA serving the Eastern seaboard have on Californians? Texans? Floridians? Practically speaking, no effect at all, yet federal tax dollars from everyone are spent on a relative few people.
That's the kind of question people have about AMTRAK, light rail projects, and railroads in general... and is the sort of thing journalists label as "pork barrel projects".
erikthered wrote: Another big difference I believe we should take into account is difference in priorities.The biggest expenditures this country has made have all been "Defense" related. Not neccessarily so in Europe. I don't want to open up a can of worms or political anger, but simply put, the money for design, funding, and operating an HST has to do a lot with priorities Americans see fit to employ.The reason the Interstates were built was Defense related. Eisenhower had personally led a convoy coast to coast in a vehicle, plus he had also seen the Autobahns in Germany. The Interstates were built to facilitate rapid movement of military vehicles over terrain. (In fact, I have heard that one of the specifications of an Interstate highway is that they had to have straight sections built in, to act as emergency runways for fighter aircraft.)That kind of engineering costs a lot of money- to the point of excluding other means of transportation.You don't have to worry about ancilliary costs of purchasing real estate, or environmental protection, if your country is laid flat to start with. A theory I have is that the reasons Germany, France, and continental Europe are so "modern" is because they literally had to start over from scratch. They didn't need to worry about large standing armies, the latest technology for aircraft, or whether running the railroad through John Gotbuck's back yard might be a concern. John Gotbucks was probably dead, and his mansion was flattened.If you bomb a country back into the Stone Age, you should not be surprised when that country takes the technology you have unleashed on them and improves on it. Especially when you tell them that you will guarantee their safety, at your own expense. While you are busily and happily cranking out billion dollar bombers, your "protectorate" is taking the same money they would have spent on a Luftwaffe, an Imperial Navy, or a hundred division Army, and building up a balanced infrastructure.You won't get an HST in the United States until a couple of things happen. First, you will have to empower the government far beyond what it is now. The governments of Germany, France, and even the UK are much more willing to run over civil "entitlements" if they see a positive, lasting impact on the country as a whole. So, to build an HST corridor implies, in my mind, granting the Federal, State, or even local governments the power to confiscate land under "emminent domain". That won't happen- in fact, the current feeling of most Americans is that the government has too much power to do that already.The second point is that you have to take away choices. That's another kind of emminent domain. Oltmann, living here just south of you, I know what driving through Atlanta is like. What do you suppose would happen if the state government said, "We aren't going to build a highway into Atlanta. Instead, you must use a train."I would suspect the rail system, from MARTA to AMTRAK, would improve dramatically in terms of capacity- not neccesarily comfort. I've been on regular commuter trains in Japan that were fast, clean, efficient, and run on time. They still required rail employees to herd the crowds onto the train, and made the ride as comfortable as a hot, steamy summer day on the New York subway.To build ridership, you have to take away the choices of a self indulgent society that believes it's neccessary to get into their SUV and drive 45 minutes into work 18 miles away. Not going to happen in this country.We have the technology to build an HST network. We just haven't been forced into doing it... Europe has, and so has Japan.
I agree with the above thread, but just want to touch on Eisenhower's defense rationale for building the original Interstate highway system: it was part of the reason, but not the primary one(s): to save lives on the highway and with the safety, improve speed (although nothing like the "recommended" 130/kph [ca. 80 mph] that Germans still enjoy on most of their Autobahnen, in rural areas). Recall that Ike had originally called for a (federally sponsored or subsidized, I guess) system of toll highways that would run from the edge of one city, with relatively infrequent intermediate exits, and terminate at the edge of another city. BTW that was how the original Hitlerian roads were laid out and even today, except for several very large German cities, one doesn't expect to find exits that permit cross-town driving. Those familiar with Chicago will note that the original 1953 Chicago Skyway (which connects to the Indiana Toll Road at the border) ended at Stony Island Boulevard, a broad avenue and probably a great place to begin and end a toll road -- Ike would be proud, although those early Northeastern and Midwestern toll roads were built with little or no public subsidy that I know of past the state level of gov't. Also note that the Indiana Toll Road and Ohio's toll version of same have fewer exits than a "free" Interstate: Toledo has only one exit, for example.
I believe it was also Eisenhower's administration that promoted the idea of a national sales tax per gallon of retail gasoline. Most people will say that worked well, but it is sadly apparent today that those funds are not enough for all the expenses related to our now frequently ancient system of freeways and toll roads.
Later in the early Sixties the defense connection was stengthened when Sec'y of Defense Robt. McNamara (sp?) proposed that the Interstates would be useful in any coming atomic war or sudden build-up; hence the many, many bridges over Interstates that list the bridges' height, especially those over the older tollways or freeways: The newer roads were to carry mobile missles-on-a-truck platforms should need arise, and the newer freeways etc. were designed so that a warning label wouldn't be necessary (to those trucks w/ cannons). McNamara held, and probably correctly, that the nation's railroads couldn't get their act together enough to coordinate routes AND offer priority service within a two- to three-day window. It didn't hurt, I would guess, that the Interstates already had become, by virtue of being public highways if nothing else, under state control -- fortunately we have not had to go beyond (state) Troopers or local police to, well, police the new roads. Again I don't think McNamara's jawboning brought forth the expanded budgets for new and better Interstates all by itself; but doesn't it seem in our history, both before and since, that often a relatively good idea often is sweetened with a possible defense purpose, sealing it as a deal-maker? And since that's getting into politics, I'll say no more on that.
IIRC, it was primarily under LBJ's administration that funding for specifically urban-oriented Interstates became widely, and generously, available. For example, Roanoke Virginia has an Interstate spur built in the Sixties that originally extended from the "mainline" Interstate 81 to downtown; over the years the erstwhile &
Samantha wrote: Whether people are aware of the subsidies received by all or nearly all forms of transport in the U.S. does not change the subsidy. It is still a payment that is not covered by the user fees. It is, in a sense, a hidden tax. The question in my mind is who received the subsidies and what economic and social value goals are achieved as a result.
That, pretty much, is how I look at it, too. However, I'd go a step farther.
I would suggest that gov't or gov't agency collected "user fees" are really just taxes with strings attached. And those strings often result in sub-optimum allocation of resources.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
erikthered wrote: The second point is that you have to take away choices. That's another kind of emminent domain. Oltmann, living here just south of you, I know what driving through Atlanta is like. What do you suppose would happen if the state government said, "We aren't going to build a highway into Atlanta. Instead, you must use a train."
Well, the state pretty much has said the first part - "no more highways thru Atlanta". But, they've yet to do anything about the second part, except talk. We did get a small network of express commuter busses from an initiative started under the previous gov. But, the current gov. hasn't shown any leadership w.r.t. transportation and with the balance of power in the state gov't tilted away from metro Atlanta toward rural GA, nothing is happening. Add to that, the new DOT head has uncovered that the DOT is a complete disaster of project planning and deliverly and you have quite mess.
Maybe they'll surprise me this legislative session. The leading pro-commuter rail line group has already started beating the drum. Maybe this is the year the state'll let loose with some money.....but I doubt it. The Gov is too busy praying for rain. Meanwhile the traffic gets thicker and bloom that is Atlanta starts to wilt and petals start to drop.
Actually, it was originally called the Dwight D. Eisenhower National System of Interstate and Defense Highways. It still bears the flag of a 5 star General on signs in many areas.
It was authorized by the Federal Aid Highway Act of 1956, which was popularly known as the National Interstate and Defense Highways Act of 1956.
The reason the Highway Trust Fund is insufficient to maintain the road system is because huge portions of it are used for pork projects. In just the last two years it has been used for 3 million dollars to rebuild the Packard Museum, $400,000 for the Erie Canal Museum, $950,000 to build a bicycle and pedestrian walkway along an abandoned rail right of way, a 1.5 million dollar bus stop in front of the Anchorage Museum of History and Art, 2.3 million for landscaping along the President Reagan Freeway, $300,000 for boadwalks at Pismo Beach, 4 million dollars to build a parking lot in Baltimore, etc.
JT22CW wrote:I don't see a single reference to support anything you've asserted. Care to provide them? As far as I've heard, plenty of direct subsidy goes into air traffic control, and without it, it would fall apart. (Is the Airline Trade Group an unbiased source?)
Here is some beef for the numbers that I quoted in my post regarding Southwest Airlines and airline subsidies.
My original estimate used some but not all of NARP's numbers. I eliminated the ones that were not supported, e.g. $700 million to $1 billion of NASA research that NARP claims benefited general aviation.
Information regarding Southwest Airlines' flights from Dallas to Austin, Houston, San Antonio, etc., can be found in Southwest's on-line schedules. I added up the flights for the second Monday in February.
For FFY ended 30 September 2007, Amtrak received a federal subsidy of $1,051,500,000 for train related operations. During the year it carried 25,847,531 passengers. Dividing the subsidy by the number of passengers gives an average system subsidy of $40.68.
The average subsidy for NEC passengers was $2.52, while the average subsidy for state and other corridor train passengers was $16.00. It averaged $129.78 for long distance passengers. I assumed that 80 per cent of the interest and the depreciation was attributable to the NEC, leaving 20 per cent to be split evenly between the other two categories.
NARP lists 15 Federal Subsidies for Aviation. Four can be quantified. The others cannot be quantified without making assumptions that would be difficult to support, or they relate to investments - airways and airports - that go back as far as WWII, or they don't tell the whole story.
NARP lists the assumption of the pension plan obligations of several bankrupt airlines by the Pension Benefit Guaranty Corporation (PBGC), as well as a change in the actuarial assumptions for funding legacy airline pensions, as an aviation subsidy. But they failed to mention that the PBGC is an insurance program.
PBGC is not funded by general tax revenues. It collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans it takes over. The airlines paid actuarially adjusted premiums to the PBGC. Equally important, actuaries frequently change the minimum funding assumptions associated with legacy pension plans. The treatment received by the bankrupt airlines with legacy pension plans was not extraordinary. They collected on an insurance policy. The net benefit would have been the present value of the benefit stream offset by the present value of the premiums paid since the formation of the PBGC.
NARP fails to differentiate between commercial aviation and general aviation, thereby implying that commercial aviation is the sole beneficiary of a subsidy. General aviation does not compete with Amtrak. People who can afford to fly their own plane or be whisked around the country in the corporate jet are not serious candidates for taking a train.
Governmental investments in airports and airways facilities are listed as significant subsidies. It is true that the airlines have benefited from a variety of fiscal incentives to build airports and airways facilities. It is equally true that the railroads have enjoyed similar fiscal benefits, i.e. the large land grants for the development of western railroads, local tax incentives to build union stations, etc. Amtrak would not have any tracks out west to run on if it had not been for these subsidies. To cite historical incentives for the development of airports and airways without citing similar support for railway development is disingenuous. Translating these incentives into present dollars would be a daunting challenge. Both are sunk costs and are irrelevant for on-going comparisons.
NARP claims that 15 per cent of FAA operations are a function of military operations in FAA controlled airspace. It provides no data to substantiate this number.
NARP claims that FAA operations were slated to receive $2.703 billion of general funds in 2007. It further claims that $1.453 billion was destined for general aviation, implying that half of the subsidy must be for commercial airline operations. I cannot determine how they came up with this number, as per the next paragraph.
Assuming that the federal subsidy was spread across all FAA operations, the amount that would have been available in 2007 to control general aviation and commercial airline operations would have been $2,297,550,000 (2.703 X .85). According to the FAA Aerospace Forecast Fiscal Years 2006-2017, in 2005 - latest audited figures - commercial airlines flights made up 26.1 per cent of tower operations - ground control, take-off and landing clearance, and approach/departure control hand-offs. They accounted for 35.1 per cent of Enroute controlling. The average of these two numbers is 30.6. Thus, under a conservative scenario, the FAA federal operations subsidy applicable to commercial airline operations using NARP's numbers would be $703,050,300 (2,297,550,000 X .306).
In 2005, the latest year for audited financial numbers, $2,827,809,000 was transferred from the general fund to support FAA operations. Assuming military flights make-up 15 per cent of FAA's workload, for conservative illustrative purposes, $2,403,637,650 (2,827,809,000 X .85) would have been available for general operations, of which $735,513,121 (2,403,637,650 X .306) could be considered a subsidy to control commercial airline operations.
These are just some of the disconnects that I found. There are others.
NARP's verifiable figures add up to $5,852,845,871 before the removal of unsupported items, e.g. NASA research. After the removal of these items, the general fund subsidy totals $4,619,787,047. According to Federal Department of Transportation (DOT), for FFY ended October 30, 2007, approximately 678,000,000 passengers boarded commercial airliners for flights in the United States. Dividing $5,852,845,871 by this number gives an average passenger subsidy of $8.63, while the math after removal of the questionable items shows an average passenger subsidy of $6.81.
Using the latest audited numbers - 2005 to 2007, the properly allocated - general, commercial, and military aviation operations - verifiable federal subsidy for controlling commercial airline operations was approximately $2,951,485,487. Dividing this number by the same number of passengers shows an average passenger subsidy of $4.35. I only used audited or verifiable numbers for this calculation. Thus, if a 2005 number was the latest audited or verified number, it is the one that I used. It resulted in some mixing and matching of the numbers, but the year to year differences were relatively small. Thus, the bottom line could change a little once the 2007 figures have been audited and verified, but it would be minimal.
Failure to prorate the subsidies between general aviation and commercial airline operations accounts for most of the variances.
Digging through government figures is a daunting task. But at the end of the day, no matter how one slices and dices the numbers, the average per passenger federal
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