Another thread has debated the proposition that subsidies of any kind are inevitably bad. There seems to be common agreement that transport subsidies are extraordinarily complex, and unlikely to stop any time soon. I think the sense of the contributors is that the world would be a great place without subsidies, and that legislation of various kinds is required to achieve desirable community outcomes, though no one has faith in legislators to be either rational or bold and deliver these on a national basis- too many vested interests. The debate then becomes a political one, about if and how Government can improve the lot of its citizens, and to what extent it should interfere with their freedom to do exactly as they please.
Don Phillips in the latest edition of Trains writes about ‘The (US) transportation disaster' and says that all modes of transport are failing, with private freight railroads being one bright spot, as they benefit from problems elsewhere, and make enough to do a reasonable amount of investment for expansion. Elsewhere, national disaster looms and only the Federal government can solve it, he argues. I certainly think that the US transportation system has deteriorated sharply over the last 30 years, but recent, infrequent experience says it is not yet so bad as to be widely perceived as a National disaster, just something older folk moan about over cocktails, as they remember how it was.
Let us however suppose that Phillips is right and that the disaster will one day become clear to all, and precipitate Federal action, and that only Federal action can deal with the scale of the problem. (Not discussable). Suppose further that you are the budget holder to whom the Government says ‘Fix it. For the next twenty years'. You are given a cheque with so many noughts on the end, you feel dizzy. At first glance, it looked like one trillion dollars over 10 years, though maybe there were more. You may adopt the libertarian position, and tear the cheque up, for as Adam Smith observed, there is nothing more difficult than a Government to give up role it has taken upon itself, but someone else would be brought in to replace you
The question is this: Given a massive commitment from federal government, where would you invest, assuming you were impervious to the blandishments of every special interest group in the land? What regulations would you introduce to make sure the package made sense? It would helpful to spell out the objectives and assumptions in your programme. For example, an objective could be:
Assumptions could be:
What would you spend and where? What would you not invest in?
Anyone want to play?
Assuming a 40-50% farebox recovery rate, look at the fare on your commuter rail, transit or Amtrak ticket and double it...and ask yourself if the product is worth the price.
I have yet to receive my issue, but I am sure Commissar Phillips recycles the same rants as in the past, etc.
With Bank of America/Countrywide writing a portion of the $300 Billion Senate housing bailout, I am sure the railroads would get a crack at writing the Railroad Investment Act of 2009.
We can even wait trackside...err...I mean on a public sidewalk for a chance to take a picture of the Pork Barrel Special rolling through town.
My train videos - http://www.youtube.com/user/karldotcom
I have read Mr. Phillips latest article and it does come across to me as his same old line. He is quite taken with the idea that government must run things in order that they are done right. I dealt with many government agencies on all levels for much of my career and I think he's "full of beans" but that's just my opinion based on my experiences. I do wish TRAINS would publish another critic besides him that would couterbalance his viewpoint so the readers get different editorial viewpoints.
As for the comment in another post that no one can make money carrying passengers, that's not true from a historical basis. Various airlines made money in the past and Southwest might even end up this year in the black. Some of the carriers looked like they were turning the corner until the current upsurge in fuel. Private transit systems often made money until the widespread use of the auto. Intercity Bus companies made money for quite a few years. Rail passenger service generally made money, with the help of the US Mail, until the combination of the auto and the Great Depression. It was actually the locals and the passenger light density lines that were the major rail passenger financial drain until the advent of modern air travel along with the interstate highway system. People tend to forget that while the loss of the US Mail was the final straw for non-commuter rail passenger service, it was also the failure of both the rail Unions and their members and the Federal Government to accept reality and change with the times that greatly contributed to the demise of passenger rail.
Well, I finally received my magazine to check out the column. Mr. Phillips states he doesn't want to get political but then does throughout the entire piece. He seems to blame President Bush for the lack of a transporation strategy, Federal overspending, and the ongoing wars.
But Congress assembles, debates and actually approves all those expenditures, adding special-interest, pork-barrel spending along the way.
He once again talks of the rails grinding to a standstill due to lack of capacity, yet doesn't mention declining rail traffic and reduced dwell times experienced by the majority of railroads. I railfan the BNSF Transcon weekly, and there is a noticeable lack of freights from a year ago.
He does point out that California is ahead of the game....but CA passed prop. 108, 111 and 116 in 1991 ($18 billion for public transportation), which paved the way for the creation of Amtrak California and expanded Pacific Surfliner, Capitol Corridor and San Joaquin services. In 2006, CA passed Prop. B which increased spending another $19 billion ($4 billion for rail)
States that want expanded rail service need to bite the bullet, and pay for it.
Suppose Subsidies are a good thing?
Q. If you call a tail a leg, how many legs does a dog have?
A. Four. Calling a tail a leg doesn't make it a leg.
"Supposing" good doesn't work either.
ndbprr wrote:Nobody made or makes money hauling people. Never did and never will.
Airlines and bus companies make money carrying passengers. Over time they have to generate net income or they go out of business, although they can have some really bad years. This is the nature of business.
Most of the nation's airlines had a relatively good financial year in 2007. This year is likely to be much more difficult, given the dramatic increase in fuel costs. Many of the nation's carriers will finish the year in the red, although Southwest is projected to have positive net income for the year.
Southwest Airlines had an operating profit of $838 million, with net income of $590 million, for the four quarters ended October 31, 2007. However, it is not the only U.S. carrier that made money on domestic operations. Other domestic or largely domestic carriers, e.g. AirTrans, Air Wisconsin, American Eagle, etc. had solid operating profits. In fact, most of the carriers had a positive return on their domestic operations, although the big carriers had a better return on their international operations.
U.S. passenger airlines with annual revenues of more than $20 million had a combined return of $7.4 billion on operating revenues of $130.9 billion and realized a combined net income of $4.6 billion.
Operating profits were 5.7 per cent of revenues or sales, whilst net income was 3.5 per cent of revenues. These margins are slim when compared to many businesses, but they are solid for the airline business, which has always operated with razor thin margins. It is the nature of the business.
Had it not been for an extraordinary net income loss at Comair ($479 million), the country's largest carriers would have realized net income of $5.5 billion or 4.2 per cent of revenues. The extraordinary item was related to Comair's crash in Ohio.
The average operating revenue per passenger was $193.04, whilst the average operating cost was $182.10, leaving an average operating profit of $10.94 per passenger.
Greyhound was acquired in the last year by First Group, which is a UK based transport conglomerate. First Group earned 267.1 million pounds before adjustments; it earned 560.8 million pounds before interest, taxes, and depreciation. It does not show the earnings for its North American operations, which includes Greyhound, but management reported that all of its operations, including Greyhound, realized net income.
I suspect that Greyhound, as well as many of the other North American bus companies, realize a greater return on their charter operations than scheduled operations, but I have not checked it out in any depth.
Samantha wrote: ndbprr wrote:Nobody made or makes money hauling people. Never did and never will. Airlines and bus companies make money carrying passengers. Over time they have to generate net income or they go out of business, although they can have some really bad years. This is the nature of business. Most of the nation's airlines had a relatively good financial year in 2007. This year is likely to be much more difficult, given the dramatic increase in fuel costs. Many of the nation's carriers will finish the year in the red, although Southwest is projected to have positive net income for the year.Southwest Airlines had an operating profit of $838 million, with net income of $590 million, for the four quarters ended October 31, 2007. However, it is not the only U.S. carrier that made money on domestic operations. Other domestic or largely domestic carriers, e.g. AirTrans, Air Wisconsin, American Eagle, etc. had solid operating profits. In fact, most of the carriers had a positive return on their domestic operations, although the big carriers had a better return on their international operations. U.S. passenger airlines with annual revenues of more than $20 million had a combined return of $7.4 billion on operating revenues of $130.9 billion and realized a combined net income of $4.6 billion. Operating profits were 5.7 per cent of revenues or sales, whilst net income was 3.5 per cent of revenues. These margins are slim when compared to many businesses, but they are solid for the airline business, which has always operated with razor thin margins. It is the nature of the business.Had it not been for an extraordinary net income loss at Comair ($479 million), the country's largest carriers would have realized net income of $5.5 billion or 4.2 per cent of revenues. The extraordinary item was related to Comair's crash in Ohio. The average operating revenue per passenger was $193.04, whilst the average operating cost was $182.10, leaving an average operating profit of $10.94 per passenger. Greyhound was acquired in the last year by First Group, which is a UK based transport conglomerate. First Group earned 267.1 million pounds before adjustments; it earned 560.8 million pounds before interest, taxes, and depreciation. It does not show the earnings for its North American operations, which includes Greyhound, but management reported that all of its operations, including Greyhound, realized net income. I suspect that Greyhound, as well as many of the other North American bus companies, realize a greater return on their charter operations than scheduled operations, but I have not checked it out in any depth.
Most of the US legacy carriers have been thru bankruptcy at least once this decade. Delta, American, Continental, USAir(twice), United. Most are cannot cover their operating expenses right now, despite high load factors.
Greyhound dragged their parent, Laidlaw, into bankruptcy in 2001 and has since been sold off to First Group. No way to tell if they are generating sufficient cash to support investment in ongoing operations or if the new parent is just milking the cash flow and will let the whole thing crumble when the equipment expires. I don't see many new Greyhoud busses operating out of Atlanta.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
greyhounds wrote: Suppose Subsidies are a good thing?Q. If you call a tail a leg, how many legs does a dog have?A. Four. Calling a tail a leg doesn't make it a leg."Supposing" good doesn't work either.
Or,
Q. When is gov't spending not a subsidy?
A. When it's constitutional responsibility of gov't.
Providing for the "common good" is one of those. ....and here, I'll stop.
I am not a free-market purist and that Amtrak or airlines or sports teams receive subsidies does not bother me to the degree it does with some.
But.
The size of the Amtrak appropriation is a major item of contention of the Amtrak critics, some of them Libertarians, some of them closet Highway Lobby people, some of them "deficit hawks" or "anti pork-barrel spending", or whatever reason.
We say Amtrak is "underfunded" at a billion+/year when aviation is getting, say 15 billion and highways around 40 billion. The critics counter that Amtrak is "overfunded", even when dismissing the "self funding" of the Aviation and Highway Trust Funds through airline ticket and transportation fuel taxes. Amtrak may be getting a small percentage of total transportation funding, but it is getting a high degree of funding in subsidy per passenger mile by orders of magnitude, and all of it comes from General Revenue.
They say Amtrak is subsidized. We say, oh yeah, what about all of that subsidy going to those "other modes." They say, oh yeah, what about that subsidy because Amtrak is funded at ten times the rate (does this point need all-caps, exclamation points, or red letters?). Then we say that the other modes have all manners of indirect subsidies, and so on.
And then we say, look how the airlines are in crisis and are losing money, it is only a matter of time before they require high rates of subsidy. Oh gosh help us, if the Amtrak experience is any guide, it is then only a matter of time that we are spending 100 billion/year on transportation subsidy or making do with a greatly diminished air transportation system.
Here is the Grand Bargain. I believe that we are past the times when the Libertarian position prevails that transportation will have to do without subsidy or government intervention. I also think that most non-railfan people are accepting of the fact the Amtrak and other ground-based common carrier modes such as bus and rail transit system receive some level of subsidy. On the other hand, percentage rates of subsidy at the level of transit districts result in hundreds-of-dollars-per-ride subsidy to patrons of long-distance trains -- we are not going to get the buildup of gas-saving congestion-relieving fast-frequent corridor trains with this other thing going on, and the advocacy community needs to face this at some point.
In light of the proposal to increase Amtrak funding by a substantial amount, not everything we want but a substantial change in the status quo, the advocacy community needs to be committed to that money being spent wisely rather than the simple "give trains more money" position. In light of the bickering and fanciful proposals to Don Oltmann's "How would you spend the money", things don't look good long-term for Amtrak in terms of the role of the advocacy community.
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
I'd be keen to see some hard data to support the contention that the airlines have had negative retained earnings since their inception.
An equity business can be viable for a period even though it is racking up loses, but not for as long as the airlines have been collectively in business. One can argue that the airline business could not survive without government subsidies; although as I have shown, most of the subsidies have been paid indirectly by the users.
It is true that Southwest Airlines, as well as the other new carriers, have a financial advantage over the legacy carriers. Instead of opting for expensive legacy pension plans, they gave their employees 401ks. Most of them supplement employee contributions to the 401ks, but at the end of the day they are less expensive than the traditional pension plans. This is part of the advantage. But a bigger part of the advantage accrues to better management. Southwest Airlines decisions to use just one model of airplane and hedge its fuel are two examples of smart management.
To the best of my knowledge American has never been in bankruptcy or at least not for as long as I have lived in Texas, which is coming up on 33 years.
I would be equally keen to see the Laidlaw financials, by operating division, to assess whether Greyhound dragged them into bankruptcy. I have heard, although not been able to verify it, that sloppy management and the other operations did the trick.
First Group executives, i.e. CEO, CFO, and COO for North American Operations, are stating publicly that Greyhound is generating a positive cash flow. Given the sensitivity to honest financial reporting in a post Enron world, I would be surprise if they are cooking the numbers. It is interesting to note that First Group, because of hedging, paid an average of $74 a barrel for oil in 2007. This is slated to increase to slightly more than $80 in 2008. Pretty smart management if you ask me.
According to Greyhound's site, they purchased a limited number of new buses in 2006. I understand that they have upgraded others, as per a friend who works for Greyhound in Dallas. During the same period Greyhound, as well as other carriers, have restructured their routes, dropped many smaller communities, and streamlines their operations. As a result they don't need as much equipment as they had.
I note that airlines and bus operators adjust their business model to fit a changing environment, which competitive businesses must do if they want to survive. However, Amtrak seems to run with the same old model.
Samantha has pointed out one key variable of the discount airlines (pensions) that doesn't get discussed enough. No company in its right mind goes with a defined benefit retirement plan for its employees anymore unless its locked into one by contract or law. Side Note: That's also one of the reasons for sending jobs abroad if your company is indeed locked into one. All the news media and politicans focus on the lower wage cost of foreign labor but retirement/fringe benefit (including medical) costs as well as corporate income (and property) taxes (Federal, state, local) also play major roles.
As for her comment about Amtrak changing its model, its a political and bureaucratic organization so it will never change its model unless forced to by the Congress and Executive branch. Since politicians and the unions have a stake in the status quo, I don't forsee that happening.
Question for someone: the last time I was in the Trenton, NJ station arround Christmas in 2002, there were 2 ticket sellers for Amtrak and two for NJT (and I presume they handled SEPTA too although I can't remember). Although the station was very crowded, the two NJT's weren't that busy and the two Amtrack sellers were just sitting around the hour or so I was there. It was pretty obvious to me that two or at least just 3 ticket sellers could have handled it all if they could sell all the tickets. At the time, I remeber thinking that's a waste of Amtrak's money. Has the staffing situation changed at all in Trenton since then, ie. ticket machines?
alphas wrote: Question for someone: the last time I was in the Trenton, NJ station arround Christmas in 2002, there were 2 ticket sellers for Amtrak and two for NJT (and I presume they handled SEPTA too although I can't remember). Although the station was very crowded, the two NJT's weren't that busy and the two Amtrack sellers were just sitting around the hour or so I was there. It was pretty obvious to me that two or at least just 3 ticket sellers could have handled it all if they could sell all the tickets. At the time, I remeber thinking that's a waste of Amtrak's money. Has the staffing situation changed at all in Trenton since then, ie. ticket machines?
I've wondered the same thing, why 2 sets of employees selling tickets, these are not operating employees, they're ticket agents. But it's not just the trains. Camden and Philly, Greyhound and NJTransit share bus stations, but have separate ticket windows and agents.
Anyway there's still more than 1 agent for both Amtrak and NJT at Trenton. But it's not just Trenton, although that's one of the few places where the agents are near each other and the 2 agencies' trains always use the same platforms, and New Haven's the only place I can think of where the Amtrak trains serve the same stops as all of the local trains. Philly 30th St, Newark NJ and New York Penn also have separate ticket agents, but some of those local trains go to lines that Amtrak doesn't serve. I assume the other Wash-Boston stations have similar agent arrangements.
Bear in mind that Trenton to New York passenger loads have increased since 2002, so even with increased ticket vending machines they might also still need to maintain the same manpower level.
Patrick Boylan
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One advantage the Europeans have is that Europe is made up of relatively small countries all packed together, so there are many runs in the 2-3-400 mile range that are ideal for train operations. America has a few places like the Northeast corridor where this is true, but most US and Canadian runs are much longer - making airline travel more appealing for most people.
Keep in mind when talking about subsidies that passenger trains were always subsidized, either by state/federal land grants to the railroads or by mail contracts. The steady trickle of passenger train abandonments became a torrent once the mail was taken off of trains in the early 1960's.
Oil prices may temporarily go down in the future, but in the long term they're going to continue to go up, since we've basically reached the peak of production in world oil - that is, we've used up the first 50% of the world's oil, the oil that is easiest to find, transport and process. If we don't continue to support - and in fact, expand - passenger service, we're likely to be stuck in the future with autos that are too expensive to drive, and no way to go city to city by rail in an efficient manner.
wjstix wrote: Keep in mind when talking about subsidies that passenger trains were always subsidized, either by state/federal land grants to the railroads or by mail contracts.
Keep in mind when talking about subsidies that passenger trains were always subsidized, either by state/federal land grants to the railroads or by mail contracts.
the land grants would have subsidized the freight as well as the passengers.
Was the government giving inflated compensation for the mail contracts? If they were an honest price for an honest day's work then they were not subsidies from the government to the railroads. The railroads may have accounted for the revenue so one money making division was subsidizing another
wjstix wrote: we've used up the first 50% of the world's oil, the oil that is easiest to find, transport and process.
we've used up the first 50% of the world's oil, the oil that is easiest to find, transport and process.
we don't know that we've used up 50% yet. We can only know what we've used so far, and what we've found already. We can estimate what we expect to use in the future. We can guess how much we expect to find in the future. What we haven't found, which is probably not the easiest to find, transport and process, is unknown. It could be less than what we know we have now, or it could be more.
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henry6 wrote:There has always been subsidies for railroads (and all other American businesses). Charters, subscriptions, bond authrizations, grants, government contracts, US MAIL, patents, land grants, donations, and on and on. And anybody in the business of moving people does not make money from doing so, especially if not subsidized with traffic control, rights of way, terminal, policing: it is whatever "extra" an operator can charge for that may make money. This is true of buses and airlines as well as railroads. But the subsidies to highway and air transportation is measured in hundreds of billions of dollars annually while rail rarely makes it to a billion here or there. And further, this country has never had a Federal transportation policy beyond fiscal supports: no planning, no coordination, no comprehensiveness. Many have pushed for such a policy for years but it has fallen on deaf ears and otherwise open pocketbooks. Now push is shoving and congestion, environment, and energy are converging as major issues which have to be addressed in the transportation arena in order for us to both move freely and move goods and resources economically and safely. No one form or method of transnportation is a whole answer, so discussion and private and public sectors pocketbooks have to remain as wide open as necessary and prudent to meet the future.
Most American businesses have not been subsidized. Most of them are small to medium sized entities, sometimes referred to mom and pop shops. They have created most of the jobs in the United States.
Most forms of commercial transportation have been subsidized, at least in some form, since the beginning of the country. But at the end of the day, at least in recent times, the seat mile subsidy for passenger rail has dwarfed that for air or buses or any other form of commercial transport many times over. It is not even close.
For the FY ended 30 September 2007, U.S. airlines earned $7.4 billion with net income of $4.6 billion. Hauling people as opposed to goods does not generate the best returns, to be sure, but to say that there is no money in transporting people is not true.
As far as airlines are concerned, if the figures you stated, Samantha, are so great how come the airline insdustry is rife with cutbacks, layoffs, bankruptcies, and mergers? On the other hand since those figures are so good, then my tax dollars supporting airports, air traffic controllers, research and developement for the military (from whence come commercial aircraft designs), etc., should be paid back somewhere along the line and there should be no need for cutbacks, layoffs, bankruptcies, and mergers.
When it comes to business subsidies there are very few mom and pop operations of any kind any more. Retail complexes are built with tax breaks, easements, and "other concessions"; then the mom and pop operations rents from them. Large manufacturing facilities are given many of the same breaks for taxes, utility aid, etc. as communities bid or compete to attact them. In the past, communites and state legislatures, would guarentee bonds and offer other incentives and help to businesses, even allowing monopolistic practices (from 1776 in this country). Don't be fooled by the "free enterprise" mantra...it never really existed except as a propaganda weapon to keep us from "socialization". Business and governement always has been, and always will be, and should always be, a partnership of community and business development for the benefit of all.
As far as airlines are concerned, if the figures you stated, Samantha, are so great how come the airline insdustry is rife with cutbacks, layoffs, bankruptcies, and mergers?
Samantha can respond on her own account, and I don't adhere to Samantha's strict-Libertarian no-subsidies line. But the more comments I see like the above, the more I am persuaded that on balance Samantha has the correct general outlook.
The airlines may be rife with cutbacks, layoffs, bankruptcies, and mergers, but these are allowed to occur to reduce the level of airline service to reflect the willingness or lack thereof of the traveling public to pay for the cost of such a thing. I don't hear of an NAAP counterpart to a NARP starting up a lobbying campaign to save this or the other flight departure. I don't see a community of airline passenger advocates holding meetings wondering what to do about the impending cutbacks, and the only people seeing this as an impending End of Air Travel are those in the passenger rail advocacy community engaged in a kind of wishful thinking that people will finally see things their way and throw all of the subsidy bounty going into airports and air travel back to trains.
We don't live in Galt's Gulch of a Libertarian commune, and yes the government is intertwined with all aspects of commerce, from the direct subsidy to the indirect tax break. So the argument is made that all transportation modes are subsidized, forget that, all commerce is in some way subsidized. Samantha, a member of the passenger rail advocacy community in good standing as far as I am concerned, is advocating laissez-faire. It seems a lot others in the community are drawing the opposite conclusion and advocating laissez les bons temps roulez (that is a New Orleans-French expression that loosely translates, Let's have a good time freely spending other people's money).
The amount of Amtrak subsidy is small, but the rate of subsidy per passenger mile is large compared to much of anything else, and whatever turmoil is happening in an airline industry that is accounting for 100 times as much travel as Amtrak, 10 times as much travel as we would get spending 400 billion dollars over 40 years as proposed by the Vision Report, doesn't change much.
There is much work needed to put our own house in order with respect to Amtrak -- gosh awful timekeeping of many trains, a marginal fuel efficiency advantage when trains should be beating the pants of other modes in a time of high energy prices but are not, expensive maintenance operations that it pays to keep bad-ordered equipment parked rather than repaired and earning revenue, and so on. With Lautenberg-Lott, there may be what is admittedly a small amount of money to address these concerns, to improve Amtrak to make the case for more money down the road, that is, if the money is spent wisely.
The one question I want to ask of holders of the "all commerce is subsidized so why not Amtrak?" viewpoint: many in the advocacy community spend a lot of words ridiculing Amtrak reform, NEC privatization, "glide-paths to profitability" and so on. Is it a matter of doctrine that all attempts to apply any kind of financial performance metric on Amtrak come from the Dark Side? Is it the passenger rail advocacy position that Amtrak should be funded with whatever level of subsidy it takes to provide the train services deemed necessary? Is there any measure of financial performance of an Amtrak train that the advocacy community would say, "OK, this is not working, let's try something else with the limited financial resources at hand?"
I would not describe myself as a Libertarian, although I can see how one might come to that conclusion. I support free markets, but ones that are regulated by independent government agencies (federal, state, and local).
Free enterprise should have first crack at providing a commercial activity, i.e. commercial transport. Government(s) should create a framework to encourage it, but should not provide the service, except under special circumstances where social welfare demands it. If free market players cannot make it because the users will not or cannot cover the cost of the service, those players should be allowed to go under. Thus, when it became clear in the 1960s that private enterprise could not continue to run passenger trains, the government should not have created Amtrak to operate intercity passenger trains that few people wanted and only a small percentage used.
Using its regulatory powers government should ensure a level playing field in the market place. It should ensure that transactions are fair, open and honest; protect the welfare and health of employees; and ensure that consumers are treated fairly. But only under special circumstances should it be involved in a commercial activity.
Ideally, the true cost of all forms of transport would be passed to the user at the purchase point, e.g. pump, ticket counter, freight invoice, etc. Unfortunately, this has not happened and is not likely to happen. Transport in the U.S. is hooked on subsidies. It is unlikely that they will go away.
Government should subsidize public transport where failure to do so would work a serious hardship on a significant segment of the population.
The first that comes to mind is public transit, i.e. buses, light rail, commuter rail, etc. A significant percentage of Americans, especially those in large cities, could not get around without public transit. And many of them could cover the cost of the service.
The second is rapid rail in highly congested corridors where expansion of the airways or the highways would be cost prohibitive. Passenger trains from New York to Washington or Chicago to Milwaukee or LA to San Diego make sense. Long distance trains do not. And as Paul M points out, given the limited resources available to optimize passenger rail under the aforementioned conditions, the dollars should be concentrated where they can have a meaningful impact as opposed to fritted away on low value alternatives.
If government support is required for a commercial activity, e.g. commuter and corridor rail, the operation of the trains and support activities should be outsourced to private contractors. They are likely to run the system more effectively than government. The threat of losing the contract tends to keep contract operators sharp.
I have been a rail buff since I was 10 years old. I have ridden over every mile of the Amtrak System with the exception of Chicago to New Orleans, plus many other miles that no longer have passenger trains. I have ridden trains in Australia, Canada, New Zealand, and Great Britain. I love them. But I am also a retired CPA who is worried about the debt (current and pending) being laid on this country. And I have grave misgivings when people argue for more trains or more transit or high speed rail without saying how they would pay for it. Because someone must pay! There is no free lunch.
And don't forget, Interstate Highways and Airports and government owned parking lots do not pay real estate taxes, but freight railroads do, and I understand Amtrak does make contributions to local communities along the NE Corridor. There are other hidden subsidies for highway transportation as well, specifically law enforcement and insurance-health costs.
Amtrak: about 1.2 billion in subsidies to move 5 billion passenger miles -- about 24 cents per passenger mile.
Roads and highways: about 40 billion in Federal highway budget in support of 4 trillion passenger miles. About 1 cent per passenger mile. And that is arguable as direct subsidy as the money is raised on a tax payed by highway users in the way that Amtrak is unable to raise the 24 cents/mile in costs by any kind of tax specific to railroad users. It is also said that there is a substantial shortfall in the Highway Trust Fund and that as much as 10 billion/year in general revenues will need to be used -- OK, let's say that the Federal highway subsidy is then one quarter cent per passenger mile.
But of course, that 40 billion doesn't include the state and local spending, the property tax loss, and so on. What does that make the government subsidy of highways, with generous allowance for all factors -- 3 cents/passenger mile?
Then the argument is made that new Interstate Highways or lane additions are so costly and there is so much cross-subsidy going on in the highway system that the effective rate of subsidy on those roads is perhaps an Amtrak-sized 24 cents/passenger mile. These costly roads are a hard sell. So we have a data point that when roads cost as much as Amtrak, some are getting built, but it is difficult to get such project approved.
OK, it is said that for the cost of new Interstate construction, we could construct high-speed rail. The Interstate Highway is simply one leg of a trip that starts in your driveway, continues on local roads, travels for a part on the Interstate, and then ends up in some parking lot. A high-speed rail trip most likely would be intermodal in this country, starting in your driveway, taking local roads or perhaps short stretches of Interstate to get to the HSR station, parking, assuming that there is enough parking at an affordable price, taking a leg of the trip on HSR, and then arranging some transport at the other end -- commuter or light rail, rental car, taxi.
We could promote the use of HSR for one segment of an intermodal trip by making it more costly and less convenient to use the Interstate by collecting tolls as they do in Illinois and other places. One could have institutions like the Illinois Tollway Authority, where it seems that a lot of the collected tolls pay labor costs of the Tollway Authority, essentially a kind of Highway Amtrak.
Or one could use the cross-subsidy model. If motorists are perfectly happy with the road taxes collected on idling their car motor in their driveway going towards the Interstate Highways, which are only one segment of a multi-segment journey, perhaps the motoring public would be perfectly happy with their gas tax money going to HSR, which would constitute a segment of an intermodal trip.
We already subsidize commuter rail out of gas-tax money. There is general and broad-based political support for this. There are some folks who think that the motoring public is getting the short end of this arrangement, but in the train advocacy community we are able to quickly dismiss those arguments without a reasoned examination of any of the statistical evidence by mentioning their names, pointing out that they work for "right-wing think tanks" and that their reasoning is tainted by "concrete lobby" funding of those organizations.
We don't support Amtrak with gas-tax money. Many in the train advocacy community think this is a travesty, although to the extent that the right-wing think tank people are wrong and trains are effective in counteracting the ills of car and highway, the most effective place to spend the cross-subsidy is on commuter trains and light rail, which is what we are doing right now.
Forty years ago at the beginnings of NARP and the days of the passenger train discontinuances, we had an argument that passenger trains were in decline because their competitors were enjoying government subsidies, and we asked for government subsidy for Amtrak to level the playing field. Today, Amtrak is subsidized at either a somewhat higher rate or perhaps a vastly higher rate than those other modes, and we are still complaining that trains are not competing on a level playing field.
So wouldn't giving Amtrak more money to build a more effecient and productive system attract more riders and therefore bring down the per passenger cost?
Great question. In other words, is there some economy of scale, that if you scaled up Amtrak instead of trying to trim it, you would reduce the subsidy per passenger-mile?
The people who wrote the Vision Report implicitly believe the answer is no. Instead of spending about a billion/year to get .1 percent of passenger miles on Amtrak trains, they want to spend 10 billion/year for a 40-year stretch to get 1 percent of passenger miles on trains. In their Appendices, they base these spending numbers based on the European experience, where they spend a comparable amount to the US Federal Highway budget on trains to get about 4 percent of passenger miles.
But what I am saying is that if the economy of a single train track verses a 6 lane highway in a given hour is used to its fullest, then wouldn't the cost of the train's riders be less than the 6 lane highway?
henry6 wrote: But what I am saying is that if the economy of a single train track verses a 6 lane highway in a given hour is used to its fullest, then wouldn't the cost of the train's riders be less than the 6 lane highway?
That depends.
First, that's an awfully big "if".
Second, what's "used to its fullest" for each case. Single vehicles with one passenger each for highway or 50 passenger busses on 2 second headways at 70 mph. Is it 6 car passenger trains, 2 per hours ala the NEC or something more rapid transit like?
Third, are the costs just operating costs or do they include capital costs? How about social costs like the value of the automobile driver's time or the health costs of air polution?
Fourth, has Amtrak shown any inclination for economies of scale? Did they reduce the forces for maintaining the Amfleet Metroliner service cars when they started running the Acela and quit the Metroliner schedules? Did they reduce forces needed for maintaining Heritage cars when they dropped them?
Just back from holiday- thanks for many intelligent and informed comments on my original query. I read an interesting article whilst away that said the American Society of Civil Engineers estimated that spending of about $320B per year was needed for the next five years just to bring US infrastructure into good repair. http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=11636517
This would not address the future needs, e.g. an anticipated 70% increase in freight by 2020, and a 50% increase in population by 2050. The US invests 2.4% of GDP on infrastructure, Europe 5%, and the article argues that the US transport budget is often used nonsensically, e.g. buying a stadium in Montana and museum in Las Vegas. A Texas Institute says flight delays cost $15B/year, road congestion $78B. A national commission on transport policy recommended this year that the US spend $225B/year for the next 50 years. The Brookings Institute says investment should be focussed on the top 100 Metro areas. There is a bipartisan Senate plan to raise the finance, a House commission to guide infrastructure investment, and Messrs Rendell, Schwarzenegger and Bloomfeld are trying to make infrastructure a national priority. I'm just reporting what I read, but it does seem to me there is something big out there that needs to be addressed at some level by someone sometime reasonably soon. On this, at least, Phillips is right. The who pays and how questions are of course crucial, but is doing nothing an option? The article says that when major infrastructure investment has been needed, the US has always produced politicians of sufficient stature to address the question, and says it believes history will repeat itself, as do I.
No one has actually come out and said what they believe the nature of transport infrastructure development over, say, the next 50 years should be. I believe that any advocacy of major investment in passenger rail has to be part that. The nearest to a prescription is a view that Federal investment should conform to some kind of subsidy/passenger mile criterion. In this light, the current Amtrak subsidy is folly of the highest order. Increasing its subsidy even ten fold would not lead to any economies of scale, and with current types of operation Amtrak would still make no meaningful contribution to intercity passenger travel, outside one or two areas. So, there is no case for subsidising Passenger Rail. I like the clarity of this logic, but wonder if a point is being missed somewhere.
It is true that presently, US passenger rail investments look absurd in cold economic terms. Amtrak recently published plans for a new Chicago-Rock Island service, a distance of 159 miles. The trip time of 3'20" gives an average speed of 48 mph. As I understand it, this may well happen. It is estimated that two trains each way per day would carry 111800 passengers per annum, say 75 passengers per train. This would cost the state $5.9M per year. The investment required in infrastructure is $22.4M, plus coach refurbishment and training costs of $5.25M. The proposal relies on the CB&Q and its intermediate stations already being in good shape, and spare capacity at Union Station; it also requires no new equipment- as cheap a proposal as you are likely to get. If the average trip length is about 120 miles, then we can infer that the subsidy/passenger mile on an operating loss basis is about 44 cents, if we add in capital costs, spread over 10 years we get 65cents/passenger mile. Each passenger will cost taxpayers about $78, and pay about $25. I assume the numbers are similar or worse for other State initiatives in the recent past.
What is going on here? Surely you can drive to Chicago in 2½ hours, for an out of pocket gas cost of no more than $25? Why would anyone, let alone 111800 people choose to travel by train? You reduce the number of daily car trips on Chicago roads by 200 at most. Are Illinois politicians (and, by implication, voters) completely mad, along with other State legislatures around the country? And the 75 passengers per train count really gets me. I can't think of a perfect European analogy to ‘significant metropolitan area about 150 miles from regional capital, little intermediate business, few onward possibilities', but the best equivalents I can come up with say the train service frequency would be hourly. With 200-400 seats, a 50% occupancy factor says there would be over 2000 journeys in each direction per day, albeit with transit times of around two hours (I can't imagine BNSF being happy about that)- a premium product that costs more than $25. This is prime rail travel territory. So I struggle with 150 vs 2000- do folk in the Quad Cities and Chicago not get along with each other, that is, is the travel market smaller than in Europe? And how many would take the train if transit time were markedly superior to driving?
It is true that European travel is subsidised. In the UK, the figure is about £6B/annum for 30B passenger miles-say 40 cents/passenger mile, though it is alleged (Government accounting) that high speed inter city is profitable, the rest (Commuter services, predominantly London, and cross country services linking Outer Porkbarrel with Lesser Cowfield- our Amtrak)- lose the money. With European levels of ridership, a significant number of cars are taken off the roads of large cities. Because of the way we have developed our infrastructures, rail is an essential part of the mix. There would be chaos without it- though there are course some who argue not. The overwhelming present view of the media, transport gurus and the politicians who pay their salaries in the UK however is that roads are evil, cars detestable, so rail is here to stay.
It should be clear that having postulated that contributors have missed a point, I can't really define what that point is, other than to say that US voters and politicians seem to disagree with the passenger subsidy/mile argument, as in Europe where no one really questions the value of passenger rail any more. So does Matt Rose: in an interview in the latest Trains magazine. He says: ‘we need to look beyond the actual costs to the societal benefits of passenger trains'. He advocates separate rights of way, and endorses the view that the US needs a real transportation policy. Looking at how he's running BNSF, he seems a pretty head screwed on kind of guy.
A transportation policy spending the $225B/year mentioned above buys a lot of concrete. The subsidy/passenger mile argument says that the implicit US transportation policy since WW2- look after yourself and fly or drive - is the one that will work for the next 50 years too- people have been very happy with it, both in a practical and ideological sense. That means a lot of new freeways and runways. The private sector could build both, for profit if the freeways are in fact toll roads. Problem solved. Question is, are there circumstances where this would not work- where is it not possible to concrete over? Can you bulldoze property in large tracts of existing cities to speed traffic flow? (they do in Shanghai), or do you simply let existing metro areas expand? Can all of them expand? And where does the escalating price of fuel come in? What will voters and politicians permit? Is it in these questions where passenger rail begins to make sense? The concept of a politician spending my money on vague ‘societal benefits' scares me, but I think if you begin to reduce this to more practical concerns, there may be a legitimate case to be made.
In another forum, someone wrote that the US had the best passenger rail system in the world in 1940- well, maybe, but there's absolutely no sense in trying to recreate it, it died for very good reason. Amtrak is largely irrelevant because it seeks to preserve this, using 1940s technology on infrastructure that was better suited in the 1930s. Something like $225B, 2% of the proposed infrastructure spend would build you a High Speed Rail network, with 21st century game changing technology, linking all large metro areas up to 400 miles apart, and provide a better alternative to flying or driving in many cases for large number of people- a fundamental, major and irreplaceable contributor to the transport mix. (Amtrak seems to get it right between Washington and New York). A well-used system should break even at an operations level with sensible pricing. So, if expanding current Amtrak operations, outside some Corridors makes little sense, and if the Feds are going to spend countless $B on freeways it seems to me that High Speed Rail, (plus commuter rail) should at least be put in the mix. Surely this is worth a full evaluation? Has anyone done the sums? It might just lead to a better transportation system. If the answer is ‘It will never provide a worthwhile alternative in the US for reasons x,y and z', then US passenger railfans ought to shut up and be left with our memories.
Perhaps we should not be too despondent. Over the last 35 years, I have said to my wife every so often, ‘We have to go back to the US for a holiday because President X will close Amtrak next year, and we must travel on #3-14 for the last time'. I no longer do. I sense that #3-14 will see us out. Maybe, as long as they exist, we can hope, along with Mr Micawber that something will turn up.
America faces numerous infrastructure challenges. Many of its highways, airports, airways, rail lines, pipelines, electrical grids, telecommunication facilities, etc. need to be upgraded or replaced. In addition, given the projected growth in the population, new infrastructure will be needed.
Following the end of WW II Americans focused on two national passenger transport systems, i.e. systems that cover the nation as opposed to serving a regional market. They settled on highway and air transport while shunning passenger rail in most markets.
The shift to highway and air travel was a function of superior technology. It was not, as some have suggested, a political conspiracy to wreck the country's railway passenger business. The car is more flexible, comfortable, convenient and, in many instances, economical than taking a train. The airplane, especially the jet, beats the train hands down for long distance travel. It can cover as much distance in a hour or two than a train can all day long.
Had Amtrak not been formed as a political solution to the shrinking passenger train market, intercity trains would have disappeared, with the exception of commuter rail and perhaps the NEC. The NEC, because of its population density and lifestyles, i.e. people were used to taking the train, might have been able to stand on its own if it had been managed properly.
Now, as the country's population grows larger and larger, there is a place for passenger rail. But it is not in a reincarnation of a 1950s style intercity passenger rail system. It is rapid rail in relatively high density corridors, on an upgraded existing rail infrastructure, where the cost of building more highways (the choice of most people) and expanding airways (the choice of most business people) is cost prohibitive.
Building a passenger rail system to connect America's 100 or so largest metropolitan areas, as advocated by some, including NARP, begs two important questions. Would people use it in sufficient numbers to cover at least the operating costs? And can America afford a third national passenger transport system?
The U.S. national debt is approximately $9.5 trillion. And it is growing at the rate of more than $600 billion a year. This is the federal operations spend deficit, which is masked in part by Social Security surpluses. This averages out to nearly $100,000 per household, with an annual interest burden of more than $4,000 per household. But approximately one third of the households in the U.S. that file a federal income tax return pay no federal income taxes. So the burden for the households that pay income taxes is considerably more than $100,000. But it does not stop there. It does not include state and local government debt, consumer debt, mortgage debt, credit card debt, etc. When these amounts are factored into the matrix, the average debt per American household is estimated to be more than $175,000. However, this is only the tip of the iceberg.
The former Comptroller of the Currency, David Walker, estimates that the average burden for American household is more than $400,000 when the unfunded liabilities (Social Security, Medicare, and Medicaid) are taken into consideration. He is so concerned about it that he left the current administration to become an advocate for recognizing the problem and taking steps to fix it. How heavy is the burden?
The median household income in 2007 was $48,200 per household. Thus, the potential federal finance burden is nearly 10 times the country's median household income. And that is not sustainable.
Unfortunately, I have not seen from those advocating a massive investment in passenger rail in the U.S. a serious plan to finance it. They talk about getting more federal monies, as if this will not further acerbate the country's financial problems. Advocating more spending without a plan to pay for it lays the burden off on our children and grandchildren. And that is irresponsible.
America needs to improve and expand its highways and airways where it is cost effective. It should build rapid rail where the cost of improving the airways and highways is cost prohibitive and there is a commercial need for it. But it cannot afford a third national passenger system, unless it wants a tax structure like most of the European countries. And polls show that most Americans want to go there.
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