The world's oldest argument

Posted by Fred Frailey
on Saturday, September 29, 2012

Actually, the world’s oldest argument goes like this: If a tree falls deep in the forest and nobody knows, is it still the husband’s fault? But here’s one almost as old: Is Amtrak worth it? I’ve been reading the manuscript of a book Indiana University Press will publish, by retired Norfolk Southern corporate strategist Jim McClellan, who during a stint of government service in 1970-71 was present at the creation of Amtrak. He notes that “the debate about rail passenger service is just as intense today as it was 40-plus years ago.” The economic issues, he adds, have never changed, either.

Then as now you had three “buckets” of passenger trains. There were the commuter trains in a few major cities, the short-distance trains (including those on the Northeast Corridor), and the long-distance trains. Privately owned railroads bore the costs of all these services. But there was a belief then (as there is today) that if done right, dense corridors such as the NEC could be profitable. This, at least, was the message being broadcast by the federal government’s Office of High Speed Rail, McClellan writes.

Since Amtrak’s creation, we’ve had 40 years of additional experience running passenger trains. What’s different is that the public sector now bears the costs. That’s one reason why we have such a vibrant private freight-rail system today, I should add.

And as McClellan says, the economics of passenger trains remain about the same. The one major change we’ve seen is evidence that high-speed corridor operations can recover all of their operating costs and then some. Amtrak’s NEC is on track to earn $325 million above its fully allocated operating costs in the fiscal year that ends this weekend. But the capital needs of the corridor (some $600 million a year and growing) drown those profits. Want better, faster NEC trains? Then double the capital spending and really lose money.

So passenger trains, with some possible exceptions that I’ll discuss in the December issue of Trains, lose money. The real question, as I said at the start, is whether they’re worth it. I cannot imagine the chaos you would see on the roads of New York-New Jersey, Chicago, Los Angeles, San Francisco, and Washington, D.C., if you took away the suburban train services. The nation would be thrown into recession, probably. Commuter rail is worth it and on politically safe ground virtually everywhere.

The same is true in the Northeast with Amtrak. What we achieve in mobility between Washington, Baltimore, Philadelphia New York City, Providence, and Boston is easily worth the capital investment, which is partly returned by Amtrak operating profits over that stretch. It’s a fraction of what we pay in public money for roads and airports and air-traffic control in this region.

What we’ve really argued about these past 41 years are the short-distance trains outside the corridor and of course, the relatively few long-distance trains. Congress has decreed that as of 2014 the states underwrite all the operating losses and capital costs of short-distance trains, and their fates will be decided at the state rather than national level. I suspect that few states will find reason to dump their short-distance trains. More likely, they’ll want to add more. For goodness sake, look at what California has accomplished on its three corridors.

The long-distance network that so frustrates Amtrak’s critics is the price paid to have a majority of members of Congress vote to put any federal money into passenger rail. The argument I make in favor of these mere 16 routes is twofold. First, take them away and political support in Congress for the short-distance and NEC services would be imperiled. A lot of votes in places like Texas, Arizona, Florida, Indiana, and Ohio would change, because without the long-distance trains, there would be no benefit for people in these states. So take away one bucket and you might lose the other. Second, while the operating costs of long-distance trains are large, their capital needs are small, because the host railroads make their infrastructures available at a modest price. My takeaway from looking at the numbers is that the Northeast Corridor and long-distance trains each end up costing taxpayers about the same amount of money.

Yes, passenger trains are worth it. But Amtrak itself? I think it needs to do a better job of dealing with its costs, across the entire spectrum of its operations. To provide just one example: Joe Boardman appears to have decided that the price of keeping his job as president of Amtrak is to let the unions have everything they want. I don’t begrudge Amtrak employees the wages they earn, but they owe taxpayers higher productivity, and it’s up to management and Amtrak’s board of directors to demand it. If they won’t, then maybe it’s time to let the private sector compete for those subsidies and try doing more with less in the passenger realm. Several state governments are coming to this very conclusion. — Fred W. Frailey

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