Wow, back here again already? To repeat what I have said previously, Amtrak, like all other forms of public transportation (and the highway system is very much a form of public transportation) is a "public good," something which society as a whole needs but which cannot be provided at a profit to a private firm. Here is a good discussion of public goods (in the context of highway spending, but it applies to rail transportation as well) I posted previously, from the US Congressional Budget Office:
The public sector provides most highway infrastructure for several reasons that tend to limit the role of the private sector. First, such infrastructure displays, at least to some degree, important characteristics of “public goods.” Such goods are usually not profitable for the private sector to produce, because once they have been produced, they are available to anyone who wants to use them; as a result,they are often provided by the public sector. Second,because such infrastructure is costly to build, though less expensive to operate and maintain, having competing highway networks is not practical. As a result, such “natural monopolies” are often either provided directly by the government or regulated by it. Third, the benefits of highways—promoting commerce, for instance—may extend beyond the places where they are built and beyond the people who use them directly. All three of those characteristics of highway infrastructure tend to limit the incentives for the private sector to provide it. The private sector, on its own, would provide less of that type of infrastructure than is socially beneficial.
Economists have talked about public goods for centuries. Adam Smith's "third duty of the sovereign" in his The Wealth of Nations, after internal and external security (police and armies) is
the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.
In sum, public transportation is something that cannot and will not be provided at the initiative of private for-profit firms, for a profit, and so if we want the benefits of mobility we, society as a whole, through our government, must provide it ourselves. But Sam1 does not recognize public goods, in regard to Amtrak she has stated repeatedly that it must be able to completely pay for itself through farebox recovery only (although that hides the subsidies in the form of around $150 Billion per year in highway spending, only about half of which is paid for by fuel taxes).
Finally, Taken on a passenger-by-passenger basis, trains cost taxpayers far less than cars, planes, motorcycles or rickshaws. The big difference, as National Corridor Initiative president and CEO James P. RePass noted in a recent interview, is that "Subsidies for airlines and highways are far less obvious than Amtrak's single line item.
Phoebe Vet The government is not a for profit business enterprise. Almost no service provided by the government breaks even or produces a profit. Government operates for the common good of the society.
The government is not a for profit business enterprise. Almost no service provided by the government breaks even or produces a profit. Government operates for the common good of the society.
Many government activities, e.g. defense, education, law enforcement, regulation, etc. serve the common good. Other government activities, however, serve a very narrow constituency. Amtrak is in this category. Given that less than one per cent of intercity travelers use Amtrak, to argue that it is a common good is a stretch.
The common good is more often than not in the eyes of the beholder, and there are legitimate differences in what constitutes a common good. Jerry Jones, the owner of the Dallas Cowboys, argued that a new football stadium funded largely by the taxpayers is a common good. Not to be outdone, the owners of the Dallas Mavericks and Dallas Stars made the same argument for a new arena in Dallas. And the Dallas Symphony Orchestra, of which I attend regularly, made the same argument. And got taxpayer money from the citizens of Dallas, most of whom have no interest in classical music, to build a concert hall beyond what the patrons were willing to pay for.
You are correct about government. It does not earn a profit. And that is the best argument that I can think of for why it should not be running a commercial enterprise.
Dave
Lackawanna Route of the Phoebe Snow
I don't think that disassembling Amtrak would be the greatest choice, considering privatizations complete failure in the United Kingdom to improve service.
blue streak 1 This article may have some interesting points ?? http://www.bloomberg.com/news/2012-07-31/amtrak-shifts-strategy-from-begging-for-money-to-thinking-big.html
This article may have some interesting points ??
http://www.bloomberg.com/news/2012-07-31/amtrak-shifts-strategy-from-begging-for-money-to-thinking-big.html
The article has some interesting points to be sure. However, many of the numbers have been cherry picked or stated out of context. For example, the article mirrors Amtrak's claim that it covers 76 per cent of its operating costs. This is only true because of the Acela and the Lynchburg trains. The Acela is a premium fare train that covers its operating costs and offsets the operating losses sustained by the NEC regionals and NEC special trains. Moreover, Amtrak does not come close to covering its capital costs, most of which have been incurred in the NEC. Focusing on operating costs without factoring in the capital costs is disingenuous.
In addition to the regular budget allocation of $1.4 billion received by Amtrak in FY12, which was similar to the operating grants received in FY10 and FY11, it received approximately $3.3 billion in ARRA monies in FY09 and FY10. Most of these monies were spent on capital projects. As the cost of the projects is amortized over the expected life of the assets, Amtrak's losses are likely to grow unless it can find additional revenues.
Big dreams without a realistic plan to fund them outside of a raid on the U.S. Treasury only flies in the minds of government bureaucrats. If a competitive business organization had big plans to expand continuing operations, without a realistic plan to fund them, it would not get very far.
The best solution for intercity passenger rail in the United States would be to open the routes to competitive bidding. In doing so, however, other than transitional subsidies, all transport subsidies should be eliminated, thereby allowing each mode to dominate where it has a competitive advantage. If the country adopted this approach, passenger rail might be able to survie in relative short, high density markets where the cost of expanding highways and airways is prohibitive.
They already have a lower subsidy per passenger mile than any commuter authority and one way way below the average. I think they may be lower than VIA's also, and someone can check on this. But of course we hope they will do even better.
It's about time Amtrak started thinking strategically. Score one for Boardman. However, if they are to have any hope of being taken seriously, they have get their own house in order. They have to show some meaningful progress toward smaller subsidies per passenger mile.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
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