June 18, 2011
Trains to NowhereBy Gary Jason
Two recent reports remind us of how ridiculous the Department of Transportation is when it comes to passenger rail service and offer additional insight into why this nation is heading towards bankruptcy.
The first story is that Amtrak, our socialized passenger rail service, racked up an operating loss of $506 million this calendar year. The bad news is that this is a considerable increase from last year's loss of $420 million. The worse news is that next year's loss is projected to hit $618 million.
Amtrak ran these deficits despite an increase of nearly 10% in ridership over the last year, putting it on track to exceed last year's record of 28.7 million passengers.
The taxpayers are on the hook for all these losses, of course. We subsidize Amtrak to the tune of a whopping $3.94 billion a year, or about 16% of its operating expenses. Here is your paradigm case of a socialized company: it has a nearly 10% increase in customer traffic, is a legal monopoly, and still operates at a massive loss, all paid for by the taxpayers.
Of course, it is rent-seekers who have kept this boondoggle alive. These rent-seekers include, of course, the railroad workers' unions, the company execs, and the politicians who represent them. But the rent-seekers also include the relatively few passengers whose tickets are cheap because everyone else is picking up part of the tab -- remember that the "28 million passengers" cited above refers only to seats filled, and one commuter is going to "fill" hundreds of seats a year. (It would take only 56,000 commuters to fill seats 28 million times a year supposing, each rides five days a week, out and back, fifty times a year.)
These rent-seekers argue that Amtrak serves a public good and that the problem is the long-distance routes. All Amtrak needs to do, management claims, is drop those routes and improve service. (Among other things, Amtrak wants to add Wi-Fi to its coaches to attract travelers). With the excuse of improving service, Amtrak just got a $450-million grant from the Federal Railroad Administration to upgrade one 24-mile-long segment of its line between Morrisville, PA and New Brunswick, NJ.
Congressman John Mica (R-FL) is once again pushing to at least remove Amtrak's government-sanctioned monopoly and let private companies compete. Of course, the real answer is to end all subsidies for Amtrak; privatize it; and let it drop whatever lines it wants, add whatever services it wants, and improve whatever lines it wishes (with private capital). At the same time, we should allow any other companies who want to enter passenger rail service to do so. Then let the market sort it all out.
But the Amtrak rent-seekers are quite powerful, so it is unlikely that this will be done anytime soon.
The second story concerns the desperate attempt by Obama's Transportation Secretary Ray LaHood to find a state whose leaders are stupid enough to accept $300 million in funding for high-speed rail.
LaHood first offered the money to Florida, but the Florida governor and legislature were economically wise enough to realize that the federal handout would only start the boondoggle express. Then the state would have to spend billions of scarce taxpayer dollars to help buy the trains, construct (or improve) the track to carry them, and pay to maintain them. And, since those trains (like virtually all passenger trains on the U.S.) would carry few passengers, there would be no chance of the project ever turning a profit. Like Amtrak, it would require endless subsidies.
But LaHood thinks he may have found a state just wacky enough to take the bait: California, with its ultra-left legislature and the economically ignorant executive. Governor Brown, a devout Green from way back, favors a high-speed rail connecting Anaheim (via Los Angeles) and San Francisco. Of course, the relatively few people who regularly go back and forth between those cities now just take the freeway or fly between the five Los Angeles area and three San Francisco area airports. But Brown is convinced that these folks will abandon their cars and planes to take the inconvenient train -- even though California's existing passenger rail trains are not particularly popular.
Keep in mind that this is the same (if now aging) Governor Moonbeam during whose earlier regime (from 1975 to 1983) not one mile of new freeway was built, resulting in the overcrowded freeways that plague California today. Moonbeam's theory then was that if he didn't build more freeways to tempt people to drive, why, then they would take mass transit.
Yeah, that really worked out, Moonie, now didn't it?
The California High-Speed Rail Authority, the spearhead organization of the rent-seekers here, has estimated the cost of the project at $43 billion. However, no less than the California legislature's own Legislative Analyst's Office has put the costs of building this pointless project at $67 billion, assuming no cost overruns. Sixty-seven billion! Oh, and when on earth has the government not had cost overruns in these sorts of idiotic projects? Remember Boston's infamous "Big Dig," and the Los Angeles Metro Rail projects? Those were boondoggles of mind-boggling proportions.
It is unclear how California will raise the $67 billion. Yes, the voters approved a $9-billion bond back in 2008 to fund this project (led as they were by the usual promises that it would create massive numbers of new jobs). But the bond measure passed with the rail authority's public assurance that $30 billion would come from private investors and federal sources. The rail authority further projected that $15 billion would come from California businesses and local governments.
However, all of the rail authority's projections were just smoke. The feds have chipped in only $3.6 billion, and the present Congress (at least half-controlled by Republicans) is unlikely to chip in more. Add to this the fact that most of the local governments in California are broke and that no business in its right mind is going to invest in a sure loser like this, and it seems unlikely that the thing will ever see the light of day.
But the California High-Speed Rail authority is a rent-seeking machine, and it is pushing ahead to open the first stretch of track in California's Central Valley, where organized NIMBY resistance is minimal. The project is unlikely to ever be more than a patch of track from nowhere to nowhere.
The simple reality is that American passenger trains carry relatively few passengers because Americans prefer the convenience of cars and the speed of planes. If this weren't the case, private companies would have built high-speed rail all over the country by now.
Once again, this is your tax dollars at work. Meanwhile, the feds project another trillion-dollar deficit next year.
Gary Jason is a contributing editor to Liberty.
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