Posted on 12/18/2001 11:42:31 AM PST by Publius
I'm an expert on patience. It took me eight years to get to a position where I could influence American passenger rail policy. I started out in 1993 seeking a presidential appointment to the Amtrak board of directors. It was April 2000 before I finally received a congressional appointment to the Amtrak Reform Council, a body that didn't even exist when I began my quest. I'm not complaining. Now that I am on the ARC, I have to admit it was worth the wait.
My colleagues on that panel include some of the most serious, committed, thoughtful and dedicated partisans of passenger trains in our nation's history. With only one exception, all of them want to see passenger trains run, and all of them embrace the idea that it is the responsibility of the federal government to provide the leadership and financial support for a strong and growing passenger train system in our nation.
Working with my colleagues on the ARC was the most exciting, stimulating and rewarding thing I have done since the early Eighties. In those days I actually ran chartered passenger trains and served full-course meals and poured wine for our first-class passengers riding in the dining and lounge cars we chartered from private owners. More than a decade ago I made an important decision about my life. I decided to switch from running passenger trains as a personal frolic to getting our government to run passenger trains as a public obligation.
The ARC Finding
On November 9, the ARC exercised one of its statutory responsibilities. The members voted 6-5 in favor of a finding that Amtrak would not become financially self-sufficient in time to meet a congressionally imposed deadline of October 1, 2002. This was something the ARC was mandated to do under the 1997 Amtrak Reform and Accountability Act, the legislation that created the ARC and laid down the mandate that Amtrak must become self-sufficient within five years. When the vote on self-sufficiency came, I voted in the minority. I voted that the ARC should not make such a finding, even though I knew at the time -- as all of the ARC members did -- that there is no possible way, and never was any possible way, that Amtrak could have reached operational self-sufficiency, deadline or no deadline.
Many people have asked me since then, “If you knew Amtrak couldn't break even by October 2002, why didn't you concur in a finding that said that?” And my answer was, “Because to do so would have been to concur in an absurdity, which is the presumption that passenger trains can or should be profitable.” In fact, it would be to concur in two absurd presumptions, the second being that passenger train profitability can be ordained by an Act of Congress.
The absurd Myth of Passenger Train Profitability has retarded the nation's progress toward a sound passenger train system.
There are two ancillary myths, the Myth of the Great Debate and the Myth of Picking Winners and Losers. Together, these three dangerous myths have led passenger train advocates, as well as critics, down the primrose path of falsehoods. These falsehoods -- some of them propagated by Amtrak itself -- have made public discussion of passenger train issues unnecessarily confusing and set back the construction of America's new passenger train system by well over a decade.
The Myth of Passenger Train Profitability
I voted against the ARC finding because the 1997 law was silly, meaningless, irrelevant, futile, superfluous, gratuitously punitive and inappropriate. Companies don't become profitable because somebody passes a law ordering them to. Companies become profitable for two reasons:
Passenger trains have not enjoyed a favorable economic or political environment in this country since the 19th Century. Absent a change in that environment, passing a law commanding Amtrak to stop losing money is like shaking a baby to make it stop wetting its diaper. It's an act of futile, cruel desperation by somebody who doesn't understand what's really happening or how to stop it.
We laugh about the blind leading the blind. But the 1997 Amtrak Reform Act compounded that absurdity: It presumed that politicians could command bureaucrats to become businessmen. Congress acted without understanding the forces that drive transportation economics in this country. Profitability is not a reliable or trustworthy index of the effectiveness of a transportation system. Our highway and civil aviation systems are not profitable, nor do we expect them to be. Why then should we place this burden on Amtrak?
The chairman of the Senate Commerce Committee, Fritz Hollings of South Carolina, recently noted that no passenger rail operation in the world operates at a profit. Sen. Hollings was correct but he didn't go far enough. He made it sound as if passenger trains are unique in being unable to make a profit. In fact, all forms of inter-city commercial passenger transportation are money losers -- if you calculate their costs the same way we calculate the costs of passenger trains.
Warren Buffett, America's most successful investor, became one of the nation's ten richest people by picking investments shrewdly and risking his money with companies he felt were poised for strong growth. In the October 21 Chicago Tribune, Buffet said, “The airline business, from the time of Wilbur and Orville Wright through 1991, made zero money net.”
During the Clinton prosperity bubble, of course, several airlines made enough money to move the industry as a whole into profitability. But in the year following the collapse of tech stocks in April 2000, all of those profits and more were wiped out, and the airline industry as a whole once again has become a lifetime net loser. This year the market capitalization of United Airlines dropped so far that the parent company lost its ranking as one of Chicago's fifty largest corporations. By the time United's board fired the CEO last month, the nation's second largest airline had a lower market capitalization than Tootsie Roll, Inc. And United's meals in first class now feature entrees with the consistency of a Tootsie Roll.
So using the logic Congress applied to Amtrak in 1997, should we force the airline industry into liquidation or restructuring just because it has shown a negative aggregate lifetime profit? The failure of the airline industry to earn a profit over its 75-year lifetime should tell us something about the futility of expecting Amtrak to make a profit, particularly over a 5-year timeline as specified by Congress in 1997. For the airlines have been the beneficiaries of the one of the largest taxpayer subsidy programs in the history of American socialism.
And let's not forget the $15 billion in chump change that Congress gave to the airlines so fast that “please” and “thank you” were separated by a nanosecond. Midway Airlines is getting a check big enough for it to start flying again. (Midway is one of that group of airlines -- like TWA -- who frequent Bankruptcy Court the way professional athletes hang out at strip clubs.)
If the airlines cannot be profitable after 75 years of federal investment in state-of-the-art infrastructure and command-and-control systems, how is Amtrak supposed to operate profitable, customer-friendly passenger trains over a 22,000-mile network of privately financed 19th Century railroad alignments using 19th Century signaling technology and 19th Century grade crossing protection that limits trains to an effective average speed of 48 miles per hour? You wouldn't dare pass a law ordering a bunch of managers to operate a profitable shoe manufacturing business in a 19th Century factory using technology built in 1920 while paying their employees 21st Century wages. So why would you pass a law ordering a bunch of managers to earn a profit carrying railroad passengers according to those same rules?
Since the establishment of their respective federal infrastructure programs, each of those three modes has enjoyed hundreds of billions of dollars in federal infrastructure investment, each from its own infrastructure and development program, and each eventually from its own trust fund. But today, after nearly a century of federal investment in road, air and water infrastructure, we still have no federal fund for the development of a modern passenger rail system. Our passenger-train service -- as well as our congested highways and our terror-threatened airline industry -- reflects this colossal failure of congressional will.
Transportation is no different than any other area of human activity: You may not always get what you pay for, but you definitely do not get what you don't pay for. So when six of my fellow ARC members said, “We are shocked -- shocked! -- to find that Amtrak isn't making any money,” I just couldn't go along with the charade. My vote was my way of saying, “You're telling me Amtrak isn't making any money? So what else is new? Who is?” Profitability in passenger transportation is a myth. Everybody is subsidized. Congress needs to get over it.
The Myth of the Great Debate
Amtrak's CEO, George Warrington, got up in front of the National Press Club last May and announced that he had discovered -- after three-and-a-half years in his job -- that Amtrak could not make a profit while also carrying out its mandate to provide a public service. I don't know why it took George so long to figure that out. It may not be sufficiently common knowledge to be included in the standard high school civics curriculum, but every state Department of Transportation official knows it, and they say so every year when their friendly Amtrak government affairs officer comes around soliciting alms. After three-and-a-half years of reassuring Congress that he would make their passenger trains profitable, George got up and told the National Press Club that it couldn't be done. And to resolve the dilemma he called upon the people and their elected representatives in Congress to hold what he called “a Great National Debate” on the future of the American passenger train. Sen. John McCain of Arizona has called for the same thing.
I’d like to spare the people and Congress all that unnecessary effort. The idea that we need some sort of Great National Debate on passenger trains is a myth. Why? Because the debate has already been held, passenger trains have won, and I've got the proof!
I feel like that defense attorney in “Miracle on 34th Street” who wins Kris Kringle's sanity hearing by saying, “OK, boys, bring 'em in!” and the clerks start emptying mail bags full of letters that say the people of New York believe in Santa Claus. So let’s imagine my speech to the Senate Transportation Committee.
”Mr. Chairman, I hold here in my hand copies of forty editorials and guest essays that have appeared in the nation's media since September 11, all of them urging Congress to get busy on funding a passenger train system. Only three media outlets published essays against passenger trains. There were forty of these editorials and op-ed pieces in the days following the September 11 attack. You may be familiar with a couple of them because Andy Rooney presented them in his segment on ‘Sixty Minutes’. I have the transcript of one of them here, along with thirty-nine others clipped from newspapers across the country. Well, ladies and gentlemen, I rest my case. The people of the United States believe in passenger trains, and they don't expect to get them from Santa Claus. They expect their taxes to pay for the building of new railroad tracks and signals, just as their taxes paid for highways and airports and dams and barge canals. Mr. Warrington, Sen. McCain, you can forget about that great debate. It's over. We may not yet know how we're going to pay for that new infrastructure, but as for the question as to whether we want it and whether we need it, that's settled.
”Now let me just say something about funding. If I am reading the sentiments of the American people correctly [hold up stack of editorials], we are rapidly approaching the same phase of passenger rail development that we had reached in highway development in July 1954. That was when Vice President Nixon addressed the National Governors’ Conference at Lake Placid, New York to announce the Interstate highway program. Nixon told the conference that President Eisenhower, the auto industry, the petroleum industry, the cement industry, the trucking industry, the manufacturers of earth-moving equipment and the big civil engineering firms had all agreed on the basic design of a 40,000-mile coast-to-coast, border-to-border network of limited-access, grade-separated, high-speed divided highways that would connect all cities of more than 50,000 people. Despite that agreement, however, it wasn't until two years later that Congress passed the Interstate and Defense Highway Act. All of the intervening time was spent debating a funding formula. Three bills failed before Congress agreed on a funding mechanism, a fuel tax paid into a new Highway Trust Fund. I hope it won't take this Congress another two years to devise a formula for funding passenger rail infrastructure, and I hope the people in this room will not feel unduly frustrated if it does. All of the different transportation modes had to fight for their existence, some for a very long time.
”In 1925 Orville Wright testified before the House Committee on Interstate and Foreign Commerce that the chief obstacle to the development of aviation was the lack of a federal airport program. It was another twenty-one years, 1946, before the federal government began dispensing matching funds to help local communities build commercial airports. Trains can't wait that long. We have to start funding now.”
The Myth of Picking Winners and Losers
This is the myth that government not only should build the rails for new passenger trains but should pick the winners and losers. What I am referring to here is the growing number of would-be passenger train supporters who propagate the doctrine that the only type of inter-city passenger train that can be justified economically is the short distance or intermediate distance high speed corridor species. Don't let anybody tell you that. For one thing, we don't actually know if it's true. A lot of people have been going around acting as if it's true, but the fact is we just don't know what kinds of passenger trains will work in this country. There is no solid body of evidence and no corpus of experience that would enable us to pick the winners and losers in advance. The dirty little secret of the passenger train business in the United States is that there has been so little passenger train activity in the last thirty years that, in effect, there is no passenger-train industry and hence no industry experts.
I include myself when I say that, even though I've probably got more passenger train experience than most of the management at Amtrak. I worked for Amtrak as a station agent and reservations clerk from 1973 through 1979. In 1971 I co-founded a rail travel club which by 1986 had operated nearly 100 profitable rail excursions, about half of them on special trains we chartered. Nevertheless, despite all that experience, I hesitate to call myself a passenger train expert, and I don't acknowledge very many others in this country to be passenger train experts either. Most of the trains we need to be running have never even been tried, the number of trains we do run is so small, and our passenger rail technology so outdated, that America has never had the opportunity to build up a body of passenger rail expertise and management capability to measure against the best practices overseas.
Let's face it. We're amateurs. We're not in a position to get doctrinaire about what's going to work and what isn't. So when people ask me, “Can overnight business class sleeping car trains be a successful alternative to air travel in any American markets of 700 to 900 miles?” I honestly have to say, “I don't know. I have strong suspicions, but I don't actually know. The concept hasn't been in existence in this country for thirty-five years, and in the last ten years of its existence it wasn't supported.” When people ask, “Can modern, fast, comfortable, long distance coach travel, something like the El Capitan or the Pacemaker, again make a significant contribution to American mobility?” I have to say, “I have my suspicions, but I'm no expert, and neither is anybody else.”
This is not false humility. I'll stake my passenger train credentials against those of anyone in this country. We passenger train advocates have to recognize that there's a huge vacuum of knowledge and experience in this country. We have no basis for picking winners and losers at this stage of our understanding. Mail-and-express trains, seasonal vacation trains, long distance trains that network with feeder trains at key junctions, high speed rail lines into hub airports, tour trains, group travel, corporate charters of whole trains or of certain cars -- same deal: We don't know. There are no American passenger-train experts. The corporate memory of American passenger train management has been devastated by time and mortality and by nearly a century of neglect on the part of our national policymakers. We will have to re-invent and rebuild those skills ourselves.
So the idea of picking winners and losers, like the idea of having a Great Debate and the idea that profitability is a reliable index of passenger train success, is a myth. What does that suggest about the railroad infrastructure Congress is now being called upon to build? It suggests that this new infrastructure should not be configured for any one particular type of train or for any particular region of the country. Instead we should follow the model used in building our highways, our airports and even our waterways: Don't let the government pick winners and losers. Just put a modern infrastructure out there and then rely on the ingenuity and greed of the American business community to find profitable uses for it.
We’ve Been Down This Road Before
Don't forget that we had this debate when we tried to build highways. When the Better Roads movement began back in the 1880’s, it was the farmers who started the agitation. The road advocates in Congress all sang the same tune: “We have to get the American farmer out of the mud so he can get his crops to the local grain elevator and bring his supplies and mail order merchandise back from the freight house.” This was the period when so-called “farm-to-market” roads were the justification for a federal highway program.
Then the League of American Wheelmen got into the act and demanded hard-surfaced roads so they could ride bicycles from town to town. When cars were invented, the motoring lobby started agitating for roads. That got the farmers upset. “Why waste precious federal tax dollars to pave roads for city folks with autos when the farmers need the roads more?” they asked.
The same issue cropped up again after World War I when the motor truck became sufficiently reliable for manufacturers to start switching some of their freight shipments from rail to road. After the truckers spent several frustrating years making nine-day trips from Chicago to New York over dirt roads, they began agitating for hard-surfaced highways to connect major cities. But the critics wailed that trucking freight over long distances was a utopian fantasy that could never justify itself economically. Long distance freight shipping, they said, was a natural job for the railroads, and government should not interfere with nature.
The same debate broke out in the Thirties when Congress rejected a proposal for an $8 billion national highway program. The critics charged that only rich people owned cars capable of driving long distances between cities, so Congress should not waste federal funds on “extravagant speedways for the luxurious few.”
We're not ready to say which kinds of trains will work and which won't. We don't know what the “natural market” for passenger trains is, and we won't know until we get some experience running them. We have to start building projects that will enable us to run more trains of all types -- including the high speed freight trains that shippers like UPS and FedEx are demanding -- and run them faster, more frequently, more closely spaced, more safely and grade-separated from conflicting rail routes and the motor vehicle system.
When I hear critics say, “Well, the federal government may have a role in financing improvements for high-speed trains that carry business travelers in urban corridors, but it has no business promoting long distance leisure travel for a tiny minority of well heeled tourists,” I have to ask, “Oh, really? Then why does the Army Corps of Engineers use taxpayer funds to build breakwaters and dredge channels for the cruise ships that dock at Miami, Fort Lauderdale, Palm Beach and New Orleans? Then why does the US Coast Guard protect those harbors, and why do Customs & Immigration have an army of inspectors at every pier? And anyway, who says long distance train travel consists only of so-called leisure travel?”
The pace may be leisurely compared with air travel, but when I spent my days putting people on board the Zephyr, the Empire Builder and the City of New Orleans at Chicago’s Union Station, they didn't look much like cruise ship passengers to me. The people I put on those trains were college students traveling between home and school, people visiting their families, people relocating to new jobs or checking out an out-of-town job opportunity, professional groups heading to a conference, foreign visitors who wanted to see the US close up and meet Americans en route, and retirees -- most of them not particularly wealthy -- who wanted a relaxing and informative travel experience.
Those are activities worthy of federal infrastructure support. They already get federal infrastructure support when they're carried out on the highway, airway and waterway systems. Why not on rail as well?
If a so-called tiny minority of well-heeled tourists wants to ride a passenger train, I say, “Welcome aboard!” Cruise ship travel started out as an upper class fringe phenomenon in the Sixties, but thanks to the billions of dollars the federal government handed out to local communities to improve their deepwater ports, the cost of cruise ship travel came down, new entrepreneurs entered the business, and what was formerly considered a luxury for a slender stratum of super-rich individuals has now turned into a virtual entitlement for the middle class.
Conclusion
I can't prove it, but I strongly suspect that a firm federal commitment to rail infrastructure also will change the demographics of rail travel, creating new markets, opening up new travel and leisure choices for millions of Americans who today know nothing of rail travel, attracting train-riding overseas visitors who find our current mobility options puzzling and inconvenient, and opening up new entrepreneurial opportunities that the bureaucratic mind, with its picking- winners-and-losers mentality, simply is not configured to imagine.
I hope people can now accept the idea that profitability is of no more importance in a passenger train environment than in an air or highway environment, that we need no further debate about funding a national passenger rail system, and that government bureaucrats cannot handicap the system's winners and losers. The time to start building our new national passenger rail system has arrived. It's a job that will require all of our efforts.
It's a concept called a Nation, best exemplified by the Latin motto, E pluribus unum.
Amen. A government junkie and economic illiterate.
Sadly that's what this country has become. A nation of people trying to suck the government teat fast enough to get thier share of the milk. They have bought into the notion that wealth is going to be redistributed anyway so why fight it? Suck harder and make youself well instead of reclaiming our heritage of freedom. It's a sell out that almost no one recognises anymore. Sad
Stated succinctly and eloquently. Because of the strong belief in a government role in "internal improvements", the government has been using its "hidden hand" since Madison's presidency. The author wants us to accept that fact and go to the next level -- subsidizing the railroads because it is cheaper than further subsidies for the highways.
People are oblivious to the fact that there was a huge and intricate interurban rail system in the east, midwest and west, since the time of the Civil War, and before, and its contribution to the growth of the US is immeasurable.
And it really didn't start to atrophy until after WW2.
And government subsidies, in one form or another, have existed from the time of the Eire Canal, and before, for various transportation projects.
Can you imagine what it would cost to fly, if the ticket actually represented the costs of the airport, the FAA, the air traffic control system, the costs of training pilots, etc.
I would add that much of the Canadian identity is tied up in the not-so-trivial task of uniting Canada's remote towns with the Canadian Pacific in the nineteenth century.
Anyone who is dumb enough to vote for a thief deserves to have his pocket picked.
However, I think his argument is stronger when it is used to justify reducing government support for the airline industry and highways than to increase taxpayer support for passenger rail.
And it really didn't start to atrophy until after WW2.
The railroad industry has nothing to complain about, since they were one of the earliest beneficiaries of government largesse in the transportation industry. The government has simply decided to subsidize someone else these days.
Canada actually has an interesting history as far as the railroad is concerned. British Columbia refused to join the Canadian confederation in the 1860s until the Canadian government promised to connect the province to the rest of the country via the railroad.
As a libertarian, I support that in principle. But let's look at it in practice.
The airlines could create a consortium to take over the air traffic control function and then buy all the airports. The cost of air travel would skyrocket, and there would be a lot of airline bankruptcies, but as Joseph Schumpeter has said, that's just "creative destruction". Only those who could afford to fly would do so -- until the costs were amortized.
We could end the highway subsidy by installing a transponder in each automobile. Once a month, the motorist would get a bill for his travel on local and county roads, which would remove the need for a property tax for local and county road-building. He would get a bill from the state for his travel on state-maintained roads, which would permit repeal of the gasoline tax and other car-related taxes. And he would be billed for his travel on the former interstate highways, now sold to private entrepreneurs, that would permit the end of federal gasoline taxes. But the motorist would raise holy hell, and FReepers would start muttering about "the Communists trying to track our movements and herd us all into the cities to control us."
Which level playing field works best? A totally private transportation infrastructure, or a mix?
Gas tax revenues are generally only used for capital projects, not operating expenses. The cost of plowing or resurfacing a road is normally paid out of general tax revenues.
In every state in the Union, the state gasoline tax pays a bit less than half the cost of building and maintaining state highways. Other car-related taxes and contributions from the general fund (sales taxes and income taxes) make up the remainder.
Automobile drivers are heavily subsidized by the taxpayers in their respective states. It's one of the dirty little secrets of the transportation game.
The cost of training pilots is already in there. The airlines also pay the airports for gate access and landing fees. These are also already in your ticket, although I have no idea if the costs truly reflect what it costs to run the airpot. Even if I were to concede that air travel costs would go up if the whole system were privatised, I do not have a problem with that. There is no reason why non-fliers should subsidize fliers, particularly since fliers are on average wealthier than non-fliers.
The average company in the US pays an incredible amount of corporate tax.
Do away with that stifling influence, and the rails would thrive.
Is it considered a 'subsidy' if it is simply the absence of murderously high taxes?
Look what happened to e-tailing and e-commerce in general, helped in part by absence of taxation on internet transaction.
The central lesson is, don't tax it, and if it is remotely feasible, in the United States of today, it will thrive.
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