Tuesday, February 25, 2014

Amtrak: Self-sufficient by 2003?

I wrote this article for my Technical Composition class at MSOE during my Freshman year in 2001.  At the time, there was a lot of talk of Amtrak’s demise, and it looked like the end was near.  In this article, I explained why Amtrak couldn’t expect to meet the 2003 deadline, and why it seemed likely that Amtrak would disappear.  I have followed it with an update expressing my current views on the subject.

Amtrak: Self-sufficient by 2003?
By Robert West
“There’s something about a train that’s magic.”  If you have ridden a passenger train recently, you might recognize those words as a slogan for Amtrak, our national passenger railroad.  Soon, however, that magic may disappear.  Congress has declared that if Amtrak is not making enough revenue to support itself by 2003, it will be privatized or liquidated.  With less than 2 years before the deadline, Amtrak is still in the red. Can its “magic” save it, or will the government make Amtrak’s final last call?
Since being created by the federal government in 1971, Amtrak has never shown a profit, and currently loses over $900 million every year.  This shortfall is made up by federal tax dollars.  In 1997, after over 25 years of support, Congress decided to stop covering Amtrak’s losses, beginning in 2003, leaving Amtrak 5 years to show a profit.  So far, Amtrak’s only profitable trains are the high-speed metroliners in the northeastern part of the country, in an area called the Northeast Corridor.  Trains in the rest of the country continue to lose money, leaving Amtrak seemingly hopeless.
Can Amtrak become self sufficient in 2 years?  Amtrak still believes it is possible.  Since the deadline was imposed, Amtrak has worked with state governments to improve service in Southern California and the Pacific Northwest with sleek new equipment and many more scheduled trains to make Amtrak more competitive with commuter airlines.  As a result, ridership in these areas has increased dramatically.  For example, ridership in Oregon increased 27% in 1998, and ridership in the Pacific Northwest was at an all-time high in 1999.  Amtrak has also recently introduced new high-speed trains called “Acela” in the Northeast Corridor.  These trains are being used to give Amtrak a new inage and are expected to boost ridership and revenues in the already profitable corridor. 
Yet despite all Amtrak’s improvements and record-setting ridership in several areas, self-sufficiency still seems out of its grasp.  The new trains in the West have yet to break even, and the new Acela trains were introduced a year later than planned, delaying potential profits Amtrak desperately needs.
But did Amtrak ever really have a chance of becoming self-sufficient at all?  Many people argue that since the Northeast Corridor is profitable, certainly other routes can show a profit as well.  And it has been suggested that Amtrak could do some internal restructuring and reorganizing to streamline their operation.  Obviously that would save it some money, but it probably would not make Amtrak self-sufficient.  Amtrak’s shortfall is a lot of money to make up for, and the cards seem to be stacked against Amtrak. 
First, most of Amtrak’s funding is allocated from Congress, and some Congressmen have been almost blackmailing Amtrak, forcing the railroad to continue operating money-losing routes in their states to ensure their states’ support for the railroad’s funding.  Second, based on the history of America’s railroads, Amtrak cannot support itself.  The railroads of America had been losing money on passenger trains since the Great Depression and passenger trains have continued to lose money ever since.  They continued to exist because the Interstate Commerce Commission forced railroads to continue passenger service, and the railroads had the profits of their freight trains to make up for the shortfall of the passenger trains.  In addition, a large part of the revenue of passenger trains was produced from express and mail shipments.  In the 1950s and 60s mail and express shipments accounted for 40% to 50% of passenger train revenue.  Recently, Amtrak has started to offer express service to increase revenue, including boxcars and modifies truck trailers in some of their passenger trains, but the service’s growth has been slow, due partly to opposition from the freight railroads, on whose tracks Amtrak operates in most of the country.
The chances of Amtrak becoming self-sufficient are almost non-existent, but no one should have expected Amtrak to be able to turn itself around, especially so quickly.  At least some good came out of the government’s deadline, in the form of Amtrak’s new equipment and improved service.  Hopefully, Amtrak’s successor, whatever it may be, will be free enough to base its decisions on economics instead of politics, and still maintain the “magic” Amtrak claims to have.  As for Amtrak itself, it’s heading for the end of the line, and no magic wand can stop it.
Since I wrote this, things have changed for Amtrak.  Most notable was Amtrak’s service in the days after September 11, 2001.  With all the nations airports closed, Amtrak became the most viable form of transportation for a time, proving its worth and forcing Congress to take another look at it.  In the summer of 2002, Amtrak President David Gunn pushed the issue by threatening to shut down the entire system if the government didn’t find it $200 million to operate the rest of the year.  Then the numbers starting coming out.  According to an editorial by Derrick Jackson in the June 21, 2002 issue of the Boston Globe, Amtrak has lost over $20 billion since 1971, however in 2001 alone, airlines lost $7 billion!  In 2001, airlines received $13 billion in government funding, and highways received $34 billion, but Amtrak has only received $24 billion since 1971.  Currently, Amtrak receives less than $2 billion per year, and unlike airlines, which are private companies, Amtrak is a federal program.
In my opinion, the government should stop funding airlines, or at least significantly cut their funding, since they are, after all, private companies that should be able to survive without government help.  In theory, the government shouldn’t have to give Amtrak any money either, but so much has been put into the airlines and highways already, that the government should increase Amtrak’s funding for a time to level the playing field.  Eventually, Amtrak would be able to show a profit, without federal funding and only slightly higher fares.  The airlines remaining in business after losing government funding would have to increase fares dramatically, so that they reflect the speed air travel provides.  Most airline fares would at least double, whereas on Amtrak, the most dramatic ticket increases would be about $100.
Through the implementation of this plan, I believe both Amtrak and the airline industry can be profitable within only a few years.  While the cost of traveling would increase, taxes would decrease because of the billions of dollars that would no longer go into transportation.  Also, because of the healthy competition that would result, service on Amtrak and airlines would improve, and the transportation industry would aim for improved efficiency, reducing our demand for oil.
So what would keep this plan from being implemented?  I believe the answer is politics.  The airline industry is a powerful lobby, that presumably donates large sums of money to candidates for federal office, and expects something in return: subsidies.  Amtrak on the other hand, being a government entity to begin with, cannot make donations and has no leverage with which to secure its funding, aside from the threat of cutting service.  Also, neither the Republicans nor the Democrats want to actually put any effort into making Amtrak profitable.  Republicans tend to see Amtrak as a waste of money and just want to cut it off, while the Democrats want to simply continue to throw money at it and maintain it as it is.  (Note: If you are curious as to my political views, I believe in minimal interference by the federal government in most affairs and thus consider myself a Republican, although I oppose the actions of many Republican politicians, including the acceptance of corporate campaign donations.)  So, while I do believe Amtrak can be saved, I don’t think it ever will be.  At least not as long as lawmakers are more concerned about their own political careers than what is best for the American people.
© Robert D. West: 2000, 2003.

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