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Jewish World Review Jan. 4, 2002 / 20 Teves, 5762

John H. Fund

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Consumer Reports

The little engine that couldn't--and the senators who don't want it to -- AMTRAK, the government's national passenger railroad, got a Christmas gift from Congress: protection from the law.

In November the Amtrak Reform Council, a watchdog group funded by Congress but independent of the railroad, triggered a 1997 law that requires the railroad to submit plans to Congress by Feb. 7, 2002, either to restructure or liquidate itself. The law was triggered when the council voted 6-5 that the railroad would not be financially self-sufficient by December 2002.

No one believes Amtrak trains will stop running, I'm a frequent and satisfied customer on Amtrak's New York to Washington run. The law requiring a restructuring plan is "tough love" and designed to force the railroad to change what its president, George Warrington, calls "a business model that does not work," one that has cost taxpayers $25 billion in subsidies since the railroad's formation in 1970.

But restructuring is anathema to Sens. Joe Biden (D., Del.) and Ernest Hollings (D., S.C.). They slipped an amendment into the defense-spending bill that bars Amtrak from spending money to put together any liquidation plan. And as payback for the Amtrak Reform Council having the effrontery to follow the law, Congress slashed next year's funding by $500,000.

The reform council and Amtrak have been feuding for years. In 2000, Joseph Vranich, a former Amtrak public-affairs officer, resigned from the council. He accused Amtrak officials of "adding pork-barrel trains to the districts of politically connected officials" and disguising the nature and extent of the railroad's losses through "bogus accounting methods."

Before November's vote, several of the remaining council members mentioned their frustration at Amtark's stonewalling. Indeed, early reports that Amtrak received a significant boost in traffic after the Sept. 11 terrorist attacks proved to be exaggerated. In November, Amtrak admitted that its September ridership had actually dropped 6% from the same month in 2000, and October ridership was down 1%. Small wonder, when one realizes that many trains run much more slowly today than their predecessors of 50 years ago. Today Amtrak carries a mere 0.3% of all intercity passengers.

Paul Weyrich, an Amtrak Reform Council member who wants to see Amtrak replaced by a network of private high-speed railroads on short to medium-length routes where they can compete with planes, says the council's vote to require a liquidation plan "is the only way we can force the Congress to look at alternatives." Amtrak's current structure is clearly no way to run a railroad. Its archaic labor laws allow any worker who is laid off to be eligible for one year of severance pay for every year of work, up to an astonishing six years. With an average salary of $50,000, letting go of one worker could cost Amtrak $300,000 or more.

The council's members also believe that Amtrak must abandon some of its less-profitable routes. According to the General Accounting Office, a mere five of Amtrak's 40 routes--all in the Northeast or Southern California--account for half of its riders and revenue. The other routes are a different story. In 2000, 14 out of Amtrak's 40 routes lost more than $100 per passenger trip. The line from Janesville, Wis., to Chicago lost a staggering $579.41 per passenger, covering only 6% of its costs. Amtrak discontinued that service,

Bruce Chapman, a former head of the U.S. Census Bureau who now heads the Discovery Institute, says Amtrak should be redesigned by starting with a series of intercity passenger rail corridors that make economic sense and then adding some national routes. He would have private operators eventually run most of the trains, with the federal government making investments in infrastructure as it does with highways and airports.

Private companies would gladly steam into action, if Congress would let Amtrak restructuring go forward. Guilford Rail and Railway Services Corp. have both offered to purchase Amtrak's Northeast Corridor lines. Bob Poole of the Reason Foundation reports that some 40 nations are replacing nationalized railroads with franchised private operators or devolving rail routes to regional or local governments. Profitable models include Australia, Brazil, Japan and New Zealand. There is even a model in the U.S. from the sale of Conrail, the freight railroad that serves the East and Midwest. It sold for $1.6 billion in 1987, at the time the largest initial public stock offering in U.S. history, and its value has continued to grow.

But none of those innovative approaches are likely to be tried now that Amtrak's political protectors have once again delayed the railroad's day of reckoning. They prefer stoking its fiscal engine with more tax dollars. That will mean that taxpayers will keep being taken for a ride as they chug up a never ending mountain of rail subsidies.

Comment on JWR contributor John H. Fund's column by clicking here.


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©2001, John H. Fund