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May 06, 2004

Ain't nothing but a political economy thang

Businessmen are lining up to support Amtrak in the Northeast Corridor.

The annual wrangling over Amtrak is the result of a bizarre bind that has cursed this particular state-owned enterprise. Let's run through the vicious cycle.

- Amtrak gets funded just enough every year to limp along. That money comes with all sorts of strings forcing it to run unprofitable lines and stop an unprofitable stations.

- Congress justifies this budget because ridership is low.

- Amtrak can't make investments to increase ridership because of its budget.

- Each year, the odds of selling off profit-making services goes down because track and train maintainance doesn't get done because Amtrak is limping along on a minimal budget. Any purchaser would have to spend at least the entire purchase cost all over again to bring the system to a respectable standard. The profitable lines won't be sold either, because Congress will still want to run the unprofitable lines, but won't want to make up the loss of profits from the good lines through subsidy. Given these constraints, it's cheaper for the government to keep the system on life support than to revive it.

Seems like the perfect dilemma, doesn't it? Can't sell it. Can't kill it. Can't muster the willpower to improve it. Can't rationalize it.

Post Author: rj3 | 12:02 PM | Link | TrackBacks
Comments

I thought Amtrak didn't own much track--basically the NEC? (which has gotten a lot of upgrades in recent years for Acela)

Ok, here it is: http://www.amtrak.com/about/amtrakfacts.html

"Amtrak operates over more than 22,000 route miles. It owns 730 route miles, about 3 percent of the total nationwide, primarily between Boston and Washington, DC, and in Michigan. In other parts of the country, Amtrak trains use tracks owned by freight railroads."

Posted by: Sam at May 6, 2004 03:57 PM

What strings are there? I just read the legislative summary here: http://www.amtrakreformcouncil.gov/materials/legsum.pdf
and it looks like the most onerous one--that is was nearly impossible to eliminate services that were part of the basic system, was repealed by the ARAA in 1997.

Posted by: Sam at May 6, 2004 04:05 PM

It's not a matter of specific rules forcing Amtrak to keep unpopular lines running... it's pressure from legislators in exchange for voting to keep the system funded. It's hard to get someone's vote if you want to cut a service in their district.

Posted by: Randolph at May 6, 2004 05:22 PM

That's politics of course. On the other hand, if Amtrak management can't muster the will to radically reform, it shares a significant part of the responsibility for its problems.

Posted by: Sam at May 7, 2004 04:27 AM

The problem is that you need money to make money, and Amtrak can't float bonds without congress.

Posted by: Randolph at May 7, 2004 08:57 AM

Amtrak does have real assets, which they can sell or use as collateral for loans. Now, borrowing against them for operating expenses is usually a bad idea (e.g. Penn Station) but for capital improvements and restructuring, it might make sense.

Posted by: Sam at May 7, 2004 08:05 PM
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