Heritage Foundation Leadership for America

WASHINGTON, Feb. 23, 2001—President Bush should demand the immediate resignation of Amtrak's board of directors and ask Congress to approve a new one when he submits his first budget to federal lawmakers, a new Heritage Foundation paper says.

The reason: chronic financial mismanagement, writes economic policy expert Ronald Utt. Despite a steady flow of federal subsidies—$23 billion since 1970—the passenger railroad is expected to post a record-high operating loss of $944 million when it releases its financial report for the most recent fiscal year. Amtrak has averaged $812 million in annual losses over the past decade.

"The red ink continues to flow, despite the longest peacetime economic expansion in America's history, with unprecedented prosperity that allows Americans to travel in record numbers and profits to soar for most business," says Utt, who served as privatization "czar" for President Reagan. "There is little reason to expect the current Amtrak management team will do any better in the future, especially if the economic environment becomes less favorable."

Amtrak's usual response to rising losses is to seek ever-higher federal subsidies, Utt says. Last year, the company tried unsuccessfully to obtain $10 billion in government-subsidized bonds. This year's request—unveiled Feb. 2—seeks triple that amount in grants and interest-free loans. "Under this board, Amtrak cannot hope to meet its congressionally mandated goal of becoming economically self-sufficient by Dec. 2, 2002," Utt says.

For that reason, President Bush should make next year's Amtrak subsidy—likely to be near this year's amount of $500 million—contingent on the board's resignation, Utt says. And he should threaten to veto any legislation that appropriates the funds without requiring a new board.