How To Run A Railroad (Or At Least Amtrak)
Many wasteful government programs contribute to the growing federal
deficit, but the king of them all is Amtrak.
The national passenger rail service incurs two dollars in costs
for every dollar of tickets sold. Created in 1971 from a collection
of ailing passenger-rail systems, Amtrak has never lived up to its
promise of breaking even. Instead, it has plowed through about $25
billion in federal subsidies.
It gets worse: Amtrak's most recent annual reports reveal record
losses-more than a billion dollars in fiscal years 2001 and 2002.
In fact, in 2002, Amtrak experienced its first decline in
passengers since 1996-despite an increase in security-check hassles
at the nation's airports and congestion on the highways. Now Amtrak
President David Gunn claims he needs $10 billion in federal
subsidies over the next five years to continue operations.
Please. What Amtrak really needs in the next five years are new
managers and a new attitude, not new money.
Amtrak's outgoing board missed an opportunity to put the system on
a market-based reform path last May, when Gunn's predecessor
resigned. Instead of appointing a reform-minded CEO, the board
hired a replacement comfortable with its vision of a railroad that
operates on the principles of monopolist socialism.
Amtrak's new management promptly made clear that it has little
interest in even basic reform. For example, it firmly resisted
calls to cut back or eliminate parts of its far-flung and underused
route system. This despite the fact that every single one loses
money, and some lose substantially more than others.
Amtrak's new management also expressed no interest in renegotiating
the railroad's costly labor contracts. Amtrak's unionized workforce
earns about 20 percent more than the unionized employees of
airlines, and this gap is widening as troubled airlines renegotiate
labor contracts to reduce costs and cut losses.
Finally, Amtrak's new management opposed contracting out any of
Amtrak's work or services to private businesses that can do better
work for less money. Although European and Asian railroads have
successfully used competitive contracting and partnerships with
private investors to remain viable, Amtrak's management appears to
be unaware of this trend-despite critics' constant reminders that
they try it.
"If they are serious [about making us compete] would somebody give
me the plan?" Gunn said in an interview with London's Financial
. "How are they going to do it?"
Well, not this way: Amtrak lost a competitive contract to operate
part of the Massachusetts' commuter rail system in 1999. Amtrak's
bid was $116 million more than the winning bid from a private firm.
When that same contract came up for another bid in 2002, Amtrak
elected not to compete for it. A French company, Connex, won the
job. Perhaps Connex can tell Amtrak how to compete for-and
If Gunn really wants to see a plan to make Amtrak pull its weight,
he need look no further than The Rail Passenger Service Improvement
Act of 2002, introduced last year by Sen. John McCain, R-Ariz. The
bill lays out a five-year plan to restructure and gradually
privatize Amtrak. They also could look up "Agenda 2003," The
Heritage Foundation's new policy guidebook, at agenda.heritage.org.
It offers several suggestions on how to improve Amtrak and other
areas of transportation, including airports and highways.
Here's one way to jump-start the long overdue Amtrak reforms: The
terms of four Amtrak board members expire in June. President Bush
should replace them with people committed to market-based reforms,
thus creating a majority on the seven-member board. Under current
law, only one federal employee can sit on Amtrak's board. By
tradition, it's been the Transportation secretary. But the
president should not be hidebound in this regard. Rather he should
appoint either the Treasury secretary or the director of the Office
of Management and Budget, who can better speak on behalf of
taxpayers whose sacrifice has kept this lead weight of a budget
expense afloat for more than a generation.
At a recent Heritage policy forum, the World Bank's rail expert
predicted that within a few years, the United States and Cuba would
be the only two countries in the Western Hemisphere with a
government-run passenger railroad. Most other countries are solving
their costly rail problems through privatization, partnerships and
competitive contacting. The United States can learn from their
Utt, privatization czar during the Reagan
administration, is now a senior research fellow at The Heritage
Foundation (www.heritage.org), a Washington-based public policy