October 3, 2001

October 3, 2001 | News Releases on Federal Budget

Congress Should Nix Amtrak bailout, Analyst Says

WASHINGTON, Oct. 3, 2001-Congress should disregard Amtrak's latest campaign for billions in federal aid-this one pegged to the Sept. 11 terrorist attacks-because it would erode the budget surplus and remove any incentives for the train service to improve its second-rate performance, a new Heritage Foundation paper says.

Amtrak loses money on 39 of its 40 routes, and, because of congestion and poor track quality, its "high-speed" train service averages 66 mph between New York and Boston-the speed most cars travel on Interstate 95, writes Heritage economic policy expert Ronald Utt.

"Amtrak suffered no damage from the Sept. 11 attacks and actually received a boost in customers immediately after them," says Utt, who served as privatization "czar" in the Reagan administration. "Yet it is posing as a victim to get even more taxpayer money, and Congress seems all too eager to hand it over."

Congress is currently considering several proposals to help bail out the 31-year-old government-subsidized passenger train service. One measure would create a new type of federally subsidized bond that would let Amtrak borrow as much as $12 billion, interest free, over the next 10 years. Amtrak now wants this supplemented with a $3 billion aid package that it says is compensation for expenses incurred because of the attacks. But instead of giving aid, Utt says Congress could better help Amtrak by:

· Firing Amtrak's management and board of directors and replacing them with experienced transportation professionals who have proven track records.

· Encouraging new management to review Amtrak's routes. Those that make "little transportation sense" but require huge subsidies should be scrapped.

· Ordering the new managers to pursue arrangements with the private sector that have been successful in reforming passenger train service in Europe and Asia-including privatization, competitive contracting and public-private partnerships.

And Amtrak isn't the only outfit claiming "victim" status. As Utt details in a related paper, others have lodged requests for taxpayer dollars since the Sept. 11 attacks, including the airlines, the American Bus Association, the American Society of Travel Agents, the farm industry and the steel industry. Worse, he says, federal lawmakers appear all too ready to listen to these appeals, even though many businesses have suffered little, if any, as a result of the attacks.

"In contrast to the rest of the country, some in Washington believe sacrifice can be expressed in terms of how much of somebody else's money-namely, the taxpayer's-you're prepared to spend and how fast," Utt says.

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