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No End to Amtrak

Mises Daily: Thursday, August 22, 2002 by

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What's up with Amtrak? The government’s peculiar "National Railroad Passenger Corporation" has fallen on hard times, halting service of its high-speed Acela Express for safety concerns and disrupting the plans of those made dependent on this government monopoly. 

As a result, many commuters can be forgiven for forgetting that (according to Amtrak officials) "Acela" equals acceleration plus excellence.

"Maybe I’ll just stay at home until they get things right, or they go out of business," Rhode Island financial analyst Elaine Almeida told The New York Times, implying that she has other travel options but that she prefers the kind financed by coerced wealth transfers by millions (who have no intention of ever boarding a government train). 

Sure, funding Amtrak may involve legal plunder, but, hey, these trains have air conditioning.  Other commuters bemoaned the reduced service and pined for the high standards once set by Mussolini. Said Tom Toomey, a New York schoolteacher, "You know a country is really in trouble when the trains don’t run on time."  

Of course, others might conclude that a country is in trouble when it has operations like Amtrak in the first place. Indeed, the vast majority of Americans who somehow have lived happy and full lives without access to government rail will have a different take on Amtrak's recent afflictions. Two reasons come to mind that haven’t yet made the mainstream media.

First, many view this incident as a bald attempt at budget-building. Since its inception, the rail service was to be self-financed out of its profits, which is another one of those ideas that looks good in theory but that has yet to work in practice--because it hasn’t had any profits in 30 years of operation. Private firms, when faced with such performance, simply shut down, freeing up their assets to others who think they can use them more efficiently. 

Not so with government production. Amtrak’s losses are socialized. Although American Airlines recently announced a major reorganization in response to mounting losses, Amtrak has no intention--or incentive--to reform itself because it is free from normal market profit-and-loss concerns.

Amtrak’s Ten Busiest Train Stations in 2001

Rank

City/ Station

# of Boardings
& Alightings
 

1

New York, NY

8,589,534 

2

Philadelphia, PA

3,764,734 

3

Washington, DC

3,518,423 

4

Chicago, IL

2,152,241 

5

Newark, NJ

1,430,144 

6

Trenton, NJ

1,013,138 

7

Boston, MA

989,749

8

Los Angeles

984,870

9

Princeton Junction, NJ

915,396

10

Baltimore, MD

879,136

Source: Amtrak

Nonetheless, the rail bureaucracy is coming up for funding authorization once again, at a time when many politicians are proposing scrapping Amtrak in favor of a new federal/state consortium. This maneuver--trading one bureaucracy for another--allows the government to claim that is not inattentive to Amtrak’s many shortcomings, but it also creates fear in the hearts of existing bureaucrats of losing whatever power and perks they get from maintaining the original bureaucracy.

Fortunately for them, however, the Acela trains have been sources of persistent mechanical problems since Amtrak purchased its first set of 20 trains for $700 million in 1996, so timing a reduction of service during a budgeting phase is easy to implement. 

Such gimmicks, which serve to remind politicians how many voters have been made dependent on government services, shore up political support for existing bureaucrats, especially during election years. Perhaps this reason, more than any other, explains why wasteful programs persist within democratic capitalism. (Fiscal conservatives should keep this lesson in mind as they embark on the creation of a new class of dependents via school voucher programs.)

Second (and more important), Amtrak plays a significant role in maintaining public support for the transfer state. Despite Amtrak’s touting of its service to outbacks such as Whitefish, Montana, it operates primarily in its Northeastern Corridor and Washington, D.C.  (See table above.)  The emphasis on the Northeast can be explained by many reasons, often concerning pollution and congestion, but rarely mentioned is the fact that Amtrak is a very visible government service. This characteristic is especially important to regions of the country that pay more in federal taxes than they receive back in the form of transfers and government services.  

Connecticut and New Jersey fair the worst in this category (according to data collected by the Northeast-Midwest Institute), with both states receiving 63 and 67 cents in federal spending, respectively, for every dollar they send to the Treasury. New Hampshire, Delaware, Massachusetts, and New York are also big losers at the federal spending game. This means that, from a public finance perspective, there is little benefit to union for these states. 

Any state that receives less in federal funding than it pays out could secede and maintain its current level of government service with money left over. Given this situation, taxpayers require visible assurance that they are receiving some return on their forced investment, and Amtrak provides this. Taxpayers may complain about the ever-swelling claim the government makes on their income, but resentments can be tempered by access to cheap government travel.  

What's more, many individuals who otherwise might oppose the expansion of the transfer state are less likely to make this case when they become dependent on services such as government rail (or government news outlets, or government mail operations, or government research facilities, or government police protection, et in secula seculorum). This tendency--I call it the "Cato effect," named for the libertarian Washington, D.C., think tank that over time has become more of an apologist for interventionism--enables the federal government to pacify opposition to its continued growth.     

So don’t expect Amtrak to go away any time soon, despite the facts that its demise would be a cause of rejoicing for most of the country and that there is no justification for federal involvement in transportation found anywhere in the Constitution. "There ain’t no end to doin’ right," or so said the federal employee chasing the reclusive Josey Wales in the legendary Clint Eastwood movie. The power of entrenched bureaucrats to create dependents of both politicians and their voters underscores a major reason why.


Christopher Westley is an assistant professor of economics at Jacksonville State University. See his Mises.org Articles Archive and send him MAIL.