The Bush administration has sent a powerful signal to Amtrak in
proposing virtually no government funding for the struggling
passenger train operation for the coming fiscal year. Amtrak has
been persistently plagued by cost overruns, project delays, poor on-
time performance, maintenance problems, missed goals, poor
management, and government bailouts\u2014not to mention the fact
that it has never posted a profit\u2014since its inception in 1971.
Congress must realize that, with the rise of relatively cheap
transportation alternatives such as airlines, buses, and cars,

subsidized intercity passenger rail is no longer necessary or desirable. Privatization would allow those
Amtrak assets that hold true value and promise to be operated more efficiently by private firms\u2014which
would be not be hampered by political directives that often conflict with sound management practices\u2014and
save the American taxpayer from wasting any more money on unprofitable and unnecessary operations.

The National Railroad Passenger Corporation, or Amtrak, was established by Congress through the Rail
Passenger Service Act of 1970 and began operations on May 1, 1971. It currently serves more than 500
stations in 46 states and had a total ridership of over 25 million in fiscal year 2004.124 Amtrak operates over
more than 22,000 route miles, most of which is owned by freight railroads. It owns 650 route miles of its
own, primarily in the Northeast Corridor route between Boston and Washington, D.C., and in Michigan.125

According to a February 2004 General Accounting Office (GAO) report, Amtrak was created \u201cbecause
existing railroads found such service [intercity passenger rail] to be unprofitable.\u201d126 Indeed, the 1970
bankruptcy of Penn Central\u2014which was created by the merger of the Pennsylvania Railroad and the New
York Central, the two largest railroads at the time\u2014prompted lawmakers fearful of an industry-wide failure
to ensure the future of intercity passenger rail.127 However, the GAO report neglects to note that it was
government regulation that was killing the railroad companies in the first place! The Interstate Commerce
Commission strictly regulated railroad rate schedules and routes, among other things.128 The inability of
freight railroads to discontinue unprofitable intercity passenger routes and reduce freight rates to compete
with truckers (who had become an increasing threat since the development of the Interstate Highway
System) ultimately crippled the industry and led to bankruptcies such as Penn Central.

When Amtrak was created, Transportation Secretary John Volpe asserted that it \u201ccould be profitable within perhaps three years.\u201d129 In its 34-year existence, however, it has consumed $29 billion in taxpayer dollars, and not once has it posted a profit.130 Last year\u2019s cash loss exceeded $600 million.131 In addition, despite the fact that it is currently $4 billion in debt, Amtrak is requesting an increase in federal subsidies of more than

Numerous reform efforts have been made over the years, but to no avail. According to a Congressional
Budget Office (CBO) report, \u201cBy 1978, the Congress had apparently given up on the notion that Amtrak
could become profitable and free of federal subsidies.\u201d134 The Amtrak Improvement Act of 1978 sought to
improve customer service and set a goal for Amtrak to provide service between Boston and New York City
in 3 hours and 40 minutes and between New York City and Washington, D.C., in 2 hours and 40 minutes.
These goals would not be \u201csubstantially achieved\u201d for about two decades.135 The Amtrak Reorganization
Act of 1979 sought to reform the organization by allowing it to generate greater revenues and improve on-
time performance while establishing a reduced-fare program for the elderly and handicapped. Thus, it
directed Amtrak \u201cto act like both a business and a public-service agency.\u201d136 These dual\u2014and oftentimes
conflicting\u2014roles would serve as the policy throughout the 1980s and most of the 1990s.

In 1997, the Amtrak Reform and Accountability Act loosened restrictions on business decisions (of which
Amtrak failed to take advantage) and authorized appropriations of approximately $5.2 billion between
1998 and 2002, in addition to about $2 billion in funds available from the Taxpayer Relief Act of 1997137
(an ironic bill title, it would seem). This money was to be used to make the investments necessary to get
Amtrak on solid financial footing once and for all and end its dependence on federal subsidies. The
legislation also created the Amtrak Reform Council (ARC) to oversee Amtrak, and required Amtrak to
submit a liquidation plan to Congress if the ARC determined that it would not be able to achieve self-
sufficiency by December 2002.

On November 9, 2001, the ARC found that \u201cAmtrak is no closer to self-sufficiency today than it was in 1997.\u201d138 ARC Chairman Gilbert E. Carmichael had few kind words to say about Amtrak. Among his findings:

\u201cThe chronic difficulties that Amtrak experiences\u2014year in and year out\u2014are not due principally to
lack of funding. They spring primarily from an organization that is obsolete, that cannot do all the
things that it is charged to do, that will not consider recommendations for change, and that desperately
needs to be redesigned.\u201d

\u201cNo matter what the Congress decides to do about Amtrak one thing is very clear\u2014the Northeast
Corridor will continue to exist, with or without Amtrak. . . . Based on historical funding patterns . . .
having Amtrak as the owner of the NEC [Northeast Corridor] may be the worst outcome.\u201d139

Of course, Amtrak was not liquidated. To get around the Amtrak Reform and Accountability Act mandate,
Congress prohibited Amtrak from preparing such a plan in an amendment attached to a defense-spending
bill.140 It also provided a bailout in the form of a $100 million loan and a $205 million supplemental
appropriation.141 Not surprisingly, the same problems that existed in 1997 and 2002 remain to this day.

In an attempt to generate significant reform of the troubled passenger rail \u201ccompany,\u201d the Bush
administration proposed no federal funding for Amtrak, except for $360 million specifically dedicated to
preserving the valuable Northeast Corridor commuter route.142 Amtrak officials and Transportation
Department inspector general Kenneth Mead have warned that Amtrak will face bankruptcy within months
or even weeks of the end of the current fiscal year (September) if its budget request is not met.143 According
to Amtrak Chairman David M. Laney, \u201cAt current funding levels, existing operations and capital
investment will have to be severely curtailed or discontinued beyond FY05.\u201d144 Added Laney in Amtrak\u2019s
2005 Annual Report to Congress, \u201cAny significant reduction in the infrastructure investment program will
likely force Amtrak to suspend high-speed operations on the Northeast Corridor. This will potentially
balloon the operating deficit due to erosion of revenues.\u201d145

If all this sounds familiar, recall that in 2002, after the ARC report was issued, Amtrak threatened that if it
did not get the $1.2 billion it was seeking it would discontinue its unprofitable cross-country routes at the
end of the fiscal year.146 According to Joseph Vranich, a former Amtrak spokesman and a critic of the
organization, the latest scare tactics are a form of \u201cblackmail\u201d and \u201chostage-taking\u201d because no one wants
to suspend service in the important Northeast Corridor (which crosses numerous political districts). Argues
Vranich, \u201cWould we permit a small, badly-run airline on the brink of bankruptcy to somehow have the
power to shut down the entire commercial aviation system if Congress wouldn\u2019t give it more money? No,
of course we wouldn\u2019t.\u201d147

The Bush administration seeks to shift the responsibility for intercity passenger rail from the federal
government to the states. States would be primarily responsible for developing and funding rail service and
would be permitted to bid routes to providers other than Amtrak.148 Yet, while this would get the monkey
off the government\u2019s back, it would largely just shift existing problems to the states (although outsourcing
strategies might result in some efficiency gains, depending on how strictly providers are regulated). Amtrak
claims that if Congress would just fork over another $1.8 billion, it will be able to eventually bid
competitively with other rail lines for service routes.149 (Where have we heard this before?) This begs the
question, however: Assuming that this time the statement is true (a dubious proposition at best), why should
we pay just so Amtrak can compete with other rail companies? Why should we spend nearly $2 billion so
that Amtrak can compete when we could instead sell Amtrak\u2019s assets, realize ani nf lux of capital from those
asset sales, and simply allow existing competitive firms to take over Amtrak\u2019s operations?

A number of supposed public benefits of Amtrak are put forth to validate its existence. Among these are:
(1) Reducing congestion, (2) Improving air quality, (3) Increasing transportation capacity, and (4) Offering
travel choice. All of these arguments fail to provide reasonable justification for Amtrak\u2019s government
subsidies, however.

Intercity passenger rail clearly will not have any significant impact on long-distance travel since \u201crail travel is not time-competitive with air travel.\u201d150 The only possible congestion relief would be on shorter-distance travel in certain densely populated areas of the country, and even then the impact is likely to be minuscule. according to a GAO report, \u201c[I]n 1995, we reported that each passenger train along the busy Los Angeles-