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Wednesday, October 31, 2007

 

Congress funds more unprofitable business

Great news from the Wall Street Journal. Our wonderful leaders in Congress have decided to provide more funding for Amtrak, the wonderful rail line we all use quite regularly. The reason: Why, to stop global warming of course. We Americans, with our horrible use of cars and pollution of mother earth need to be using the rail more. We need to sacrifice our precious time to take long commutes on a rail system that allows the environment to 'green up'.

I won't even question the 'sincerity' of our leaders. They are all politicians. Enough said.

But I do question the funding of a business that if allowed to run in the real world would be OUT of business because it is unprofitable and caters to a virtually non-existent demand.

We all know our Congressional leaders lack the skills to carefully think about something like this. Obviously, or they would have cut the program once they figured out it had LOST money, let's see, EVERY YEAR since its inception in 1997. But a few things about this bill are incredibly moronic and thus worth noting.
First, part of the $12 billion, 6 year project (1.8 billion) would be devoted to paying off the debts of the unprofitable business. Wonderful. Is it just me, or does it seem pointless to try to reduce a debt that is constantly growing (and will be as long as we Americans prefer driving)? By financing this sort of debt, the government is diverting tax-payer's hard earned money to what boils down to a pointless exercise in 'debt management.'

Next, the project grants $1.4 billion to NEW RAIL PROJECTS run by the individual states. Great, we now know that the government wants to fund MORE losing businesses.
Let me explain why I think this is bad (I know you all agree with that premise...). The government is funding losing businesses. Businesses that otherwise would fail (if run on a scale as large as Amtrak-perhaps smaller scoped rail lines would be run efficiently) in a free market society accumulate debt, and if that debt is financed by the gov’t, it comes from taxpayers. Taxpayers are thus incurring costs that most of them are not receiving the corresponding benefits for, and thus there is a distorted (and unfair) diversion of funds.
Now, one thing about the bill is somewhat reasonable. In the past, the government has financed Amtrak with the goal of making it financially self-sufficient. Since it hasn’t been able to do that, it is trying something else with most of the funds: Make the trains better. Improve service, quality, speed, and overall efficiency. That, in my mind, is at least a better use of funds than trying to pay off debt that will continue to accumulate for all time…

But you cannot change people’s preferences (at least not ethically), and that is the crux of the matter. The government is attempting to stem global warming by making us all want to use a rail service that it finances. I would argue, though, that if Americans truly valued train service over cars, train services would have developed prior to Amtrak, because somebody could have made some money. Clearly, Americans don’t value rails, and this applies even more directly to Amtrak: Government goods and services are, quite honestly, shoddy at best and hardly as good as free-market driven goods (in most instances). I think that unless the people’s preferences change to reflect greater demand for rail, the funding of Amtrak is inefficient (because it artificially creates something for which there is a relatively small demand) and unfair (because it takes our money and allocates it to something that I, for one, do not use). Theoretically, money could be allocated much more efficiently if we were allowed to have it, but obviously the government thinks we are too stupid to know what’s best for ourselves and use our resources accordingly.

Comments:
You rail against Amtrak mainly because you have no idea how it actually works. Amtrak has tons of problems for reasons mainly beyond their control. Except for a few right-of-ways in the northeast corridor, Amtrak does not own the track upon which it operates. It has to travel on track operated by the freight companies. That means trains stuck behind slow moving freights, stuck waiting at sidings for freight trains, and rails that are not managed to provide a comfortable ride to humans.

In addition to being at the mercy of track maintenance and operations provided by the freight lines, Amtrak has a tiny budget (thanks to people like you) so that they cannot afford to buy newer equipment very often and so you get a lot of broken down older stuff. They also cannot afford to run trains to very many places since people don't want to ride a train when even the car is so much faster (back to the freight operators).

So, in conclusion, yes Amtrak does suck. It is not, however, completely due to mismanagement and incompetence (although they have as much of that as anyone else). Until people realize that you can't operate a transportation service where you are not in control of your own infrastructure at a profit, there will continue to be calls for cutting funds for Amtrak.
 
Passenger train service is unprofitable not because it's an alternative to driving. It's unprofitable as an alternative to FLYING.

Flying is faster, cheaper and more convenient for passengers. There are a few places where it operates a well utilized commuting service (Acela on the east coast, CalTrain in San Francisco) that could be spun off to municipalities. Other than those exceptions, Amtrak needs to be dismantled.
 
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