Amtrak, or The National Railroad Passenger Corporation, is a federal organization that operates passenger rail service in the United States. The name “Amtrak” is a portmanteau of the words “America” and “trak.” Amtrak was created in 1971 by Congress as a public-private partnership tasked with continuing American passenger-rail service, which was foundering at the time.
Although structured as a corporation, its board members are appointed by the President of the U.S. Virtually all its stock is owned by the federal government. As of 2014, Amtrak has about 20,000 employees with annual revenues of $2.4 billion. Incidentally, Amtrak owns only about 3 percent of the tracks it operates in the U.S.
Gargantuan Operating Losses
The company is operated as a for-profit enterprise. Yet, the “sleeper” has not reported a single profitable year since its inception. Operating losses have ranged between $230 million and $450 million over the period 2005 and 2014. Government subsidies to support the “occidental express” have been staggering. Each year, federal funds between $1 billion and $1.5 billion are required to support the omnibuses’ operating losses and capital investments. According to some estimates, total federal subsidies since its inception have exceeded $40 billion.
Some rightly claim that It pays to eat on Amtrak. Government auditors have found that Amtrak lost more than a billion dollars on its food and beverage services over the last 15 years because of waste, employee theft and lack of proper oversight. On average, the locomotive loses about $80 million a year selling food. The 2005 GAO report said that poor management, lack of planning and enforcement of its food and beverage contract were likely causes of losses.
The average Amtrak passenger coach is 26 years old and some of its oldest coaches have been in operation for more than 60 years. Some coaches were tracked into service when Harry Truman was president. The company’s last major equipment update was in the 1980s. In 2010, Amtrak approved the acquisition of 130 cars to replace the oldest ones, or about 9 percent of its fleet, but it’s unclear when they got tracked into service.
The irony is that the government of the world’s largest free-market economy continues to subsidize using hard earned tax dollars a state-run enterprise that has never generated any profit since its commencement and is unlikely to do so in the future. Why we have ignored the first best solution, which is to privatize and deregulate passenger rail mode of travel, is beyond any economic imagination. Other advanced countries including Australia, Britain, Germany, Japan, New Zealand, and Switzerland have managed to incorporate varying degrees of privatization while managing to generate profits.
According to a survey of likely voters in the U.S., 53 percent want the federal funding to stop and are in favor of privatization. So why have we not privatized the locomotive? Newton’s First Law of Motion?
All aboard, Amtrak chugs along while burning more and more tax dollars….…
December 11, 2015; 6.57Pby