This is an installment in an ongoing series, titled "Reader Sound-Off," which will focus attention and conversation on readers' and NARP members' opinions on important rail and transportation issues.
In Maryland, two bottlenecks on the Amtrak lines slow passenger rail progress along the Northeast Corridor, adding hours to the trips of passengers unfortunate enough to travel through the state. Recently, local officials have set into motion plans to have the archaic infrastructure at the center of the problem repaired, as long as the federal government can pitch in to help.
And therein lie the controversy: subsidies.
It has become such a dirty word in the economy-obsessed age we now live in. As we sit deep in the clammy grasp of this 2016 election season, the idea of how much money the government should or shouldn't be dolling out to industry is a hot topic and one of polarizing effect.
The two Maryland projects of discussion at the moment are the 110-year-old Susquehanna River Rail Bridge and the elder Baltimore and Potomac Tunnel. The two projects have been slated by Amtrak for completion by, at least 2025 at best, and at worst around 2040.
Unfortunately, Congress has been hesitant to set aside funds for Amtrak. This is for two reasons:
- the government-owned railroad is already subsidized by taxpayer money
- Amtrak has continuously failed — by Congress' estimation — to prove its profitability
In a Baltimore Sun article, author Colin Campbell noted how these two projects are being held up by the political reticence that surrounds government-led funding and taxpayers' money.
However, according to longtime NARP member and former executive committee/board member J. Howard Harding, that's not the full story. Here is Harding's response:
"Your otherwise informative report about railway bottlenecks in Maryland perpetuates the subsidy myth regarding rail passenger service. While it is true that Amtrak receives federal funds every year, all other U.S. transportation modes also receive substantial federal general fund financial assistance.
Amtrak recovers 91 percent of its operating costs from operating revenues such as fares and on-board food and beverage sales. No other form of U.S. nonautomobile surface transportation (such as urban rail and bus transit) recovers anywhere close to that percentage.
U.S. highways, commercial aviation and urban transit do not earn true operating profits. In fact, for nearly a decade, all federal funding for each of these U.S. transportation modes has been heavily subsidized by very large transfusions from federal general fund revenues (i.e. from federal income tax revenues).
Without such transportation services, however, the U.S. economy would collapse. Thus federal (and other) government transportation funding is easily justified by the widespread economic, social and environmental value provided by modern transportation. And labeling such funding as a 'subsidy' reveals gross ignorance of how national economies function."
To subsidize or not
Sure enough, Amtrak announced last year that for the fiscal year 2015, "unaudited ticket revenues reached $2.185 billion, 0.1 percent below the prior year, and ridership was more than 30.8 million, also 0.1 percent below the previous year, primarily due to service disruptions on the Northeast Corridor, significant weather events and lower gas prices."
Most importantly, however, "Operating cost recovery remained strong; Amtrak covered 91.1 percent of operating costs with ticket sales and other revenues."
According to Harding, "Around the world, not one single national intercity rail passenger service equals Amtrak's operating costs recovery ratio. The relatively few intercity rail passenger service routes that claim to earn an operating profit benefit from very large, long-term national capital investments unmatched in the U.S."
While it is true that other countries may subsidize rail transportation with little to no problem, Amtrak opponents argue the company should nonetheless be privatized. The argument is that this will force Amtrak to put the wishes of its customers first, rather than the wishes of its government benefactors.
Jeffrey Dorfman, a contributor for Forbes, noted that "Amtrak carries about 30 million passengers per year. Amtrak does not provide statistics on how many different individuals this represents. However, given that over 11 million passengers rode on the Northeast Corridor trains, which are most suited to commuting, and that some people commute daily or weekly on Amtrak trains, it seems likely that the actual number of distinct people riding Amtrak annually is a much smaller number, more on the order of 5 million people.
"This leads to the question of why Americans taxpayers should subsidize a rail service that only somewhere around 1 or 2 percent of Americans actually use. The clear and obvious answer is that they should not be."
Although many people share this opinion, the answer may not be so simple.
According to 2014 estimates, Amtrak employed more than 20,000 individuals and supported an additional 90,000 jobs through its daily operations. This job impact rises to more than 110,000 when considering the indirect impacts of tourism and supplier impact. Ultimately, Amtrak and its passengers — excluding ticket fares — generated an economic impact of $7.9 billion.
"Using 2014 as a guide, this represents a net contribution of $6.5 billion to the U.S. economy when adjusted for Amtrak's federal funding," the Amtrak report states.
The impact is also felt on the local and state level. According to the editorial board of The Scranton Times Tribune, the government funding of Amtrak is justified.
"President Obama seeks $1.9 billion for Amtrak in his fiscal 2017 budget, but members of the Republican-controlled Senate Appropriations Committee are considering a $1.42 billion allocation," the editorial states. "Budget-cutting ideologues in the House contemplate even less funding. Amtrak plays a key role in Pennsylvania's economy, spending $200 million annually on procurement and employing more than 2,600 Pennsylvanians, according to Sen. Bob Casey."
It is no wonder the issue of a federally funded Amtrak remains polarizing. But with Amtrak's economic impact on both a federal and local level, perhaps, as Harding noted, dismissing those funds as unnecessary "subsidies" is a bit short-sighted in the grand scheme of things.
What are your opinions?
Don't hesitate to contact the Hotline Midweek Brief and share your thoughts atrclark@multibriefs.com. Please let us know if you have an issue on which you would like to "sound off." For anyone who wants to contact or correspond with Harding about this story, he can be reached at hardihox@gmail.com.
