“Derail this Gravy Train”

December 09, 2013

By Akash Chougule

At the start of his presidency, President Obama laid out a grand plan to construct a high-speed rail network throughout the country, eventually hoping to connect eighty percent of the nation in twenty-five years. Needless to say, this project would cost billions and billions of taxpayer dollars – seldom a concern for the Obama administration. Four years later though, this idea has stalled, thanks in part to some in Congress and certain governors recognizing the wasting of taxpayer dollars to an industry that has already blown billions on a failed operation. Passenger rail is a poor investment for government. It is inefficient, serves a minuscule portion of the population, and leaves taxpayers on the hook.

If Amtrak has been any indication, federal government involvement in passenger rail is asinine. Amtrak has become one of the most well-known examples of government waste and inefficiency, having lost over $800 million on food sales alone in the past decade, and consistently running trains behind schedule – not to mention the train that derailed or the one that went the wrong way, both shortly before Thanksgiving of this year. It is also the most heavily subsidized mode of passenger travel. As Ronald Utt wrote for the Heritage Foundation, amid calls to discontinue government funding of passenger rail, “Amtrak has argued that it is cheaper to keep it alive—however horrible and costly the service—than to shut it down and pay off the loans, six year’s severance to workers, purchase-leasebacks, mortgages, retiree health care, and pension obligations. In the case of the RRIF (Railroad Rehabilitation and Improvement Financing) loan, Amtrak will likely argue that any reduction in its annual federal subsidy will jeopardize its ability to service this debt, thereby forcing government to incur a $563 million loss.” Clearly, Amtrak has hardly been a sound investment of taxpayer dollars – especially considering that it accounts for less than one half of one percent of interstate passenger travel.

Nevertheless, despite American disinterest in rail travel, the Obama administration, along with Nevada Senator Harry Reid, were hoping to move forward with “XpressWest,” a high-speed rail line that would connect Victorville, California (85 miles outside of Los Angeles) to Las Vegas, and would require a roughly $5 billion taxpayer-backed loan. Were it to fail, taxpayers would be on the hook. The project did not pass the laugh test for Washington Post, who called on the Federal Railroad Administration to “derail this gravy train.” Fortunately, the Department of Transportation suspended consideration of the loan earlier this year. Still, the federal government remains intertwined in California’s $68 million high-speed rail venture. After a judge for the Sacramento Superior Court blocked the Golden State from selling $8.6 billion in bonds to help with funding, the federal government must now decide what to do about $3.3 billion it awarded California for high-speed rail. As Americans for Prosperity has written, the sale of tax-exempt bonds in general is poor practice for states, never mind that passenger rail itself is not profitable.

Thanks in part to the House of Representatives’ unwillingness to continue to pour more money into a losing industry, and governors like Rick Scott (R-FL), John Kasich (R-OH), and Scott Walker (R-WI) turning down federal financing, the growth of government’s role in passenger rail transport shows signs of coming to a halt. As Tad DeHaven wrote for the Cato Institute, “if high-speed rail made economic sense, the private sector would build it without government subsidies.” With Amtrak up for re-authorization in 2014, the federal government should realize the numerous reasons it has no place in passenger rail transport. High-speed rail puts the taxpayers on the hook for a risky investment, and Amtrak has repeatedly shown its inability to run efficiently. If the market deems passenger rail necessary, slow- or high-speed, it should be left to the private sector accordingly.

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