Friday, March 25, 2005

Funding and The Great Lie - Part 5 - Consequences

There's no business like show business, and railroading. Passenger railroading has always been a little bit of both. This fact is particularly true of long distance passenger railroading since the Great Depression and of commuter railroading after 1950. In future articles, I would like to demonstrate how "doing a little sidestep" is a dance peculiar to passenger railroading. However, in the blogs just preceding this one, we have brought the reader to the point in time where federal funding for Amtrak is completely gone and where the system has shut down, with the probable exception of some areas of the country where the service is more vital to the smooth flow of daily transport. We took a one-blog time out to bring you some up-to-date news on funding to which nobody paid any attention. (Come on, folks! Blog me!)

There is little to no proof that the transportation system of the United States would suffer any great or even noticeable handicap with the loss of Amtrak. There is no proof that it wouldn't, either. It is all statistics and speculation. On the one hand, passengers trains have been withdrawn from many, many areas of the country in the past 50 years, and those areas are doing just fine. Or are they?

On the other hand, many areas where passenger trains have been withdrawn now have them, either in a locally subsidized or commuter form. And more are going to get them. There are areas where there is a recognition of some of the things I am going to say below. A not-so-perfect example is Albuquerque, New Mexico, where they are going to have a train from Belen (45 miles south) to Bernalillo (10 miles north), and eventually to Santa Fe (now about 60 road miles north). There used to be Santa Fe service on this same route from El Paso, Texas, on the south, to Santa Fe. The local governments are starting to realize the price paid in highway costs, pollution, lost productivity, and restricted development, by the absence of the passenger train.

There have always been consequences for the withdrawal of rail service. Highway costs and vehicle pollution are just the most obvious. Small towns withered and passengers chose the private passenger automobile. Trucking has grown beyond the capacity of the Interstate Highway System (another government subsidy for transportation), and the growth of trucking was in part spurred by the withdrawal of passenger rail before and during Amtrak enhanced by business decisions made by Amtrak on what they could and could not carry on a passenger train.

How? Passenger trains used to carry the mails. This was an extremely efficient deal for the post office, but it was part of a losing proposition for the railroads that, pre-Amtrak, wanted to lose the passenger train that - I have said this before - NEVER MADE MONEY, EVER! The mails went to truck, the trucks got sloppy with service, UPS and Fed Ex came in and took up the slack. More trucks. Amtrak tried and failed to make money on carrying the mails again, putting even more trucks on the roads and on dedicated intermodal trains that currently clog the remaining freight railroads.

Consequence: If you get on an Interstate in your SUV, even in the most remote part of the country, you have to deal with heavy trucks. More of them every year, and no end in sight. The buses have to deal with them, too. With no Amtrak, your only other alternative is to take off your shoes and get in line at the airport security check.

Incidental to all this, the airlines are just about where the railroads were with passenger rail just before Amtrak. They can't make money at it. But unlike the railroads, they have already used up their subsidy from the government. The airports, terminals, airway system, control towers, and regional traffic control centers. They are all federal government owned and operated. Cry for the airlines, as they have found that the only thing they can do is reduce service and drive the customers away, or onto the highways. I do not think we can build, or afford to build, highways fast enough, or to maintain them.

Consequence: For the sake of argument, let's say there is a day in the future when we are all out on the road bucking the truckers and the airways are full of money-losing airplanes and the buses are tootling along the roadways that are left in condition to take them with their busloads of passengers who can't drive and won't fly, and with their toilets overflowing. We suffer a national disaster at that moment.

It is not unfair to argue that any disaster half of September 11, 2001, or beyond would result in the grounding of commercial passenger fights.

Let me then ask this question: How does one get from, say, Las Vegas, New Mexico, to Buffalo, New York? (Both cities are on Amtrak routes now.)

Next time: The Start of The Dance

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Friday, March 18, 2005

Funding and The Great Lie - Time Out to Blog The Media

In the Chicago Tribune of March 17, 2005, Tribune reporter Rudolph Bush (we suspect no relative of our two presidents) writes about the senate blocking an additional $1 billion to fund Amtrak. He reports further on how this is a blow to those hoping to cripple the administration's efforts to zero out Amtrak funding. He also quotes a former Amtrak chairman as saying that zero is not an option because zero leads to bankruptcy.

The administration wants to see states fund intercity rail, and wants it done sooner rather than later. Reporter Bush also notes that this may be a good start in getting Congress to seriously consider the shape for Amtrak in the future.

Finally, the article also reveals that even the Bush Administration is reluctant to zero completely, recognizing that the Northeast Corridor, already a huge investment in taxpayer money, cannot exist or function without federal subsidy. (Could this possibly be read that they also know there are too many votes in the densely populated northeast to screw around with, even in a second-term administration?)

Then, today, the Albuquerque Journal carried an editorial by David Broder of the Washington Post Writers Group. (Disclaimer: Washington Post = Not Our Favorite Newspaper but Albuquerque Journal = OK) This editorial, while having nothing whatsoever to do with Amtrak, talks about the many unfunded mandates already imposed by the federal government on the states. He also talks about the 1995 Unfunded Mandates Reform Act.

We argue that zeroing out Amtrak funding is just another form of unfunded mandate, with the states having their arms twisted by the extortive "fund or lose service" proposition that the administration has to offer. Can we get our esteemed Senators and Representatives to believe that the UMRA applies to any law reducing Amtrak funding to zero?

Maybe Amtrak funding is not in as much trouble as it seems - if we can just get some creative thinking in Congress.

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Monday, March 14, 2005

Funding and The Great Lie – The System Shuts Down

Right now, Amtrak, the national passenger railroad system (motto: serving mostly the Northeast), is operating on a budget roughly $600 million short of what it needs just to remain in a “state of good repair.” The latter is Amtrak’s phrase, not mine. The Bush Administration has let it be known that it does not want Amtrak federally funded beyond the current fiscal year. This series of blog articles has focused first on our opinion that there is an inherent Great Lie in the operation of passenger railroads in the United States, and second on what will happen if federal funding is fully withdrawn from Amtrak.

We noted in the last blog – see March 6 – that at first nothing would happen. The point was that funding would be withdrawn in the middle of a fiscal year and everyone would probably get over it by the time the next fiscal year started. The first visible reaction, reported in Trains, April 2005, was to discontinue the purchase of DMU trainsets and the pole replacements needed to maintain and upgrade the electrical system – power for trains – for Northeast Corridor right of way.

Transportation systems of different kinds react differently to shortages or outright lacks of funds. Passenger railroading is still government regulated to a far greater extent that freight railroading. Notice that I said regulated, not subsidized. Traditional government regulation for railroads covered everything from how much railroads could charge their customers to how they could account for it. Non-traditional regulation began with subsidization. The budget process from the local level up to the federal level controls what passenger railroading can and cannot do.

The managements of subsidized transportation systems reacts to shortages of funds and shortfalls that may be made up in the next fiscal year by cutting services and processes that can be done without for a short time and that can be reinstated when the government (local, state, federal) comes up with more loot. What management has done with the Amtrak shortfall is a good example.

What management will have to do if federal funds disappear completely is different. First, management of Amtrak will have to strongly lobby state and local governments for funding to continue service through those areas that now help support Amtrak trains or say they want to. This is what President Bush wants them to do.

Second, Amtrak management will have to take a long, hard look at what they can do to preserve assets in the event of a shutdown. They will have a fiduciary duty to make the property, both track and rolling stock, worth as much as possible in the event of liquidation. This will lead to certain decisions to curtail service in the areas where state supported trains are not on the horizon and where maintenance costs are high and there is a higher risk of wrecking the assets or rendering them valueless. An example of the latter would be in areas where freight railroads have deferred maintenance on Amtrak routes.

Finally, when the last of the federal money is gone, management will have to get all the trains home and shut down the system anywhere that state and local funding hasn’t kicked in. In my opinion, that will be everywhere except the Northeast Corridor, Pacific Coast, and possible Chicago trains (Kansas City, Chicago, Milwaukee, Detroit, maybe Minneapolis).

My readers will notice that I have not said anything about management deciding to raise fares to cover lost funding. They won’t, because they know that passenger railroading has never been able to cover its costs and probably never will. That fact is part of The Great Lie.

However, before we get into the History of The Great Lie, we will cover the Consequences of the Shut Down. Please stay subscribed or return often for our next blog.

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Sunday, March 06, 2005

Funding and The Great Lie Part 2 - The Great Mistake

Congress Denies Funding for Amtrak.

What will happen to passenger rail? The answer is nothing - at first. And this is one of the reasons why Congress and President Bush just might get away with it before anyone even notices.

Funding for many government programs is installed far in advance of the need for funds, or for the expenditures of those funds. This works something like when the price of oil goes up on the spot market and every gas station in town prices regular for ten cents more a gallon. The price that changes today doesn't immediately effect the actual cost of the gas you pump, but everyone connected with the industry feels the need to act as though a price change for crude oil has to be placed before the public in a way that will make the public notice.

There are two ways, then, that Amtrak could deal with a loss of funding. In the first way, the management of Amtrak starts to act like the damnfools (in our opinion) that run the gasoline industry and begins immediately to shut things down. But we predict that, for many, many political reasons, the management of Amtrak will act in the second way. That is, they will continue to run on in the current format until the money is used up. This could take months, and with the support of Congress in the way of Emergency Funding (read: Shut Up and Stop Whining and We Will Give You Some), even years.

We predict that the second way will prevail. Among the political reasons are that nobody who cuts Amtrak funding, including a Republican President, wants to be blamed when the sacred trains disappear. They hope the public forgets about it by the time they do.

God help us if the system starts to shut down at about the same time some jihadist decides to take another whack at the country.

Next time: The System Shuts Down (Please send questions or comments to © 2005