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Amtrak Is No Way to Run a Railroad

May 19, 2015 in Economics

By Richard W. Rahn

Richard W. Rahn

If taxpayers suddenly stopped subsidizing Amtrak, what do you think would happen? Before trying to answer that question, it is useful to review U.S. railroad history. The first railroads were built in the United States in the late 1820s, and by 1900, only 70 years later, almost every town in the country had rail access. Railroads were high tech, the Internet of their time. The system was built and profitably operated by private companies.

Amtrak and the modern freight railroad companies use the infrastructure that was built long ago. The 180-year-old privately built Canton Viaduct (a stone bridge) in Canton, Massachusetts and the 100-year-old Hells Gate Bridge over the East River in New York are still used by Amtrak. The investor-owned Pennsylvania Railroad built the hugely expensive railroad tunnels under the Hudson River in 1908, which were technological wonders of the time. They are still used by all of those who ride Amtrak from New Jersey to New York. (As an aside, I found it rather ironic when President Obama claimed that private business only succeeded by using government infrastructure — “you did not build that” — when, in fact, government mostly uses privately built infrastructure.)

Let’s get rid of Amtrak and its taxpayer subsidies, and see what magic free-market rail entrepreneurs might create.”

Once the railroads were built, state and local governments began heavily taxing every mile of track and other railroad facilities, and the federal government imposed endless regulations, including regulating fares. The predictable result was that expenses grew faster than revenues — causing deferred capital spending and maintenance. Eighty years ago, trucks, automobiles and airplanes began to lure away rail’s customers. As a result, the rail industry began a death march after World War II. Railroad companies ripped up thousands of miles of track to save on expenses and tax levies. Today, the United States has a fraction of the number of miles of railroad tracks compared to what it had 100 years ago. Route mileage peaked at 254,251 miles in 1916 and fell to 139,679 miles in 2011.

By the late 1960s, most of the nation’s railroads were in deep trouble as a result of new forms of competition, disastrous tax and regulatory policies, and inflexible unions. In 1971, the federal government created Amtrak as a government corporation to operate intercity passenger rail service. Freight rail was finally deregulated in 1980, now resulting in the most …read more

Source: OP-EDS

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