Monday, June 16, 2008

Subsidies

Reuters has a Q& A with Amtrak President Alex Kummantwith at that link. Among the fascinating things, we find out how much other modes of transportation are subsidized:

Q: Is there a goal for Amtrak to be profitable, and should it be profitable?
A: "I think it is absolute mythology that there's any national system that is profitable. And I think the naysayers just have to get over it. There is no example. If you peel apart the British rail privatization, there were a tremendous numbers of problems with that. People say Oh look at these wonderful new trains running around here. It's all because of the miracle of the private market.' That's complete nonsense. There's a bunch of new trains running around there because they spent five times as much tax money today as they did in 1990. And actually if you look at the subsidy structures, we are awash in subsidies for all modes of transportation. There's a $10 billion a year cash transfer from the general fund to the Highway Trust Fund. FAA gets $2.7 billion. We pay all security at Amtrak and yet there is a $1.5 billion subsidy that goes beyond any user fees for security in air travel.
There's $8 billion that goes into security and life safety for cruise ships. There's four-plus billion dollars that goes to waterways. Let's not even get into airport construction which is a miasma of state, federal and local tax breaks and tax refinancing and God knows what. And then there's private aviation which gets huge subsidies in accelerated depreciation loss for small aircraft. So I always get a good chuckle, if I'm in a good mood, when people talk about subsidized Amtrak. It's always a lot of fun then to reel off every other mode that is subsidized. And one final point. If you actually look at the amount of public capital that flows into the rail network per passenger, it's like $40 a passenger for Amtrak and $500 to $700 per automobile out there through the highways.
One final point is that the network matters. So you can find some juicy little piece of railroad that has just the right density and say Wow we make money here'. But guess what? If you peel that out and privatize it, your costs for running the rest of the network just went up. And it's actually connectivity that matters. So it's an entire network that matters. And if you don't have an entire network, you end up with a ridiculous patchwork of short little lanes of things that make no sense from a national system."

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