Eliminate Subsidies for Amtrak

Lawmakers appropriated more than $1.5 billion in 2013 to subsidize intercity passenger rail services provided by the National Railroad Passenger Corporation—or Amtrak—including $1.0 billion in grants for capital expenses and debt service, $0.5 billion in grants for operating subsidies, and $0.1 billion for disaster mitigation and repair work after Hurricane Sandy. Those amounts were subsequently reduced by a total of $71 million by sequestration. All told, the government covers almost all of Amtrak’s capital costs as well as more than 10 percent of its operating costs. In 1970, when the Congress established Amtrak, it anticipated subsidizing the railroad for only a short time, until it became self-supporting. Since then, however, the federal subsidies to Amtrak have totaled about $45 billion. This option would eliminate those subsidies, yielding savings of $15 billion from 2015 through 2023, the Congressional Budget Office estimates.

An argument in favor of this option is that federal funding is subsidizing the operation of uneconomic services and routes (including sleeper-class service and many long-distance routes) that are not used extensively and provide little public benefit in terms of reducing congestion or emissions of greenhouse gases. Eliminating Amtrak’s federal subsidy would encourage its managers to improve operating efficiency, in part by cutting unprofitable services and routes. It is also argued that if states or localities value those routes highly, they should be prepared to subsidize their operation (as is already done in some cases).

One obstacle to more efficient operation has been the limited cost data available to Amtrak’s managers. According to the Inspector General of the Department of Transportation, new accounting and financial reporting systems that the Federal Railroad Administration and Amtrak were required by law to develop, replacing older systems that assigned only 5 percent of Amtrak’s costs, still capture just 20 percent of the costs. Without the federal subsidy, Amtrak’s managers would have stronger incentives to further improve the collection and reporting of cost data and to take steps to reduce the net costs of their operations.

An argument against eliminating support for Amtrak is that the amount of such support needs to be analyzed in the context of the federal subsidies for travel by highways and air and in light of the fact that rail travel has certain advantages from society’s point of view, including a better safety record and lower emissions of air pollutants and greenhouse gases. Also, eliminating federal support could require Amtrak to significantly shrink its route network, raise its fares substantially, or both. Eliminating lightly traveled routes would cause hardship for passengers on those routes (some of whom may have few transportation alternatives) and for small communities along the routes. Raising fares could reduce ridership, which in turn would temper the benefits to Amtrak of the higher fares. Even without fare increases, ridership could suffer because of a decrease in service quality resulting from reductions in capital investment (which currently relies almost entirely on federal support).