Tuesday, February 16, 2010
Federal Money for Railroads
Eight billion dollars of stimulus money has been provided to the railroads. From the standpoint of Conservative and Libertarian ideology this is wrong. The government should not provide money to any business. However, by Conservative and Libertarian ideology, the government should leave businesses alone, neither helping nor hindering. In the case of the railroads, the government has spent over 100 years hindering them in one way or another, so using the same logic that drives affirmative action, they should make up for it by now helping them. Though this is ideologically distasteful, and politically a hot potato, it may be the only way for the US to have a viable passenger service, which despite many people’s beliefs, is essential to the overall social and economic health of the country.
Four years ago I wrote a very long essay entitled “What's wrong with transportation today” which was an outline of the overall history of transportation as I saw it. Though I am sure there are many errors of detail, I think the overall patterns were accurately described. Generally speaking the situation with railroads today is the result of governments, both state and Federal, constantly sticking their noses into the railroads business, providing constituents with lower fares and freight charges than warranted, and demanding railroads provide certain services.
The focus of this essay is primarily on passenger service, since freight service appears to be a healthy business now. However, there are some ominous indicators that shippers want the rules changed in their favor and may get it. In any political situation surrounding the railroads, they are automatically the bad guys. Passenger service is seen as essential at the state level in many states. As a consequence they provide dollars to have the railroads provide the service. However, at the national level, passenger service has been all but destroyed by various edicts.
Passenger service, after the beginnings of the railroad industry has generally been a money-losing proposition. However, railroads continued to provide the service because 1) they could make it profitable with mail and express shipments, and 2) it had a high visibility, acting as advertising. Passenger service was seen by the public as the proxy for the freight service. Good passenger service meant good freight service. Making matters worse, governments taxed the railroads for the land they had as rights-of-way, and then subsidized highways and airports. Additionally in the Sixties, the mail contracts were given exclusively to the airlines and then truckers, killing the final possible source of profit. In effect they tied an economic hand behind the railroads back, and then gave an advantage to their opponents. The most egregious examples of this were the Bush II years when Amtrak was demanded to make a profit but never given the means to do so. Actually, the way the system had become structured under the various political demands, e.g. Sen. Byrd’s demand for passenger service in W. Virginia that could never possibly pay for itself, Amtrak would never make a profit. However, many people realized it provided a necessary service.
At this point, one of the ways to determine the utility of passenger service is to consider what would happen if it weren’t there. This first struck me when in Chicago and watching the CAT and METRA systems which are either city-owned, in the first case, and subsidized, in the second. The throughways in Chicago are packed all the time, and are gridlocked at rush hour. If one automobile were added to that mess for every one to two passengers on those systems, Chicago would become totally paralyzed. The cost of freeways or toll road to make it possible would be many times the current cost or subsidies to passenger rail operations, and that assumes it would even be possible to build such roads.
Another indication of the need for passenger railroad service is the airline situation. The airlines have trimmed so much capacity to raise their profitability, that coping with any kind of cancellation often leads to multiday delays. With good passenger service, one could take the train as an alternative to waiting for days for an airplane seat to replace the one that was cancelled.
Due to various regulatory and market pressures generated by government interference in the economy in general, long distance rail is only with subsidies by the states and the Federal government. With the Federal government generally having an anti-Amtrak attitude, long distance rail has languished, and is expensive compared to airlines, if speed is factored in. Furthemore, in the name of “efficiency” there is no competition for passenger service. You take what you get from Amtrak and unless the experience is good, avoid it forever after, rather than go through it again. Before airlines were deregulated and given the mail contracts to allow lower pricing, rail was still a preferred way to travel for many people. Air was only for overseas or people in a genuine hurry. No one else could pay the prices, which were considered high in those days.
A third reason passenger rail service should be encouraged is that it is much more ecologically friendly than air or passenger cars. The automobile is an obvious symbol of pollution, but it has only been in the last year or two that the amount of pollutants and carbon dioxide emitted by airplanes has become a public issue. Rail is the most energy efficient way to move both goods and people.
As a person of conservative/libertarian orientation, I really don’t like government money going to railroads. As a student of economics and politics and where they intersect, I don’t see any other solution that is doable. The real solution would take years to implement and could only be done in the context of a general removal of government from commerce. The hazards of government subsidy are always evident, eventual government control, which is always disastrous. However, as long as the government provides subsidized highways for truckers and subsidized airports for airplanes, then in the interests of a stronger transportation infra-structure, the government needs to provide money for passenger service and cooperative projects to expand freight infrastructure.
The underlying root cause of much of the passenger rail problem today is the monopoly on mail by the US government. The economics of letter mailing are sufficiently powerful that various government directions taken in mail transportation and distribution have completely destroyed certain markets that depended on that revenue. Consider what might have been if rail had been able to keep some of the mail business. We might actually be able to go somewhere on a decent schedule, in actual comfort, at a very reasonable price, and not have to put up with the idiocies of TSA inspectors.
It is a horribly inefficient way to distribute capital, tax the people and corporations, then run it through a bureaucracy that consumes a huge percentage in churn, and pass the remainder to the intended target. But at the moment the alternatives are worse.
It is too bad there are not more Berkshire Hathaway’s to purchase the railroads. That would relieve them of much of the problem. Look for BNSF to totally dominate rail freight in the future. In the meantime, Amtrak needs to be depoliticized as Conrail finally was, by being sold.
Four years ago I wrote a very long essay entitled “What's wrong with transportation today” which was an outline of the overall history of transportation as I saw it. Though I am sure there are many errors of detail, I think the overall patterns were accurately described. Generally speaking the situation with railroads today is the result of governments, both state and Federal, constantly sticking their noses into the railroads business, providing constituents with lower fares and freight charges than warranted, and demanding railroads provide certain services.
The focus of this essay is primarily on passenger service, since freight service appears to be a healthy business now. However, there are some ominous indicators that shippers want the rules changed in their favor and may get it. In any political situation surrounding the railroads, they are automatically the bad guys. Passenger service is seen as essential at the state level in many states. As a consequence they provide dollars to have the railroads provide the service. However, at the national level, passenger service has been all but destroyed by various edicts.
Passenger service, after the beginnings of the railroad industry has generally been a money-losing proposition. However, railroads continued to provide the service because 1) they could make it profitable with mail and express shipments, and 2) it had a high visibility, acting as advertising. Passenger service was seen by the public as the proxy for the freight service. Good passenger service meant good freight service. Making matters worse, governments taxed the railroads for the land they had as rights-of-way, and then subsidized highways and airports. Additionally in the Sixties, the mail contracts were given exclusively to the airlines and then truckers, killing the final possible source of profit. In effect they tied an economic hand behind the railroads back, and then gave an advantage to their opponents. The most egregious examples of this were the Bush II years when Amtrak was demanded to make a profit but never given the means to do so. Actually, the way the system had become structured under the various political demands, e.g. Sen. Byrd’s demand for passenger service in W. Virginia that could never possibly pay for itself, Amtrak would never make a profit. However, many people realized it provided a necessary service.
At this point, one of the ways to determine the utility of passenger service is to consider what would happen if it weren’t there. This first struck me when in Chicago and watching the CAT and METRA systems which are either city-owned, in the first case, and subsidized, in the second. The throughways in Chicago are packed all the time, and are gridlocked at rush hour. If one automobile were added to that mess for every one to two passengers on those systems, Chicago would become totally paralyzed. The cost of freeways or toll road to make it possible would be many times the current cost or subsidies to passenger rail operations, and that assumes it would even be possible to build such roads.
Another indication of the need for passenger railroad service is the airline situation. The airlines have trimmed so much capacity to raise their profitability, that coping with any kind of cancellation often leads to multiday delays. With good passenger service, one could take the train as an alternative to waiting for days for an airplane seat to replace the one that was cancelled.
Due to various regulatory and market pressures generated by government interference in the economy in general, long distance rail is only with subsidies by the states and the Federal government. With the Federal government generally having an anti-Amtrak attitude, long distance rail has languished, and is expensive compared to airlines, if speed is factored in. Furthemore, in the name of “efficiency” there is no competition for passenger service. You take what you get from Amtrak and unless the experience is good, avoid it forever after, rather than go through it again. Before airlines were deregulated and given the mail contracts to allow lower pricing, rail was still a preferred way to travel for many people. Air was only for overseas or people in a genuine hurry. No one else could pay the prices, which were considered high in those days.
A third reason passenger rail service should be encouraged is that it is much more ecologically friendly than air or passenger cars. The automobile is an obvious symbol of pollution, but it has only been in the last year or two that the amount of pollutants and carbon dioxide emitted by airplanes has become a public issue. Rail is the most energy efficient way to move both goods and people.
As a person of conservative/libertarian orientation, I really don’t like government money going to railroads. As a student of economics and politics and where they intersect, I don’t see any other solution that is doable. The real solution would take years to implement and could only be done in the context of a general removal of government from commerce. The hazards of government subsidy are always evident, eventual government control, which is always disastrous. However, as long as the government provides subsidized highways for truckers and subsidized airports for airplanes, then in the interests of a stronger transportation infra-structure, the government needs to provide money for passenger service and cooperative projects to expand freight infrastructure.
The underlying root cause of much of the passenger rail problem today is the monopoly on mail by the US government. The economics of letter mailing are sufficiently powerful that various government directions taken in mail transportation and distribution have completely destroyed certain markets that depended on that revenue. Consider what might have been if rail had been able to keep some of the mail business. We might actually be able to go somewhere on a decent schedule, in actual comfort, at a very reasonable price, and not have to put up with the idiocies of TSA inspectors.
It is a horribly inefficient way to distribute capital, tax the people and corporations, then run it through a bureaucracy that consumes a huge percentage in churn, and pass the remainder to the intended target. But at the moment the alternatives are worse.
It is too bad there are not more Berkshire Hathaway’s to purchase the railroads. That would relieve them of much of the problem. Look for BNSF to totally dominate rail freight in the future. In the meantime, Amtrak needs to be depoliticized as Conrail finally was, by being sold.
// posted by Bill @ 6:50 PM 
