Throw Government Subsidies From The Train
Fascinating piece by Sean Stein Smith on the American Institute for Economic Research site.
We think of train travel in the U.S. as a loser industry, and it is -- passenger train travel, that is.
Smith writes:
The U.S. freight railway system, conversely, is the envy of the world, and this is not hyperbole or chest thumping; the facts back it up. Since the Staggers Act of 1980, which deregulated freight rail, improvements have been substantial. U.S. freight railways carry 81% more ton-miles of freight, and costs have fallen 46%. (It isn't common for an industry to increase its capacity by 81% while reducing costs by nearly half.) That level of success has even been noted by the Community of European Railway and Infrastructure Companies, which might be surprising, given the common assumption that Europe has a monopoly on rail excellence.Compared side by side, it seems a conundrum: Amtrak limps along, still relying upon billions of dollars worth of taxpayer-financed subsidies, while U.S. freight railways evince growing profitability and capacity amid rapidly falling costs. Why are U.S. freight rails so profitable when U.S. passenger rail - sometimes traveling the same routes, on some of the same rails - remains a perennial money pit?
Why the disparity
The answer is, as is so often the case, the incentives that face the private sector versus those which confront government actors. Freight rail has been deregulated and privatized for decades, which has subsequently given rise to increased capacity, reduced costs, and - in a feat that, some years ago, was said to be impossible - nearly come to par in terms of tonnage with the U.S. trucking industry. (At one point, a transportation industry adage held: "Trucks killed the trains, overnight air freight killed the trucks, and drones will kill overnight air freight.")
...The takeaway
It is easy to point to the failings and losses accumulated by Amtrak and blame any number of external factors, but the underlying causes of these failures are neither new or complicated. Chartered by government mandate, and unable to exercise the same level of entrepreneurial initiative as its private sector counterparts, Amtrak seems fated to either continually incur losses or, perhaps, to limp along at a breakeven level without the ability to make the capital investments sorely needed to improve the customer experience - let alone to compete on a cost basis versus alternative forms of transportation.The solution is not to mirror the massive subsidization of passenger rail seen elsewhere; these efforts misallocate capital, prevent the most efficient shipping of goods, and crimp economic investment. More subsidies and government funding are not the answer. To eventually be truly competitive and offer services that consumers actually seek, passenger rail should follow the example set by freight rail several decades ago. Would it remain the same? No. And that's the entire point.
The United States has a world class freight rail system; it is only political unwillingness that prevents the importing of the same template into the passenger rail sector that is preventing the latter from becoming equally robust.
And about the "public interest" that government officials behind subsidizing passenger rail are supposedly acting in, Don Boudreaux goes all logical on government intervention:
The entire case for using government to correct alleged market failures is built on the belief that self-interested actions of private decision-makers lead them to seek private benefits at the greater expense of the public. But if we assume that people act self-interestedly in their private spheres we must make the same assumption about people's motivations in public spheres.Yet despite more than a half-century of warnings from public-choice economists, mainstream economists continue to assume, without much apparent thought, that government officials act in a way that is categorically different from the way these same persons would act were they in the private sector: private persons are assumed to act to promote their own self-interests, while government officials are assumed to act to promote the public interest.
Is there a reason they can't add a passenger car to the freight trains?
NicoleK at December 20, 2019 4:29 AM
US freight rail companies ran passenger services from some of the earliest days of railroads. Providing passenger service was a condition of getting government assistance to build the transcontinental railway. Passenger rail has always lost money in the US; and in Europe, if they're honest about it.
Amtrak was the government's sop to the railways to help stop the bleeding. The government took over the money-losing passenger rail service and consolidated those lines under one umbrella, Amtrak.
When air travel was still exotic and the purview of the wealthy few, Amtrak seemed like a good idea. With deregulation, the airlines have opened up more routes, compete on price, and haul more passengers farther and faster than rail does.
My wife and I looked into a trip from San Francisco to Denver. It was a 3-hour flight and a 3-day train trip. For a one-week trip, that meant spending more time getting there and back than being there. So much for seeing the Rockies by rail.
Every single government-sponsored and/or government-run rail entity has bled money - Amtrak, Conrail, etc. And there were plenty of excuses made for all of them.
Rail is a heavily-regulated industry. Most people don't comprehend just how heavily-regulated it is. It's also a heavily unionized industry with obscure work rules that date from the days of steam engines. All of those things add up to passenger rail being a financial sinkhole.
If Elon Musk can create a hyperloop that makes rail travel competitive with air travel, more power to him. Amtrak, however, cannot.
Conan the Grammarian at December 20, 2019 4:32 AM
Behind the cattle car?
Running passengers requires more personnel - porters, conductors, etc. It requires meal service and sleeper cars on longer lines. I requires stopping at passenger terminals, which require ticketing personnel and baggage handlers. Passengers cannot be stored in warehouses or boxes until the train is ready to go and cannot be transferred between trains with a crane.
Conan the Grammarian at December 20, 2019 4:37 AM
You can NicoleK. It just doesn't make any sense to. The two businesses are just too different.
To get from Houston to Dallas by air takes around 1-2hrs (Whole trip. Only 0.5hrs in the air.)
By car around 4hrs.
By bus around 6hrs.
By train over 3 days.
If you are shipping 10 ton of steel, or wheat, or whatever how fast it gets there doesn't really matter. Just order earlier. How much it costs is the main concern. For people on trips time matters a lot. Adding six days (3 there and 3 back) means you just lost a week of vacation. And that is with your own train. Going by freight is even slower.
If you really want to move people you can't even share the same rail lines, much less the same train. The two businesses are just too different.
Ben at December 20, 2019 6:04 AM
It is the time factor that is the difference and in most cases the cargo companies own the rails - that is Amtrak has to pay to use the rails and work around the cargo companies schedule.
I have used Amtrak to go to my parents a few times. That part has usually been pretty good. To drive takes about 2.75 hours, Amtrak part is a little over 3 hours (except the one time we had to wait 40 minutes for a cargo train). Cost was a tiny bit cheaper on Amtrak. The killer is that if I drive to the Amtrak station I have to pay about $80/night to park. If I take public transit that adds about 2 hours. Plus, someone has to pick me up from the station and bring me to my parents' house. (Bus is about 2.5 hours followed by a 2 hour walk).
1.5 years ago I looked at taking Amtrak to meetup with some friend for a festival. Airfare $300, Amtrak $340 - and 1 day in transit each way (e.g. board 11pm on 1st, arrive at 1am on 3rd). So flying it was.
The Former Banker at December 20, 2019 8:23 AM
One cause of the time sink when people are involved is with people you need to always stop at every stop whether anyone is getting on or off. Have to keep to schedule. Each stop looses a lot of time since it takes a bit fora train to slow down and get back up to speed.
Same is mostly true for busses, and why they take longer than cars.
As to expense and fuel efficiency, a bus or passenger train still runs its route when empty . Cargo and cars don’t.
Joe j at December 20, 2019 9:34 AM
That isn't the issue with most of the routes Amtrak runs, Joe. The issue is freight lines built those rails. They own them. They get priority. And freight doesn't move very fast.
Ben at December 20, 2019 11:50 AM
"Is there a reason they can't add a passenger car to the freight trains?"
Mrs. Radwaste has two cousins who are train controllers, and they've said...
1) the same heavy utilization for freight forbids lots more passenger traffic. It isn't who owns the rails, it's that two of them on the same track makes national headlines.
2) look up the Emergency Response Guidebook. Putting passengers on a freight stack means they will be within the prohibited distance in the event of a release at all times - while the train transits every choke point on its route. Props above for the note that freight doesn't go where passengers want. "Next stop! Archer, Daniels, Midland Ammonia Depot!"
Now think about all the complete bullshit about "high-speed" trains. Proponents don't seem to remember the damned thing has to STOP a lot, but one of the things that struggle has revealed is just how hard it is to get a right-of-way where it's useful. We've abandoned thousands of miles of same who thought they'll always be able to drive, in those very areas.
Radwaste at December 20, 2019 1:19 PM
Who owns those rails is very significant Rad. They go to the ammonia depot because they were built to ship freight. In the same sense the original Houston light rail system went from the football stadium to the hospital because it was built by the government. Anyone looking to turn a profit shipping people wouldn't have done that.
Ben at December 20, 2019 1:56 PM
As I recall from earlier research, passenger service is subsidized in every country it is available. The subsidies are less in Europe and Japan, and more in the US.
I R A Darth Aggie at December 20, 2019 2:53 PM
The best part about the train is the crazy violent drunks can get kicked off mid-journey.
Try that at 30,000 feet. And post the video, wouldya, because everyone wants to see that.
Gog_Magog_Carpet_Reclaimers at December 20, 2019 4:05 PM
Before deregulation, trains were run like the post office. After dereg, the train companies discovered that a large % of their cars were simply lost--sitting somewhere on tracks unaccounted for. The computerized their network and took advantage of containers and this is how they modernized and now make money.
Europe is much denser (population-wise) so trains make more sense for passengers.
cc at December 20, 2019 5:40 PM
The UPC on your grocery products was originally developed for railroad car tracking.
And now, the Swedish navy is using bar codes to track their ships. That way, when the fleet comes into port, they can Scandinavian.
Conan the Grammarian at December 20, 2019 6:16 PM
There's a reason passenger rail doesn't exist, anywhere except theme parks, without government subsidies. Rail is efficient for freight, not for passengers.
You can pack enough freight on a rail car such that most of the mass being moved is payload, rather than vehicle. Try that with passengers, without using general anesthesia. With passenger rail, less than 10% of the mass being moved is payload.
Freight always has a ride waiting for it at its destination. Passengers don't.
Then there's the logistics of the passengers on a single rail car having 30 different destinations and having to stop at all of them, plus the places where no one is going because someone might just show up and buy a ticket, expecting to be picked up.
Businesses needing freight intentionally locate where there's rail. People generally avoid locating near railroads, and are very fickle about what destinations are popular. When people change where they want to go, bus drivers have a steering wheel to change their routes - trains require multi-billion dollar, multi-year infrastructure projects to change routes.
bw1 at December 30, 2019 5:19 PM
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