This Week at Amtrak

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From the United Rail Passenger Alliance:

This Week at Amtrak, Vol. 8 No. 15
Volume 8, Number 15

From the Editors…

As sands through the hourglass, so are the history and future of passenger rail in America; unrelenting.

The Year Is…

“[A]s we all know, events must run their course before becoming history, so that all true history exists only by virtue of its conclusion, and begins its historical career from there.” - Anthropologist Germaine Tillion

Contemporary thinking: The belief in that which is, has always been; ergo, shall always be. Any historian worth his or her salt knows that history does not repeat itself, but does rhyme. The way it is is not the way it has always been, nor can we expect things to remain the same perpetually. Only the most indolent of our citizenry is unaware of the rapidly shifting social order now dawning on the national landscape. Therefore, let us return to where we have been in an effort to determine where we are going.*

*This newsletter contains forward-looking statements within the discretion of the prognostic abilities of the writers. Our forward-looking statements involve expectations, projections, goals, forecasts, assumptions, history, and flat-out guesses. The writers may be spot-on or completely out to lunch. Whatever the case, our readers may rest assured we will be there to document it.

The Year Is 1970

Just 245 days after man landed on the moon, the California Zephyr completed its final run on March 22, 1970. The California Zephyr was considered to be the last word in overland travel in America; perhaps the finest conveyance in the world, but now it was gone after a mere 21-year run. For most Americans this was just a passing of the torch, no different from the demise of the stagecoach or the interstate canal network, for the year is 1970; the Interstate Highway System now makes possible national travel on your schedule. Gasoline is a national-average 36 cents per gallon ($2.09 in 2011 dollars). Jobs are plentiful and so are automobiles. The only real limiting factor of mobility is one’s endurance.

The long road to this reality has been told to the point of being hackneyed. Following World War II, the nation became flush with largess by virtue of its infrastructure remaining intact. Even though the national treasury was empty as a result of the conflict, billions of dollars were “invented” to send to Europe and Japan to rebuild their societies. As a result, those billions of dollars came back to the United States in the form of orders for the material and machines necessary to rebuild. The American worker was a benefactor of this circular cash, giving the average citizen a buying potential unheard of in previous generations. It was the Federal Government which became the primary beneficiary. All of this national income resulted in higher tax revenues, and politicians were more than eager to spend it. The American population was now on a much more level plane than at any other time in human history. With no end in sight to our newfound avarice, there came experiments in socialization. One of these was the Interstate Highway System. While this was pleasing to the American public, it was a millstone around the neck of the American railroads.

With billions of dollars going to highways and roads during the 1950s and 1960s, railroads politicked and lobbied for some sort of Federal aid. They rightfully eschewed nationalization, but did hope for some funds to invest as a counter to their subsidized competition. Any dreams of subtle aid were dashed on June 21, 1970 with the catastrophic bankruptcy of the Penn Central (Transportation Company). With the proverbial lid now blown off the true railroad condition, it became apparent to all that the situation was dire; no minor injection of public funds could rectify three decades of decline.

Even before the wreck of the Penn Central, another experiment in socialization had started public investment in the Northeast Corridor. In the early 1960s, the cause of improving passenger railroading in the Northeast was championed by Rhode Island Senator Claiborne Pell. He had no small plans:

“The encouraging news which I bring you today is that there is a strong current of opinion within our federal government that we should go forward with the kind of development which the railroads themselves have not been able to do…there is now a school of opinion that if we are to promote such a development at all, we should not be satisfied with half-way measures limited to existing technology.” – Railway Age, October 12, 1964

In keeping with the spirit of the times, the Senator sought to spend the national largess instead of answering the very basic question, Why are the railroads, themselves, not able to make such investment?

By 1970, millions of public dollars had been invested in the Northeast Corridor. With Penn Central now a financial basket case, the Federal Government saw its investment in jeopardy. As early as 1969 there was consideration inside the Beltway as to some Federal involvement in passenger railroading. With the true situation of America’s railroads now making headlines, efforts intensified, and President Nixon signed what was then known as the Railpax legislation into law on October 30, 1970. The main reason for doing so was to forestall any more Penn Centrals around the country. Railpax was renamed Amtrak, and began direct operation of a much-rationalized passenger rail network on May 1, 1971. But with other forms of nationalized socialism taking hold around the country, a little more would not hurt, right?

The Year Is 2011

Amtrak has been a reality for 40 years. If you do not believe it, just ask it: http://www.amtrak40th.com/. Amtrak has published a book, a video, and has even commissioned a train to publicize its four decades’ longevity. It has been no small task, and much blood, sweat, and tears have been shed in the process. Even so, there are many larger questions, vastly larger than Amtrak itself, now looming on the horizon.

The seemingly inexhaustible largess of the latter half of the 20th century is gone. The age of avarice is over; the era of austerity now grips us. The question of “The National Debt,” and exactly who is responsible for it, is now a subject for debate in every corner store and boardroom. Ultimately, this is all a referendum on what role government plays and what size it needs to be in order to fulfill that role. Everything is out on the table. It is only a matter of time before nationalized passenger rail is under the microscope.

Meanwhile, America’s real railroads are no longer financial basket cases. Quite the contrary; railroads are the very model of healthy business. Again, this did not come about without much blood, sweat, and tears. The Staggers Rail Act of 1980 effectively ended a bloated regulatory bureaucracy that lasted about three decades beyond its actual usefulness. Moreover, through the rest of the 1980s and early 1990s, the railroads achieved a truce of sorts with their labor organizations, resulting in a drastically-rationalized workforce. Even so, railroads hold onto their traditional role of biding their time and never forgetting the path which brought them to where they are. Eminent veteran journalist Wes Vernon, when answering the question, Freight Rail: What Recession? notes:

“Highway congestion and skyrocketing gas prices strengthen the logic of converting highway-only freight traffic to intermodal. Of the 14 million domestic truckloads moving 550 miles or more each year within the eastern half of the United States, 35 percent-or 5.1 million-have shifted to the mix of rail and highway. That means about nine million truckloads are ripe for converting to intermodal…

“What that means, in practical terms, is that the trains will likely be shipping more consumer products, from appliances to toys. Heretofore, that had been largely the predominant province of the trucks, while the freight trains primarily focused on bulk commodities such as coal and grain.” - Railfan & Railroad, August 2011

The inherent efficiency of a railroad, the thermodynamic efficiency which propelled them to success from their genesis, is once again making them the transportation mode of the future. Unfortunately, such success always comes with its detractors. Special interest groups, specifically utilities reliant upon railroads for shipment of fuels, are actively looking to re-regulate railroads for their own financial relief. The utilities, who answer to multiple state or local agencies for the setting of consumer rates, believe it easier to mandate freight rates down from the Federal level rather than push politically-unpopular higher consumer rates at the local level. Such is the result of socialization of consumer electric rates. Thus far, the railroads have been able to resist such maneuvers to set them back to the era of needless burdensome regulation. But as the era of public cross-subsidization erodes, the search for new sources of subsidy will only intensify. The railroad re-regulation battle is barely out of round one.

Meanwhile, Amtrak touts the number of riders it attracts year over year. It is expected that Amtrak will carry over 30 million passengers in 2011. Gasoline has averaged $3.50 to over $4 per gallon so far this year; for all practical purposes, this is about double the inflation-corrected price of 1970. Even so, Amtrak is a socialized government animal which looks more for “rider-voters” than customers. Even during the days of Senator Pell it was appreciated that the high density population in the Northeast would make subsidizing passenger rail politically palatable. Consequently, Amtrak has concentrated more on achieving ever-higher numbers of rider-voters than it has on efficient business acumen.

Amtrak’s formula is very simple: High-density, short-haul/low-revenue corridor trains are touted as the solution for congestion; these attract the highest number of rider-voters/constituent-subsidy. The dilution of long-distance/high-revenue trains by lower-than-historical coach fares destroys any potential meaningful revenue, but is touted as the thread of a “national network.” If coach fares were raised in line with what it costs to operate them, and the number of high-revenue cars (sleeping cars) were increased, these trains would have a chance of at least breaking even. But sleepers carry fewer passengers than coaches, thus reducing the number of rider-voters. Also, if this happened, then these trains might be turned over to private operators, and Amtrak would lose its national constituency of rider-voters. Such is the mentality of a government agency, to wit: “We have to protect our phoney baloney jobs here, gentlemen!” Governor William J. Le Petomane – Blazing Saddles.

The Year Is 2020

It has been an arduous decade; transition from a guns and butter economy to a guns or butter economy is bittersweet, at best. The American experiment of socialization has ended. The United States was born in defiance of “taxation without representation.” The belief that taxes are a necessary evil defines the American ethos; they are evil nonetheless, and as such, should always be minimized. But the largess of the latter half of the 20th century was too tempting to pass by. When said largess ended, we attempted to fill the void by massive borrowing and hoping, praying for another round of national benevolence which never came. Now the bill has come due.

Life in 2020 is much like 1920, if not in form then certainly in function. The public does not travel as much or as far as during the “good times.” Due to expanding worldwide demand, the price of transportation fuel is now well over four times the rate of inflation. Efficiency is replacing convenience. The Interstate Highway System is being rationalized in the same manner as the railroads were during the 1970s and 1980s. Automobiles and airplanes are returning to their original positions, as toys for the genuinely rich. Just as the American public adapted to the era of cheap and abundant fuel, so they have adjusted to the era of expensive and scarce fuel seen during the early days of the Industrial Revolution. The technological salvation everyone was counting on did not pan out. Technology uses energy; it does not create energy.

It is no longer 1970. No one is trying to save the passenger train from the guilt of excess. It is no longer 2011. No one is trying to expand the passenger train solely on the basis of an imperious immediacy of political interest. Passenger rail has rebounded due to its inherent efficiency, and it is back in the hands of private industry. Thus, trains are running where they should be, and not where they cannot be justified.

Back to the Present

Saving the passenger train from the oblivion of low ridership is a battle that has been fought, won, and memorialized. Unfortunately, many passenger rail advocates are still fighting the battle to save the California Zephyr from the landscape of 1970. Yet even in today’s tight budget debates, no one of any authority is talking about discontinuing passenger trains. Quite to the contrary:

“It is time to deregulate America’s passenger rail system, and give intercity passenger rail the same opportunity for success that the freight rail and commercial truck industry have benefited from.

“We must look for more effective and innovative approaches to providing modern and efficient passenger rail service by focusing on projects that make sense, leveraging private sector investment, increasing competition, and opening the door to public-private partnerships.” – U.S. Representative Bill Shuster, Chairman of the Railroads, Pipelines and Hazardous Materials Subcommittee

It was not too long ago when the call to “reform Amtrak” could be heard around Washington. To those who prefer the status quo, the response was, “Define reform; what do you mean by reform?” Now the focus is shifting from reform toward an orderly dissolving of Amtrak.

For older or retired railroaders, Amtrak’s only reason for existence is an “irrational love of trains that would have us run almost empty trains over long distances simply so a foamer can stand out there and watch ‘em.” Perhaps such reasoning was justified four decades ago. Today it is well documented that those trains, especially those long distance trains, run full. They are sold out weeks before departure. This has not gone unnoticed by the private sector; higher demand means higher revenue potential. Higher revenue should translate into profitability or at the very least break-even. Amtrak, however, as a political animal focuses on “rider-voters” rather than passenger miles. Consequently, it has become the greatest of ironies that the passenger train, which was purported to be saved by Amtrak, now has to be saved from Amtrak.

Also, Amtrak has become an important conduit for tax dollars to flow into the Railroad Retirement Board (RRB) pension system (of which all railroaders are members) instead of Social Security. Many of those currently employed by the railroads, as well as the retirees, fear that if Amtrak is fundamentally changed then an adverse effect on railroad retirement will occur. What is not realized is that any new passenger railroad venture established, which may augment or replace Amtrak service, will also have to be under the RRB; eventually making the system stronger, not weaker. There is also the possibility Congress may find another funding conduit for the RRB, other than through in-and-out entries in Amtrak’s corporate checkbook.

No, history does not repeat itself, but it does rhyme. The “good roads” crusades of the 1920s and Interstate Highway program of the 1950s happened after forgetting the lessons of the National Road debacle during the first half of the early 19th century. Now the lessons of railroad regulation/deregulation have been forgotten by many, and the results are negative.

What really is our rail future? It is not ours to see. But whatever happens, we will be writing about it.