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National Journal Blog – Privatization Will Bankrupt Amtrak

By Admin

[As posted by Ed Wytkind on National Journal’s Transportation Experts Blog]

To the question of whether or not this is the same old debate, the answer is yes.

The purpose of running a national passenger rail system isn’t to enrich Wall Street and wealthy investors by handing them one of the nation’s most prized and complex surface transportation corridors, the Northeast Corridor (NEC). This proposed privatization experiment does exactly that – and it will bankrupt Amtrak and put daily commuter rail service at risk on the East Coast and around the country.

The proposal offered by Reps. Mica and Shuster literally ends Amtrak’s operating rights on the NEC, essentially seizes Amtrak’s assets (a directive that has launched a robust “takings clause” debate) and puts Amtrak service at risk everywhere else. What do the 700,000 people who travel on the Northeast Corridor every day get from this scheme? Uncertainty and chaos. And what do American taxpayers get in return after decades of investment? Nothing except for wealthy investors looking to make a buck.

We support boosting the role of the private sector in our rail transportation system but we are opposed to privatizing and breaking up Amtrak, especially at a time that the company has launched a new strategic vision that embraces a partnership with the private sector in the hope of bringing 220 M.P.H. service to the NEC.

The Mica-Shuster proposal is a solution in search of a problem. Amtrak is doing better today than at any time in its history. Acela and all NEC services are booming, and overall demand for more train travel across America is off the charts, with ridership up 36 percent since 2000. The only thing missing is the will in Congress to fund a long-term vision.

Privatization is hardly a new idea. It has been discredited when attempted in other parts of the world, most notably in Great Britain where fares went up and service and safety deteriorated. In the end, the U.K. government doled out billions to untangle the mess.

The proponents of privatization repeatedly have pointed to a different U.K. privatization example: Virgin Trains. They present wonderful statistics about Virgin Trains but conveniently leave out a few key facts. The truth is that Richard Branson-owned Virgin Trains has received – and continues to receive – large public subsidies. The system as a whole became far less efficient after privatization with a recent study showing that the privatized UK system is now 35 percent more expensive to operate than the state-owned European railways. We’ve even heard that Virgin is repaying the government. Sure sounds great. But since 2002, Virgin has received 2.6 billion dollars in direct public subsidies. It’s true that in 2008-09 it paid back 81 million dollars. But a year later it was again receiving more than it repaid. Overall, between 1996 and 2009, revenues from the UK’s privatized system more than doubled but during the same period the public subsidy grew a whopping 500 percent. Virgin Trains is hardly an example of unleashing the power of the private sector – it’s an example of public spending enriching private investors.

Despite claims that the proposed legislation takes care of workers and holds harmless Amtrak’s employees, this plan guarantees the workers who lose their jobs nothing except a weak “hiring preference” that only gives them a chance to be considered for a job. Nothing else. They also lose their bargaining rights and thus the protections in their contracts. And coverage under the Railroad Retirement pension, unemployment and disability system is taken away. By removing thousands of workers from Railroad Retirement the Mica-Shuster proposal could place the entire pension system at risk and along the way impose enormous tax increases on the participating employers including the private freight railroads. Under the Mica-Shuster plan, by 2033, the tax rates for the Railroad Retirement program would rise to a staggering 27 percent.

Make no mistake, this is not a serious plan to modernize our high speed rail system – by design, it is a plan to destroy Amtrak.

Congress should reject this scheme. It should instead focus on completion of a long-term surface transportation bill that embraces the role of Amtrak as the centerpiece of high speed rail operations. It should put to rest the idea that the NEC and all its complexities should be privatized, and provide stable and long-term federal policy and funding for the future of our transportation system.