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Bruce Chapman, President Discovery Institute.

This article showed up in Friday's (May 2, 1997) Seattle Post Intelligencer.

This time, the national passenger rail system really is headed for a train wreck. So badly in debt is the public corporation that the General Accounting Office and a host of other observers see Amtrak as functionally bankrupt.

Congress and the Clinton Administration have been warned repeatedly of the need to plan ahead for the kind of Privatization that is being tried in other parts of the world. But they have opted instead for inertia, politicization of routes and short-term financial fixes. Amtrak has a sincere and able president, Tom Downs, but he has an impossible job.

Annual subsidies are running about $1 billion, yet Amtrak is so loaded with losses and debt service that at least one expert on the staff of the House of Representatives rail subcommittee thinks the system may run out of cash by this fall.

Earlier this week, in a case before the federal Surface Transportation Board, the Boston and Maine Railroad filed papers to stop Amtrak's plans to run a new service into Maine. The Boston and Maine contends that Amtrak's promise of indemnification in case of accidents on the freight line's tracks cannot be trusted since Amtrak is effectively insolvent.

That is the sort of story that is bound to attract the interest of Amtrak's many creditors, and also of the other private freight railroads around the country that are obliged by law to carry Amtrak passenger trains over their tracks. Apparently, it has begun to dawn on the freight lines that their current mandatory subsidies to Amtrak in the rent of tracks and the provision of cut-rate priority service could be vastly increased in some Amtrak rescue effort that lies ahead.

Suddenly, the skepticism (bordering on disdain) that most of the freight lines feel toward inter-city rail in general is becoming somewhat closer to worry about that they will be targeted to bear much of the cost of a bailout.

The obvious and overt option to Amtrak's going bankrupt and stopping service is the current proposal by the administration to raise (Internet Editor's Note: False, it is a diversion of the existing gas tax) the gas tax by a half cent to pay for inter-city rail support. But even if that legislative action is taken - and it's not all certain - bankruptcy may be forestalled by only a few months. That's where the hidden taxes on freight trains come in.

Indeed, former New Jersey Gov. James Florio and Carl Van Horn of Rutger's University are urging a new blue ribbon congressional advisory committee to create additional subsidies to Amtrak from the private freight railroads and the electric utilities.

In a recent memorandum, Florio and Van Horn suggest that Amtrak be allowed to go into the freight business itself, using its government-backed authority to win concessions from the freight lines that a normal competitor could not obtain.

They also suggest that Amtrak be allowed to sell electricity and effectively compete with electric utilities. Normally, such ideas would be considered outrageous, but in a capital that fears voter wrath from either more direct taxes or expanded budget deficits, the plan may attract support, especially as the Amtrak crisis worsens.

What is not proposed by Florio or Van Horn, is any curbing of the labor laws that burden Amtrak financially and account for many of its problems. For example, if an Amtrak worker is declared surplus or is assigned to a job more than 60 miles from his home, he is awarded a separation payment equal to six years of full pay and benefits. Taxpayer groups are bound to wonder how Congress can continue wringing its hands over inefficiencies in Amtrak Management when Congress itself - including some supposed conservatives - refuse to reform such ancient featherbedding practices.

Paradoxically, it is exactly the expensive labor provisions of the law governing Amtrak that will make it hard for the government to let Amtrak cease operations. The tab for layoffs would amount to $5 billion, and while the government technically could not be held responsible, there would be tremendous pressure to step in if Amtrak defaulted. A bailout that permitted continued operations would be far less costly.

But the least costly option may be the one the government has avoided: privatization.

Alternative approaches include opening the service to bidders, with a built-in subsidy for a transition period, or restructuring the current Amtrak into a private company - freeing it from antiquated labor requirements and political meddling over routes but also liberating the freight railroads from hidden subsidies. Management and workers would be given stock in the new company, and with it the motivation as well as the means to economize. States, as now, could help maintain marginal routes over their territory, but only if the private railroad found it feasible to make a profit there.

Why is it that government so often refuses to consider the free-market answer until all other options are found defective? Today, the issue is inter-city rail, a means of transportation in our increasingly urban country that should have a promising future as well as a glorious past.

But it seems a crisis will be necessary to force consideration of a private system attuned to our times and economy. For better or worse, that crisis is on its way.

• John Hutchings Response - Seattle PI
• Lynda Milasich Response - Seattle PI

Bruce Chapmans's take on passenger rail is interesting, if incomplete (May 2). As usual, he espouses the virtues of the so-called free-market forces to get us out of yet another government-caused jam. The problem is he forgets or ignores some pretty basic facts. To wit: There is no such thing as a free-market. A look back at the past 20 years in American business reveals the emergence of a planned economy. Planned, that is, by corporations, not by the government.

The government did not go to the corporations and beg them to take their manufacturing operations off-shore. It was, in fact the other way around. The plan is/was to cut labor costs, not to keep consumer prices low. The real reasons was to increase the value of their shares. SO, the planned economy of the corporations is not to benefit consumers, as we are led to believe, but to line the pockets of the share owners and their surrogates, the CEO's.

Passenger rail service was privately run for years, and their response was to abandon it for the more profitable freight business in the 60's. The private railroads were allowed to quit carrying passengers after they showed, to the government's satisfaction, that it was a money-losing proposition.

It became a losing proposition only after the railroads themselves began reducing the level of service on the passenger trains and driving passengers away.

The situation was further exacerbated by the major automakers as they bought up one interurban rail system after another, dismantled them and forced people into cars.

Chapman's call for returning to those failed policies is a mockery of logic. It is especially disingenuous when you consider the government subsidies enjoyed by the auto makers in the form of gas taxes to build and maintain highways for the cars to travel, the fuel-tax breaks enjoyed by the airlines, andy number of tax-breaks for freight carriers, and further, governments in Europe subsidizing their extremely successful passenger trains.

Bruce Chapman's inaccurate think-tank babble concerning Amtrak deserves a response. The thrust of his column is twofold: Amtrak should be privatized and most of the financial woes of Amtrak are the fault of labor.

There is no question that passenger rail service across America is not profitable, but is privatization a partial answer? That was tried and failed: hence Amtrak.

Chapman fears that the private freight companies will be forced to subsidize passenger service. It matters little that the same for-profit freight companies have forced passenger service to a side track, literally and figuratively, while they run on rails bedded in property for which they never paid, charging Amtrak a track usage.

Chapman complains of outrageous labor deals. Train attendants work up to 18 hours straight on six-day trips away from home, with no breaks, followed by five hours sleep. No overtime is paid until they've worked 185 hours in a month. Now, that's a sweet labor deal.

And such a retirement program. Pay into a system in lieu of Social Security at a higher rate with no vesting for 10 years. Such a deal. As for his hypothetical buyout, show us where anyone has ever been awarded such a buyout. There, too, labor gets shafted by ever-changing rules of eligibility.

Let's talk a little about the subsidies given airlines an the myriad of general-fund money given to the construction of U.S. freeways.

Note: Lynda Milasich is an Amtrak employee, On-Board Services based in Seattle.

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