Don’t Subsidize Amtrak, Just Let the Free Market Work!

Amtrak

By Adam Bitely -

As the new Republican Congress debates where it will cut back spending, Amtrak is one place they could start with. If there is any example of ludicrous, wasteful government spending, Amtrak is definitely the place to look at.

To begin with, Amtrak receives most of its operational funding from the taxpayers. Cutting the subsidy and government grants to Amtrak would save over a billion dollars a year. Of course, ending a subsidy is more simply said than done.

Amtrak operates on a grotesquely large government subsidy. How much money does the Congress give to Amtrak from the taxpayers? $1.563 billion a year — a considerable sum.  And when you consider that Amtrak had $2.4 billion in revenues in 2009, it is clear that Amtrak relies solely on these subsidies and grants to operate under its current design.

Arguing for the end of a subsidy is always messy business in D.C. When one argues for a subsidy to be taken away, they are not arguing for the destruction of the business, rather, they are arguing that the government stops forcing the public to financially support that business.

Most companies operate just fine without a government subsidy. This is because those businesses provide a product or service that willing customers are willing to purchase for the price that it is being offered. Businesses that can’t find willing customers close up shop, allowing those resources to be reallocated somewhere else in the marketplace where they are better needed.

In the case of Amtrak, U.S. taxpayers are forced to fork over more than a billion and a half dollars a year to subsidize a company that would not exist under its current model otherwise. Propping up this zombie business is ludicrous, especially in a time of fiscal dire straits.

While Amtrak does serve a purpose to customers on some of its routes, a majority of the routes it runs are completely unneeded and waste countless taxpayer dollars. Amtrak does not choose to take on unprofitable business, rather, Congress mandates they do this while covering the losses with taxpayer funds.

And when someone suggests that the subsidy be cut, all of the tax-and-spend politicians rear their ugly heads. In most cases, the argument goes along the lines of rail transportation being an American tradition. But what these central planning politicians fail to recognize is that those that propose to no longer waste taxpayer dollars on Amtrak are not advocating the end of rail transportation. If there are willing customers for rail transit, a business to provide such transit will emerge naturally and without the aid of taxpayers.

With the new Congress in place, this senseless waste of money may soon come to an end if Rep. Jim Jordan has his way. Inside of his proposed federal budget cuts, he has called for the elimination of the Amtrak subsidy. If Congress adopts this or any similar measure, Amtrak will be forced to find other ways to cover the loss of revenue or shut down.

In a true free market economy, the invisible hand guides willing customers and their capital in the direction that is best. In the case of Amtrak, this has not happened. Willing customers have indicated that they can better use their money elsewhere. Our government, however, has chosen otherwise and spends money to keep bad business alive.

If the politicians in D.C. truly believe in the free market as they so frequently profess through their rhetoric, they will end the subsidy to Amtrak.

Adam Bitely is the Editor-in-Chief of NetRightDaily.com. You can follow Adam on Twitter at @AdamBitely.

This article has 17 comments
  • Ken Whitney 31.01.2011 1:11 PM

    If Congress should eliminate the ‘subsidy’ for passenger rail, then – by all mean – Congress should also eliminate the ‘investment’ in highway spending. Amtrak’s farebox recovery ratio is about 76%. User fees for roads generally cover in the neighborhood of 60%. So … as a non-car-owner, my property taxes and income taxes are spent on highways, even though I never use them. Eliminating tax breaks for billionaires might make a little more sense than cutting a component of our transportation system.

  • Adam Bitely 31.01.2011 1:17 PM

    @Ken: No one should be forced to give their money to a third party that will “better” allocate their resources. You should only spend money on what you consume/use/want. But once you argue for elimination of tax breaks for a certain sect of society, I have to disagree. The tax code should never be used as a tool to take ones money. Instead, government shouldn’t be in the business of providing services that private companies can offer without having to forcefully extract your money. Private highways are nice, and so is private rail transit.

  • Evan Stair 31.01.2011 3:06 PM

    Eliminate the subsidy… like many other economic philosophies it looks good on paper. It is the cry of the Tea Party but only when it suits the aims of corporations such as Koch Industries that funded the beginning of the new Libertarian movement in 2004 to the tune of $110 million according to some accounts. Yes, $1.5 billion is a lot of money, but so is the $40 billion to $60 billion spent annually on federal matching road programs and the $14 billion spent on aviation subsidies annually. When will the proposition be to place a toll booth at the end of our driveways so that true costs can be covered by user fees?

  • Harold Perrin 31.01.2011 6:39 PM

    Sure, it’s nice to live in Fantasyland, where the free market prevails. How many private businesses stepped up to build highways, Adam? None.

    Do some homework before posting. The nation’s road system–the *entire* system, not just cherry-picked pieces–only recovered 51 percent of its costs from direct revenue. Amtrak does far better.

    And explain if you would–if you can–how spending on highways and airports is considered “investment”, while spending on Amtrak is a “subsidy”.

    The real reason why the extreme right hates Amtrak and other rail transit is that these services operate for the public benefit, not to stuff profits into Republican pockets.

  • Mark 01.02.2011 7:59 AM

    Good god Adam. Did you have a slow news day or what?.

    To fixate on a paltry S1.7 billion when the elimination of that wouldn’t make 1 iota of difference to the national economic complexion except injure transportation.

    You know I’ve been reading this kind of insanity from reporters year-after-year-after-year. It’s always the same diatribe. It’s also pretty stupid, and it’s always the same result. Amtrak isn’t going away. Why? because the $1.7 billion IS A BARGAIN for a national rail system.

    Hey, take a minute to think about FAA-Air traffic control: $14 billion annually to an agency that is in effect a subsidy to every “private” airline (and I said “private” as in so-called free-enterprise)sucking on the taxpayer nipple. FAA’s annual budget is actually about $28 billion all told.

    And don’t forget NASA, another $15 billion annually at the cost of two shuttle crews.

    Adam, everyone knows you gotta keep writing to stay employed, so fixate on FAA and NASA. These two can provide you with your next two subjects to entertain the tea bagger sycophants. Those folks are an easy mark, with the veins popping out of their forehead over every trivial issue de jour. Highway subsidy is another topic you might consider. But when you do the complex math of the trillions spent, and the graft of the construction racket that undergirds it it may be beyond your capacity to convey it to the small minded readers who drink you Kool-aid.

  • Mark 02.02.2011 7:49 AM

    Don’t Subsidize Airlines, Just Let the Free Market Work!

    Don’t Subsidize Highways, Just Let the Free Market Work!

    Don’t Subsidize NASA, Just Let the Private Sector Have A Chance To Explore and Develop Commerce In Space!

    Don’t Subsidize the Oil Industry, They Do Just Fine on Their Own!

    Get the Corps of Engineers Out Of The Terraforming and River Channel Diversion Business, Let The Business’s That Benefit Collectively Pay For These Improvements!

  • Chrismullinaxcm 15.08.2011 4:48 PM

    Your opinion of Amtrak is that of a foolish conservative. Rail is one of the most efficient forms of travel and also saves wear and tear on our highways, by taking cars off of them. Amtrak’s funding is a drop in the bucket: the US government spent 38 billion on roads, 20 billion on planes, and less than a billion on rail. Even so Amtrak is still more efficient in recovering it’s cost, by up to 70%, thru fares. They don’t charge you for highway, that is unless it’s tax (which is an anti-republican stance), so how much do you think they make up?

    With this said, let me ask you this…would you vote to not fund the nation’s highways?

    If you or any of your idiot republican buddies would like to make more things up, be sure to let me know so I can debunk them (I heard somewhere that Obama’s not from here and that corporations are people, maybe I can start there…)

  • Chrismullinaxcm 15.08.2011 4:48 PM

    Your opinion of Amtrak is that of a foolish conservative. Rail is one of the most efficient forms of travel and also saves wear and tear on our highways, by taking cars off of them. Amtrak’s funding is a drop in the bucket: the US government spent 38 billion on roads, 20 billion on planes, and less than a billion on rail. Even so Amtrak is still more efficient in recovering it’s cost, by up to 70%, thru fares. They don’t charge you for highway, that is unless it’s tax (which is an anti-republican stance), so how much do you think they make up?

    With this said, let me ask you this…would you vote to not fund the nation’s highways?

    If you or any of your idiot republican buddies would like to make more things up, be sure to let me know so I can debunk them (I heard somewhere that Obama’s not from here and that corporations are people, maybe I can start there…)

  • Chrismullinaxcm 15.08.2011 4:48 PM

    Your opinion of Amtrak is that of a foolish conservative. Rail is one of the most efficient forms of travel and also saves wear and tear on our highways, by taking cars off of them. Amtrak’s funding is a drop in the bucket: the US government spent 38 billion on roads, 20 billion on planes, and less than a billion on rail. Even so Amtrak is still more efficient in recovering it’s cost, by up to 70%, thru fares. They don’t charge you for highway, that is unless it’s tax (which is an anti-republican stance), so how much do you think they make up?

    With this said, let me ask you this…would you vote to not fund the nation’s highways?

    If you or any of your idiot republican buddies would like to make more things up, be sure to let me know so I can debunk them (I heard somewhere that Obama’s not from here and that corporations are people, maybe I can start there…)

  • Chrismullinaxcm 15.08.2011 4:48 PM

    Your opinion of Amtrak is that of a foolish conservative. Rail is one of the most efficient forms of travel and also saves wear and tear on our highways, by taking cars off of them. Amtrak’s funding is a drop in the bucket: the US government spent 38 billion on roads, 20 billion on planes, and less than a billion on rail. Even so Amtrak is still more efficient in recovering it’s cost, by up to 70%, thru fares. They don’t charge you for highway, that is unless it’s tax (which is an anti-republican stance), so how much do you think they make up?

    With this said, let me ask you this…would you vote to not fund the nation’s highways?

    If you or any of your idiot republican buddies would like to make more things up, be sure to let me know so I can debunk them (I heard somewhere that Obama’s not from here and that corporations are people, maybe I can start there…)

  • Chrismullinaxcm 15.08.2011 4:48 PM

    Your opinion of Amtrak is that of a foolish conservative. Rail is one of the most efficient forms of travel and also saves wear and tear on our highways, by taking cars off of them. Amtrak’s funding is a drop in the bucket: the US government spent 38 billion on roads, 20 billion on planes, and less than a billion on rail. Even so Amtrak is still more efficient in recovering it’s cost, by up to 70%, thru fares. They don’t charge you for highway, that is unless it’s tax (which is an anti-republican stance), so how much do you think they make up?

    With this said, let me ask you this…would you vote to not fund the nation’s highways?

    If you or any of your idiot republican buddies would like to make more things up, be sure to let me know so I can debunk them (I heard somewhere that Obama’s not from here and that corporations are people, maybe I can start there…)

  • Chris Mullinax 27.09.2012 10:29 AM

    Amtrak was formed because private rail could not compete against heavily subsidized roads and airlines. If you don’t want to fund Amtrak, then you shouldn’t want to fund roads or airlines. If you don’t want to drive on public roads, ask yourself: why didn’t the free market create the interstate before Eisenhower (R) did? If you still don’t want to use these roads, then don’t drive.

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