01.31.2011 1

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.

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