The American Interest
Analysis by Walter Russell Mead & Staff
Amtrak Wants to Play but Will Anybody Pay?

Not to be outdone by California, Amtrak wants to join the high-speed rail club: On Monday Amtrak announced a $151 billion plan to develop a 220 mile-an-hour train network through the Northeast Corridor, connecting travelers between Boston and Washington, DC, in a little more than three hours. That is almost as long as it currently takes to get from just New York to DC.

$151 billion. That’s quite a lot for the government-owned rail company. Note that the high-speed network isn’t expected to be completed until 2040, by which time Via Meadia hopes to be traveling through the northeast in flying cars— or at least self-driving ones.

Here’s a hint for Amtrak: Spend an infinitesimal fraction of $151 billion to make the horrible WiFi on your trains better (and maybe the seats a little nicer). If the little things get better, we bet people wouldn’t actually care all that much about the length of the journey. Certainly they wouldn’t care enough to spend $151 billion.

Published on July 10, 2012 12:00 pm
  • Kris

    “If the little things get better, we bet people wouldn’t actually care all that much about the length of the journey. Certainly they wouldn’t care enough to spend $151 billion.”

    Ah, now you are catching on! It must get worse before it gets better, Comrade.

  • Kevin

    Why don’t they just pile the money up and burn it? It would be cheaper in the long run. 151 billion at this stage means at least 1/2 a trillion with overruns. Then the ever increasing operating subsidies will need to be added in. This is just lunacy.

  • An

    This train fetish seems to be everywhere. Among the many things that sunk Greece, is 600 million euro payroll for a train system that just brings in revenues of just 100 million euros. Amtrak has never turned a profit in its history. They lost $1 billion last year AFTER congress gave them another $1.42 billion in subsidies. I doubt they ever will with this monstrosity.

    High speed trains are a wealth transfer for rich. Rent seeking political backers are enriched but the poor and middle class suffer. In my state of CA, the politicians are touting $100 tickets from LA to SF. Fora family of 4 who wishes to visit the other end of line, that’s $400. Most middle class families will drive as that solution is more economical.

  • Jacksonian Libertarian

    The only High speed train line in the world that operates in the black, is the Lyon-Paris line, every other one has to be taxpayer supported.

  • Corlyss

    Wow! Current ridership on the DC-NY really justifies THAT idea!

    We’ve GOT to get rid of this administration in Nov. without fail! There’s nothing more dangerous or expensive than industrious, ambitious stupidity.

  • Gene

    Train passengers in a hurry between DC and NYC, for instance, already pay a hefty price premium for riding the Acela, as opposed to the regular-speed Northeast Regional. Meaning that people on vacation take the slower train, save 50-100 percent, and leave the Acela to whom? Business travelers and more affluent vacationers.

    In 2040, how many business travelers will there be? A fraction of the current percentage, I’m sure, due to technology that limits the need for travel. So what is the market for this alleged high-speed train?

    Unbelievable. Please tell me this is just a scheme drawn up by a few ambitious Amtrak employees to be noticed as a boost for their own career prospects.

  • Jim.

    Metro areas in this country are far too built up to allow inexpensive purchase of right-of-way. Contrast that with America in the age of the Transcontinental… land was so cheap the government gave it away to the railroads.

    As well s being unaffordable, high-speed rail is also tremendously undemocratic. Only people whose homes are near the terminals will benefit. Everywhere else, land will be blocked off from productive use — worse than blocked off, converted from use that is productive for the locals — for the benefit of the few who live near the station. This is why voters and municipalities on the San Fransisco peninsula, from Burlingame to San Jose, are vehemently opposed to this expropriation.

    To make the train useful to them, it would have to stop there… at which point it stops being high-speed.

    Cars are far more useful for passenger transport. You start where you want to start, you stop where you want to stop. That’s why we have them.

  • WigWag

    I have no idea whether a true high speed train on Amtrak’s Northeast Corridor is a good idea or a bad idea. I do know that the Acelas, which I ride quite often, between New York and Boston and New York and Washington, are typically full to capacity even though they run hourly during the early morning to early evening.

    On occasion I also take the Delta Shuttle between these locations. U.S. Air used to fly shuttle flights on the New York to Boston/Washington, D.C. route but the U.S. Air Shuttle was forced out of business by the success of the Acela.

    It seems that few riders share Professor Mead’s frustration with the quality of the Wi-Fi on the Acela; or, if they are dissatisfied. it’s not enough of a problem to prevent the trains from departing full.

    By the way, on the Acela there is no charge for the Wi-Fi. You can use Wi-Fi on the Delta Shuttle for $15.00 which seems like alot considering the flight takes an hour (unless you sit on the runway for 60-90 minutes which frequently happens, especially at La Guardia. Of course sitting on the tarmac you are not allowed to use any device with an off/on switch which makes using Wi-Fi impossible anyway.)

    While I have no idea whether a bullet train on the Northeast Corridor is a waste of money; the truth is, neither does Professor Mead, the youngsters who intern for him, or the people who comment on his blog.

    The exact same chorus of naysayers was saying exactly the same things when the Erie Canal was built, when the New York City subways were constructed, when the TVA extended rural electrification to much of the backwards south or when the interstate highway system was built.

    Of course the naysayers were wrong in each and every one of those cases. When it comes to a bullet train, they might be wrong or they might be right.

    What they need is a little more modesty about their powers of prediction. Professor Mead reminds me of Governor Brown of California; just as sure as Brown is that high speed rail is the ticket to a prosperous future for California, Mead is certain that it’s a boondoggle.

    It must be wonderful to have such confidence in the miraculous power of your own prescience.

  • Eurydice

    Wow, the spin on this article is worthy of The Daily Beast. This isn’t a new plan – just an amalgam of two earlier ones which include upgrades and repairs to the existing system (maybe even the seats and WiFi). Also, according to the article you’ve “summarized”, Amtrak itself acknowledges there’s no clear way to fund it and federal transportation officials are cool to the idea.

    I don’t take the Acela, like WigWag, but I used to take the slower version – and I always wished they’d spend a little more money making the restrooms last unclogged through an entire trip from DC to Boston.

  • An

    @Wigwag

    High Speed trains are not in the same class as general purpose development. Our Interstate Highway System was an Eisenhower Administration project that had bipartisan support. Our railroad system in the 19th century was supported by strong majorities in both parties. Those systems filled a strategic need for the country and there was a clear cost/benefit analysis that showed the proposed system was better than anything we had in place, or proposed. Also those transportation systems were built in a timely fashion, and was mostly on budget. I’m not saying they were perfect, Congress needs to ability to graft, but they were by and large supported across the political spectrum.

    High speed trains have lost money everywhere, on every continent. There is not one single high speed rail system that has met its original stated goals, much less make money.

    In a country with artificially high gas prices, high road tolls, and among the world’s highest population density; Japan should have been the ideal environment for a working high speed rail system. For 25 years Japan borrowed money to build an 800 mile long coastal rail line that served a population of 75 million people. Japan’s rail debt was so bad that national government was forced into a massive bailout. Japanese taxpayers had to payoff roughly 24 trillion yen, equal to $300 billion dollars. The Keynesian nature of Japan’s economic policy meant that government was already deficit spending, so the $300 billion dollars in losses were added to the already enormous national debt.

    Unfortunately Japan is not alone. Smaller systems built in Taiwan, France, and England incurred billions of dollars in losses that ultimately picked up by the taxpayer.

    Wigwag, what’s makes conservatives angry about high speed rail is not that it might not work, it’s that it will not work based on the numbers presented in the proposals. It’s as if someone conjured up the spirit of Charles Ponzi, and had him write up the business plan.

  • Jed N.

    Great post, Professor Mead. Expanding a bit, consider the return on investment (ROI)… last year, ridership in the Northeast corridor was about 10.5 million. let’s say that grows with population, which according to the census, should be up 20% nationwide by 2040, a little less in the Northeast, but let’s say 13 million to give Amtrak the benefit of the doubt. And because this is going to radically improve rail transport, let’s increase the ridership up to 20 million, or just about 50%, to further grease the assumptions.

    Now, the costs. No government program comes in on budget, so let’s assume it costs $180 billion, or 20% over budget. Feel free to rebuke if you disagree. In order for the $180 billion network upgrade to be worth it, and making the ridiculous assumption that this high-end network carries no further inflation-adjusted operation and maintenance costs above today’s level (truly not possible), it probably needs to generate an additional $10 billion in revenue, or a 5.5% gross return on cost. after a reserve for maintenance capital expenditure of 2% of gross cost (i.e. replace the whole thing every 50 years), the net return would be 3.5% with $10 billion in additional revenue. this 3.5% return ignores that there would likely be little or no incremental revenue between initial construction and completion, so the return during the period is zero. Incidentally, its worth noting that a commercial project would likely require a return of at least 10%, without the greased assumptions I’m providing.

    Next, let’s divide that $10 billion required revenue uplift by the assumed 20 million passengers, and that is $500 additional dollars per ticket! That is BEFORE inflation, and assuming no elasticity of demand that would push the ridership down at those levels of ticket prices. Or, another way of putting the $10 billion in perspective: the current Northeast Corridor + Acela generates less than $1 billion today – that would need to increase 10-fold for the project to work.

    So, the question is: who comes up with these cockamamie ideas in the first place?!?!

  • MichaelM

    WigWag, while you’re correct that no one is really sure how profitable this will be, don’t load the deck by listing a (limited number of) successful public infrastructure projects while ignoring the hundreds of corpses lining the highways. Public and public/private railway consortia broke states across the upper Mid-west in the mid-19th century, driving economic crisis after economic crisis in the antebellum. There are a dozen failed canal projects from the previous era.

    There are just as many failures of public engineering as successes, it’s just that, for some reason, we don’t remember the failures while we can’t stop talking about the successes.

  • Gene

    WigWag, because no one can predict the future we are to have nothing to say about this issue? Perhaps we should just spend the $150 billion so we can find out if it works? A couple of commenters here have made useful efforts to estimate the cost effectiveness of this, and surely there are more qualified people in this world who can do an even better job of that.

    As someone clearly concerned about the travails of the weakest and most vulnerable among us, surely you must believe that $150 billion could be used much, much more effectively elsewhere.

  • FJL

    Or spend a little of that money to rebuild the Jacksonville to New Orleans line destroyed in Katrina, leaving Southeasterners with no way to travel west except via Washington or Chicago.

  • WigWag

    Some of the people who have responded to my previous comment on this post make the erroneous assumption that the metric by which high speed rail or other public infrastructure projects can be judged is by whether they are “profitable.” This is a foolish metric to judge the success of public infrastructure by.

    There are few public infrastructure projects that make a profit or pay for themselves. If there are any public transportation systems that can operate without subsidies in any developed nation, I don’t know about them.

    Whether it is worth paying for the costs of constructing these projects now and then paying the inevitable costs of subsidizing them later depends on the economic activity and growth that they generate.

    The New York subway system that cost billions to build in today’s dollars has lost money for almost every year of it’s life. Would New York City have the second highest GDP of any city in the world (after Tokyo though New York City’s per capita GDP is higher) without it’s subway system? To ask the question is to answer it.

    There will always be naysayers and they are not always found on the right of the political spectrum. As anyone who has read Robert Caro’s “The Power Broker” knows, Robert Moses spent tens of billions of dollars on infrastructure projects all over New York State. When he was spending the money leftists hated him because they had other priorities for the money; thirty two years after Moses’ death the left still detests his memory. Of course his critics are deluded; whatever the subsidies needed to operate the infrastructure he built have been repaid many times over by the economic activity generated by his projects.

    Is high speed rail on the Northeast Corridor a good idea? I have no idea.

    What I do know is that the whining of the critics of Moses’ projects, of the Erie Canal, of the TVA and of the interstate highway system back in the day is virtually impossible to distinguish from the whining of Professor Mead and his amen corner when it comes to rail projects today.

  • An

    @Wigwag

    1) The interstate highway act was passed by the Eisenhower administration with strong bipartisan support. So were the various railroad acts in the 19th century. So were the two Morrill Land grant college acts that created the state university systems.

    2)The Erie canal was first opened in 1825 at a time when travel was by foot, horse, carriage, and boat. This first phase of the Erie canal cost $7 million dollars in 200The rule of thumb

    @Wigwag
    1) The interstate highway act was passed by the Eisenhower administration with strong bipartisan support. So were the various railroad acts in the 19th century. So were the two Morrill Land grant college acts that created the state university systems. By its very nature the military is a public good. Republicans are not against spending on publics works, it’s that we question whether a lot of spending proposed by those on lefts are in fact, public goods, and are beneficial to general populace as a whole. We also like to do things on budget.
    2)The Erie canal was first opened in 1825 at a time when travel was by foot, horse, carriage, and boat. Historically shipping goods by water was a fraction of the cost of shipping by land, there was no other technology better than the boat at the time. This first phase of the Erie canal cost $7 million dollars in 1825. IN 2012 dollars that figure is $164 million calculated by using CPI. The Erie canal was truly a public good as it reduced shipping cost, which slashed the cost of most goods every day people buy.
    High speed rail does not provide a public good in the way the erie canal does. When compared to other modes of transportation, High speed rail is less efficient whether you compare by cost (car), time (airplane), or even energy efficiency (traditional trains). There is no clear economic benefit from high speed rail. Any good (including humans) can be transported cheaper by other means. Due to the high cost of the system, only those who could afford the hefty tickets would ride it, excluding most poor and lower middle class. And this does not include secondary effects, like exploding pension costs for employees.
    3) Your arguments would sway opinion to your side if you rebutted specific points of your opponents instead of make generalizations. Answers such as “To ask that question is to answer it,” is not an effective tactic. If George W. Bush answered “To ask that question is to answer it,” when asked about the benefits of outlawing aboriton, the left would throw a fit.
    Statement such as,
    “Some of the people who have responded to my previous comment on this post make the erroneous assumption that the metric by which high speed rail or other public infrastructure projects can be judged is by whether they are “profitable.” This is a foolish metric to judge the success of public infrastructure by,”
    while arguing,
    “whatever the subsidies needed to operate the infrastructure he built have been repaid many times over by the economic activity generated by his projects,”
    do not help your cause either.
    Both statements are quantifiable, and questions like these are why the field of finance was created in the first place. A profit (or loss) is the difference between revenue and expenditures. It doesn’t matter if you are a governement, corporation, or non-profit company. Everyone has profits or losses (unless you break even.)
    The essence of your argument is that its okay to lose money subsidizing publics goods, because they help grow the economy and bring prosperity, making billions more than they cost. In other words, to make a “profit.”
    This is the reason why Republicans are so skeptical about public rail and a lot of government expenditures. The numbers never add up, the promised results never materialize, and the taxpayer are the one that has to deal with repurcussions. We (literally) spend millions of dollars doing all these feasability studies, budget projections, and plans that are not worth the paper they are printed on.
    4) I also disagree with your huge generalizations on causality. Correlation does not equal causation. Just because New York is the richest city (also the largest) in the world, doesn’t mean it is due to xyz. 20% of the City of NY’s revenue is from Wall Street, and I’m pretty sure those bankers and stock brokers could make their bonuses without having to ride the subway.
    I’m going to use a football analogy to further illustrate my point. Have you ever watched the last two minutes of a football game, and noticed the team with the quarterback kneeling down 3 times in a row always win the games. Heck, why spend all this time pracitcing plays and spending money on expensive players. You don’t need a Jerry Rice or Peyton Manning, just sign 53 punters at the minimum salary, and kneel down for two yard losses three times in a row. You win go undefeated and win the Super Bowl every year!

  • Harold

    For far less money, a monorail could be suspended over the existing rail right of way, providing faster service, that would not have to fight for track space with freights.

    Any bets that will never, ever happen?