Downsizing Blog

Amtrak's New Rail Cars

Amtrak has announced that it will spend $300 million on 130 new rail cars, including sleeper and dining cars, for its long-distance trains. The government company’s announcement came with the obligatory statement that the purchase will create 575 jobs. That’s more than $500,000 per job.

As a Cato essay on Amtrak discusses, all of Amtrak’s long-distance routes are money-losers. For example, the Sunset Limited, which runs from New Orleans to Los Angeles, lost $462 per passenger in 2008. According to the Government Accountability Office, long-distance routes account for 15 percent of riders but 80 percent of financial losses. 

Amenities like sleeping and dining services contribute to the red ink: 
The demographic being served by these long-term routes does not demonstrate a strong need for taxpayer subsidies. Eighty percent of long-distance train riders use it for recreational and leisure trips, and riders tend to be retirees. Premium services like sleeper and dining cars contribute to operating losses for long-distance trains. These amenities are heavily subsidized, which means taxpayers—and not the pleasure-seeking retirees—are incurring the burden. 
To maintain its unprofitable routes, Amtrak is dependent on federal subsidies, which are usually about $1.5 billion a year (Amtrak also recently received $1.3 billion in stimulus money). Amtrak has asked for $2.5 for the upcoming fiscal year, and the Senate Appropriations Committee has proposed a 25 percent increase.
 
Amtrak’s press release brags: “Last fiscal year (FY 2009), the railroad carried 27.2 million passengers, making it the second-best year in the company’s history.” That sounds good until you realize that Amtrak accounts for only 0.1 percent of that nation’s passenger travel. Moreover, Amtrak projected in 1976 that its ridership would grow from 17.3 million in 1975 to 32.9 million by 1980.
 
With the nation’s debt spiraling out of control, taxpayers can no longer afford to subsidize Congress’s toy train. If intercity passenger rail makes economic sense, it could be profitably supported by its ridership and run as a private company. If not, then it makes no more sense for taxpayers to keep Amtrak operating than it would be for the federal government to subsidize stagecoaches. 

 

Posted by Tad DeHaven on August 3rd, 2010

City of Bell on Federal Dole

The city of Bell, CA recently made national headlines when it came to light that city officials have been receiving massive six-figure salaries. Bell taxpayers were so irate that police in riot gear were required to maintain control at a recent city council meeting. 

However, Bell taxpayers aren’t the only ones who pay for Bell city salaries and programs. The Census Bureau’s Federal Audit Clearinghouse database shows that Bell has spent almost $5 million in federal Community Development Block Grant funds over the past five years. The city also spent hundreds of thousands of dollars in subsidies received from other federal programs. Since money is fungible, bureaucrats in Bell and other cities can presumably operate in a more spendthrift fashion because they receive a large inflow of federal dollars.   

California controller John Chiang has opened an investigation to see if federal and state funds awarded to the city have been spent “lawfully.” That’s fine, but a better investigation would find out why Bell couldn’t find local support for all the various projects that the federal government is funding.
 
As a Cato essay on why the CDBG program should be abolished points out, federal subsidies encourage local fiscal irresponsibility: 
Moving funding for local projects up to the federal level eliminates responsible city planning. When local funds are used for local projects, local officials have an interest in ensuring that the benefits of public projects outweigh the costs. But when the federal government is the source of funds, local governments tend to invest in a range of inefficient and wasteful activities. 
In 2006, HUD’s inspector general reported that in just two and a half years of CDBG investigations it had “indicted 159 individuals, caused administrative actions against 143 individuals, had 5 civil actions, 39 personnel actions, and over $120 million in recoveries." The inspector general found that there were “repeated” problems with the program, including the improper use of funds, grantee inability to account for funds, and a lack of monitoring and oversight. 
Democrats and Keynesian economists are arguing that more state and local subsidies are needed to keep the economy from slipping back into a recession. However, these subsidies merely move money around the map. As the Bell example shows, state and local governments need to get their fiscal houses in order. Federal subsidies will only postpone the overdue house cleaning.  

 

Posted by Tad DeHaven on August 2nd, 2010

Huge Deficits, Massive Debt

According to the administration’s latest budget figures, the federal government is projected to run huge annual deficits throughout the coming decade. The actual figures could end up being considerably larger, particularly if policymakers continue to justify additional budget-busting for alleged “emergencies.” As a previous blog shows, these deficits would be driven by excessive spending.

Debt held by public as percentage of GDP would also reach dangerous heights:

The Congressional Budget Office’s estimates of the president’s budget forsees even higher debt levels than the administration projects.

 

 

Posted by Tad DeHaven on July 28th, 2010