Recent articles in respected business journals report that Amtrak lost only $29.8 million in 2019 (out of $3.3 billion in total revenues) and that it expects to make a profit in 2020. This is a remarkable turnaround for a company that cost taxpayers more than $100 billion in its first 49 years of existence. Amtrak accomplished this using a simple yet apparently effective technique: It's called lying.,
The first lie is that Amtrak counts taxpayer subsidies from the states as "passenger revenues." According to Amtrak's unaudited report, 17 state legislatures gave Amtrak a total of $234 million in 2019. The taxpayers in those states were never allowed to vote on these subsidies, and the vast majority don't ride Amtrak. These subsidies are no more "passenger revenues" than the subsidies given to Amtrak by Congress. Deducting these subsidies from revenues immediately increases Amtrak's 2019 losses to $264 million.,
Amtrak's accounting system is so full of lies that even the pro-passenger train Rail Passengers Association calls it ‘fatally flawed, misleading, and wrong.’,
An even bigger lie is Amtrak's failure to report depreciation in its operating costs. Ignoring depreciation is an old railroad accounting trick aimed at misleading investors by boosting apparent profits.
A classic example was the Rock Island Railroad, which ran many fast passenger trains throughout the Midwest in the 1950s. Then Rock Island proposed to merge with another railroad, and to improve the merger terms it began deferring maintenance. By the time the federal government approved the merger, Rock Island's tracks were so decrepit that its passenger trains ran as slow as 10 miles per hour. The other railroad backed out, and Rock Island shocked the nation by going out of business.
The Interstate Commerce Commission responded by requiring railroads to include depreciation among their operating costs. This represents the amount of money railroads have to spend or save to keep their infrastructure and equipment in good shape, ensuring that investors would never again be misled by deferred maintenance.
Amtrak dutifully includes depreciation in its audited financial statements, but it never mentions it in its press releases about its finances. In 2019, depreciation amounted to $868 million, increasing total losses to $1.13 billion — 38 times as much as claimed.
Even with federal capital subsidies, Amtrak is deferring maintenance like crazy. Amtrak passenger cars have expected lifespans of 25 years, yet the average car in its fleet is well over 30 years old. The Boston-to-Washington corridor, which Amtrak has often claimed to be profitable, has a $38 billion maintenance backlog.
Fixing just these two line items in Amtrak's accounting shows that Amtrak did not come close to earning a profit in 2019, it won't earn a profit in 2020, and it never will earn a profit. This is because, after counting all subsidies, Amtrak spends four times as much to move a passenger one mile as the airlines. The difference between Amtrak and intercity buses is even greater, which means Amtrak can't compete in any market without heavy subsidies.
Of course, airlines and highways are also subsidized, and we should end those subsidies as well. But federal, state, and local subsidies to air and highway travel average around a penny per passenger mile, whereas Amtrak subsidies were 34 cents per passenger mile in 2019.
Amtrak's biggest lie is that passenger trains are somehow vital to the nation's economy. Last year, Americans traveled an average of 15,000 miles by automobile, 2,100 miles by plane, and 1,100 miles by bus. Amtrak's contribution was less than 20 miles per person. Even in the Northeast Corridor, Amtrak reluctantly admits that it carries only 6% of intercity travelers.
According to the best available estimates, Americans bicycle 8.5 billion passenger miles a year compared with 6.5 billion passenger miles on Amtrak. Being less important than bicycles, Amtrak certainly doesn't deserve the $2 billion in annual subsidies that it requires to run a supposedly almost-profitable operation.
Rather than give Amtrak billions of dollars to restore or build infrastructure that it can't afford to maintain, Congress should simply agree to pay Amtrak a given amount for every passenger mile it carries. This will give Amtrak an incentive to focus on passengers, not politics.
Over time, Congress should reduce that amount until Amtrak receives no more per passenger mile than airlines or highways. Any trains that can truly be profitable will survive, but if they do, it will be because Amtrak has found ways to efficiently transport people, not because of lies in its accounting system.Randal O'Toole is a senior fellow with the Cato Institute and author of Romance of the Rails: Why the Passenger Trains We Love Are Not the Transportation We Need.
Key Point: U.S. foreign policy must catch up with the developments of the past thirty years and reassess its relationship with Russia.,
The American public and U.S. policymakers both have an unfortunate tendency to conflate Russia with the Soviet Union. That habit emerged again with the media and political reaction to the Helsinki summit between President Trump and Russian President Vladimir Putin. Trump's critics accused him of appeasing Putin and even of committing treason for not doing enough to defend American interests and for being far too solicitous to the Russian leader. They regarded that as an unforgivable offense because Russia supposedly poses a dire threat to the United States. Hostile pundits and politicians charged that Moscow's alleged interference in the 2016 U.S. elections constituted an attack on America akin to Pearl Harbor and 9-11.,
Thirty years after the end of the Cold War, it's time the foreign policy establishment learned the difference.,
Trump’s supplicant behavior, opponents contended, stood in shameful contrast to the behavior of previous presidents toward tyrants, especially toward the Kremlin’s threats to America and the West. They trotted out Ronald Reagan’s “evil empire” speech and his later demand that Mikhail Gorbachev to tear down the Berlin Wall as examples of how Trump should have acted.
The problem with citing such examples is that they applied to a different country: the Soviet Union. Too many Americans act as though there is no meaningful difference between that entity and Russia. Worse still, U.S. leaders have embraced the same kind of uncompromising, hostile policies that Washington pursued to contain Soviet power. It is a major blunder that has increasingly poisoned relations with Moscow since the demise of the Union of Soviet Socialist Republics (USSR) at the end of 1991.
One obvious difference between the Soviet Union and Russia is that the Soviet governing elite embraced Marxism-Leninism and its objective of world revolution. Today’s Russia is not a messianic power. Its economic system is a rather mundane variety of corrupt crony capitalism, not rigid state socialism. The political system is a conservative autocracy with aspects of a rigged democracy, not a one-party dictatorship that brooks no dissent whatsoever.
Russia is hardly a Western-style democracy, but neither is it a continuation of the Soviet Union's horrifically brutal totalitarianism. Indeed, the country's political and social philosophy is quite different from that of its predecessor. For example, the Orthodox Church had no meaningful influence during the Soviet era—something that was unsurprising, given communism's official policy of atheism. But today, the Orthodox Church has a considerable influence in Putin's Russia, especially on social issues.
The bottom line is that Russia is a conventional, somewhat conservative, power, whereas the Soviet Union was a messianic, totalitarian power. That's a rather large and significant difference, and U.S. policy needs to reflect that realization.
An equally crucial difference is that the Soviet Union was a global power (and, for a time, arguably a superpower) with global ambitions and capabilities to match. It controlled an empire in Eastern Europe and cultivated allies and clients around the world, including in such far-flung places as Cuba, Vietnam, and Angola. The USSR also intensely contested the United States for influence in all of those areas. Conversely, Russia is merely a regional power with very limited extra-regional reach. The Kremlin's ambitions are focused heavily on the near abroad, aimed at trying to block the eastward creep of the North Atlantic Treaty Organization (NATO) and the U.S.-led intrusion into Russia's core security zone. The orientation seems far more defensive than offensive.
It would be difficult for Russia to execute anything more than a very geographically limited expansionist agenda, even if it has one. The Soviet Union was the world's number two economic power, second only to the United States. Russia has an economy roughly the size of Canada's and is no longer ranked even in the global top ten. It also has only three-quarters of the Soviet Union's territory (much of which is nearly-empty Siberia) and barely half the population of the old USSR. If that were not enough, that population is shrinking and is afflicted with an assortment of public health problems (especially rampant alcoholism).
All of these factors should make it evident that Russia is not a credible rival, much less an existential threat, to the United States and its democratic system. Russia's power is a pale shadow of the Soviet Union's. The only undiminished source of clout is the country's sizeable nuclear arsenal. But while nuclear weapons are the ultimate deterrent, they are not very useful for power projection or warfighting, unless the political leadership wants to risk national suicide. And there is no evidence whatsoever that Putin and his oligarch backers are suicidal. Quite the contrary, they seem wedded to accumulating ever greater wealth and perks.
Finally, Russia's security interests actually overlap substantially with America's—most notably regarding the desire to combat radical Islamic terrorism. If U.S. leaders did not insist on pursuing provocative policies, such as expanding NATO to Russia's border, undermining longtime Russian clients in the Balkans (Serbia) and the Middle East (Syria), and excluding Russia from key international economic institutions such as the G-7, there would be relatively few occasions when vital American and Russian interests collide.
A fundamental shift in U.S. policy is needed, but that requires a major change in America's national psychology. For more than four decades, Americans saw (and were told to regard) the Soviet Union as a mortal threat to the nation's security and its most cherished values of freedom and democracy. Unfortunately, a mental reset did not take place when the USSR dissolved, and a quasi-democratic Russia emerged as one of the successor states. Too many Americans (including political leaders and policymakers) act as though they are still confronting the Soviet Union. It will be the ultimate tragic irony if, having avoided war with a totalitarian global adversary, America now stumbles into war because of an out-of-date image of, and policy toward, a conventional, declining regional power. Yet unless U.S. leaders change both their mindsets and their policies toward Russia, that outcome is a very real possibility.Ted Galen Carpenter, a senior fellow in defense and foreign policy studies at the Cato Institute and a contributing editor at the National Interest, is the author of 10 books, the contributing editor of 10 books, and the author of more than 700 articles on international affairs. This piece was originally featured in July 2018 and is being republished due to reader's interest.