Eliminate Intercity Rail Subsidies

Including funds appropriated in the American Recovery and Reinvestment Act (ARRA, Public Law 111-5), the Congress appropriated more than $14 billion to subsidize intercity passenger rail services in 2009 and 2010. About $4 billion has been allocated for the National Railroad Passenger Corporation--or Amtrak--and about $10 billion is available both to Amtrak and to state and local governments to fund high-speed and intercity regional rail service. In 1970, when the Congress established Amtrak, it anticipated subsidizing the railroad only for a short time, until it became self-supporting. Over the past 40 years, however, the federal subsidy to Amtrak has amounted to approximately $40 billion cumulatively.

This option would eliminate federal subsidies not only for Amtrak but also for high-speed and other intercity rail service, yielding savings of $11 billion over the next 5 years and $30 billion over 10 years. (Not included in those estimates are potential savings that could be obtained by rescinding unobligated funds provided in ARRA. The savings would depend on the amount of funds still unobligated when the legislation was enacted, but could be on the order of $1 billion to $2 billion.)

An argument in favor of this option is that intercity passenger rail service should be provided only if it is a self-supporting commercial service. It is also argued that current federal spending represents just a small down payment on a much larger expenditure that would be necessary to build a large high-speed rail system--such as one that would meet the Administration's goal of making high-speed rail available to 80 percent of Americans-- and that the total costs of the system would exceed its benefits, both of which are highly uncertain.

With respect to Amtrak, a rationale for this option is that eliminating its federal subsidy would encourage its managers to cut unprofitable services and routes and focus instead on those that are profitable and in high demand. One example of an unprofitable service that could be cut is sleeper-class service. The Inspector General of the Department of Transportation estimates that eliminating sleeper service would save Amtrak $75 million to $158 million annually, net of lost revenues from customers who would no longer travel by train if sleeper service was discontinued. Large savings could also accrue from eliminating unprofitable routes. According to Amtrak's Performance Tracking System, the five most unprofitable routes account for combined annual losses of roughly $260 million, although some of that amount represents allocated overhead costs that would continue to be incurred if the lines were eliminated.

An argument against eliminating support for intercity passenger rail is that the amount of such support needs to be analyzed in the context of the budgetary and social costs of travel by highways and air--namely, that highway and air travel are subsidized even though they involve higher safety risks and greater emissions of greenhouse gases. Also, eliminating federal support could require Amtrak to greatly reduce its route network. Some opponents of this option regard rail service as a public service that should be widely available. They maintain that passengers on lightly traveled routes have few transportation alternatives and that Amtrak is vital to the survival of small communities along those routes. Continuing federal support could help Amtrak and other passenger rail carriers improve service, attract more passengers, and make rail transportation more viable economically.