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No Bailout for Amtrak


Once again, Amtrak is in dire need of our tax dollars. Without a cash infusion, Amtrak president David Gunn said it will have to halt operations. Negotiations are now underway that will provide a guaranteed “loan” (read: subsidy) to the railroad.

The question that no one seems to be asking is: Why is the government even involved in the railroad business? Experience has shown time and again that in a free market, products and services will be supplied that are of a higher quality and at a lower price than if produced by the government.

The problem that America faces with Amtrak is twofold. One, Amtrak is a government monopoly — the state has made it illegal for anyone to compete with it in the delivery of train-passenger service. That is an instant recipe for inefficiency and poor service. When a firm does not have to worry about someone else producing a better product, it will inevitably be more lax in its business practices. (Think about the Postal Service.)

Why worry about late trains, derailments, old train cars, and poor food and service when no one is permitted to compete with a better product and better service?

Second, and more important, Amtrak is not held accountable by the sharp razor of profit maximization. In the private sector, if costs exceed revenue, that is a signal that the producer has failed to sufficiently satisfy consumers with his product or service. The firm then has to cut costs, produce something else, or go out of business. That results in efficiency, both in the firm and in society — resources flow to where they are valued the most.

But that’s not the case with Amtrak. Amtrak has been allowed to continuously run in the red with the aid of tax dollars. The result is not only a lousy service because of its monopoly status but also the endless consumption of resources through taxpayers subsidies.

Efficiency arguments aside, is the subsidization of Amtrak just? Well, is it moral that the state prevent citizens from providing passenger train service — a peaceful activity? Is it moral that tax dollars are used to fund Amtrak? How can it be just to take money from a person who does not use trains and give it to someone who does? That’s called theft in any circle other than government.

Amtrak should not be bailed out. It involves an unjust transfer program and it’s also a service that could be done better by private companies. What is needed is to get government out of the train business and open the market to competition. If private entities cannot turn a profit at it, then Americans don’t value train travel enough to merit its existence.

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    Bart Frazier is vice president at The Future of Freedom Foundation. Send him email.