Rep. Webster Is Misinformed

By Jim Mathews / President & CEO

Let’s read together, again, what the new House rail subcommittee chair Rep. Daniel Webster (R-FL) believes about passenger rail:

“Passenger rail works best where demand is high, competition and private sector involvement are ample, and a dependence on government support is low,” Webster, chairing his first meeting of the House Transportation and Infrastructure Committee’s rail panel, said last week.

“For Amtrak, we must look at improving and maintaining its existing network, weaning it off government support, and providing competitive, reliable, and safe service to attract riders,” he said. “Amtrak should serve as an appealing option for travel, not as a replacement for vehicles and airplanes, which remain the overwhelming preference for Americans.”

So very much to pick apart here. But I guess I’ll start with the idea that driving and flying “remain the overwhelming preference for Americans.” Well, in many instances it’s true that people are more likely to drive or to fly – but that’s because the Federal government has generously subsidized driving and flying options at many multiples of the funding made available to passenger rail, and those subsidies have in some cases made those experiences better, and easier, and less expensive.

Rep. Seth Moulton (D-MA) pushed back last week, and I agree wholeheartedly with him. He pointed out that just since 2008 highways have received more than a quarter of a trillion dollars in Federal support. That’s around seven- or eight-times what passenger rail has received in the same period.

As for withdrawing Amtrak support, I was able to confirm personally this week in follow-ups talking with committee members and staff that Rep. Webster’s concept was not just a throwaway. They truly believe – or at least they say they do – that Amtrak could somehow make a profit where dozens of mighty private railroads could not in the 1960s and 1970s.

Amtrak *can* do better financially, and has already done well in rebounding from the pandemic crush. Amtrak already wrings out more income from its fares and amenities and extra services -- too much, in my view, but that's a topic for another blog. Amtrak can find new efficiencies, like any organization can if it looks hard enough. But Amtrak will never, ever, ever be profitable. Not ever. Particularly as it transitions into being a large rail-oriented general construction contractor along with being the nation’s nationalized rail operator.

And that’s OK. The yardstick we use to measure success for government programs and agencies is different than the one we use to measure the success of private companies. As a for-profit company, Amtrak fails...spectacularly. As a government agency, created half a century ago to carry out a public purpose recognized in law and in Supreme Court rulings, it is a spectacular success worth celebrating, supporting, and building up.

I continue to read in news accounts and on social media comments the assertion that the law requires Amtrak to make a profit, or that Amtrak is a private company designed to make a profit rather than a government entity. The people who write these things, whether they're reporters or just online commenters, usually say this with a certainty that makes it sound as if they know what they're talking about. But they don't. They're wrong. The contention that Amtrak is required to make a profit is incorrect. Hogwash, nonsense, b.s., prattle, hooey, baloney, bunk, poppycock, balderdash...pick your favorite word, but it’s just not true. That stopped being true in 1978, when Congress amended the law creating and authorizing Amtrak.

Worse, saying or implying that Amtrak has to make a profit makes our cause harder. Public confusion over Amtrak’s for-profit status helps nobody, not Amtrak nor the policymakers trying to improve transportation. And as we start working on reauthorizing the Bipartisan Infrastructure Law, I’d rather talk about the future than continue to rehash tired old arguments that are not only long settled but which actively damage the cause of getting more rail investment.

Amtrak will never be a successful “company” in the traditional sense, and the leadership team is setting itself up for failure if it implies that Amtrak should be measured by that yardstick. If Amtrak tries to masquerade as a for-profit company, it diminishes the public policy purpose for which it was created and continues to be funded. A have-it-both-ways mentality (today I’m a company, tomorrow I’m an agency, next week I'm a company again) contributes to the public’s confusion about how their tax dollars are actually being used. Worse, it could actually undermine continued congressional support by setting unreasonable expectations – expectations which have already been debunked and legally removed for decades.

Moreover, the 2024 Amtrak is nothing like the pre-pandemic Amtrak. Back then, our government-supported rail operator was, by and large, a rail operator. Today, our nationalized rail operator is also a construction company responsible for managing tens of billions of dollars for building bridges, tunnels, stations, and more – with all the overhead in project-management staff and capital delivery that this entails.

Asking the 2024 version of Amtrak – part rail operator, part construction conglomerate – to pretend to make a profit now is tying cinder blocks around their ankles and telling them to run a marathon. Paradoxically, it also makes Amtrak look much worse than it actually is. Amtrak can fairly be described as a successful government agency that does a pretty solid job with the public monies it gets, thanks to high farebox recovery, broad daily service across small and needy communities across the country, strong customer loyalty, and a return to pre-pandemic levels of passenger growth.

So here's what our new rail subcommittee chair and his staff seem to have overlooked:

First, yes, in 1971 Congress wrote that Amtrak should attempt to be profitable. But Congress changed its mind in 1978, declaring in its report on the Amtrak bill that “Section 9 amends section 301 of the RPSA to conform the law to reality, providing that Amtrak shall be ‘operated and managed as’ a for-profit corporation. This amendment recognizes that Amtrak is not a for-profit corporation.” [H.R. Rep. No. 1182, 95th Cong., 2d Sess. 15 (1978)]

Second, the Congressional Research Service confirmed in 2002 that Congress changed its objectives for Amtrak in 1978, and went on to say that the profitability discussion reflects confusion rather than reality. “Most discussions of Amtrak refer to Amtrak’s status as a for-profit company and have noted that Amtrak was intended by Congress to be a profit-making enterprise,” says the CRS. “Despite these references, Amtrak is not now a for-profit company; it was originally created as such, but that status was changed by the Amtrak Improvement Act of 1978 (P.L. 95-421); the Conference report noted that the bill removed Amtrak’s for-profit status but required that the corporation be ‘operated and managed as’ a for-profit corporation (H.C.R. 95-1478).”

Third, the Supreme Court has ruled twice that Amtrak is not a “private company,” once in 1995 and again in 2015.

And fourth, in 2021, when Congress re-visited Amtrak’s mission and purpose in the Investment in Infrastructure and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law, Congress explicitly stripped profit-making out of Amtrak’s to-do list, line by line by line.

So whether you're looking at law, history, or the factual record, Amtrak is not required to make a profit, and imposing that requirement would make things worse, not better. Instead we need to look to the future, find ways to make Amtrak better, and to ensure that those passengers who want, need, and deserve service get it whether they personally generate a profit to the carrier or not.