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Burning the Midnight Oil for Living Energy Independence

The Republicans have won one of the established political Power Positions in American Politics, and so they propose to eliminate funding for Amtrak:

The Bush budgets for 2006 and 2007 proposed ending federal support of Amtrak, the only US national passenger rail service.In fiscal 2005, the federal subsidy to Amtrak was $1.2 billion, which is what Bush spends in six days in Iraq.
Now, that was a 2005 fight by Resident George W. Bush, after he won his first Presidential election and his second term in office. So as one of their "new ideas", the new Republican House proposes the same old same old.

What a big surprise. Really, you could knock me over with a feather  {Legal Disclaimer: Strictly speaking, a bronze plated ostrich feather when I am already in danger of losing my balance}.  

Intro

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Same old, same old

RSC: Federal Funding for Amtrak & HSR on the Chopping Block

First we had President George Bush and would-be president John McCain calling for the end of federal funding of Amtrak. Republican gubernatorial candidates joined the anti-rail chorus and campaigned on promises to refuse federal funds for passenger rail improvements and expansion if they couldn't be twisted and perverted into subsidies for trucks and automobiles instead. Now it looks as though the GOP-led House is not far behind on the bewildering but growing anti-rail bandwagon that is quickly developing into a fundamental platform position for the Republican party. Although there may not yet be enough Republicans in active office to completely defund Amtrak at this time the trend lines are clear. Presumably there will be some sort of reduction in a "compromise" between the House and the Senate. If the Republicans are able to regain political dominance Amtrak is likely to suffer a critical shortage of funds at their hands. I cannot predict exactly how much funding Amtrak will lose in a compromise bill or when the GOP will regain their former political clout, but I think it's safe to say it's going to happen eventually. The question that's bouncing around in my mind now is how much of Amtrak's current network can possibly survive on its own after all or most of their federal funding is finally lost?
[The Republican Study Committee] wants to eliminate Amtrak operating subsidies ($1.565 billion), which amounted to $32 per passenger in 2009. In 2009, 41 of Amtrak's 44 routes -- which service 500 destinations in 46 states -- lost money, indicating that, without the subsidies, Amtrak would have to significantly reduce or eliminate its service outside the heavily trafficked urban coastal routes. The plans also call for the elimination of Intercity and High Speed Rail Grants to the tune of $2.5 billion a year.

Fighting Back against the Amtrak Cutback

Now, when the Republicans had the Presidency, the House of Representatives and the Senate, the push from the White House to eliminate operating subsidies to Amtrak did not work. The last time they tried, there was tha familiar outcry. Then-Senator Biden argued against the cut:

MR. RUSSERT: Let me ask you about another tough issue for both of you: Amtrak. The president wants...

SEN. BIDEN: It's not tough for me.

MR. RUSSERT: You take Amtrak every day back and forth to work.

SEN. BIDEN: This is absolutely bizarre that we continue to subsidize highways beyond the gasoline tax, airlines, and we don't subsidize, we don't want to subsidize a national rail system that has environmental impact. Do you know what it would take? It would take us $71 billion to be able to go and take--if you took Amtrak out of the Northeast Corridor from Washington to Boston, to build enough highway on 95 to go up and back. This is the ultimate being penny-wise and a pound-foolish.

Take a 3% discount rate, and a 50 year time horizon (given the oil-addiction of our road-based intercity transport system, a time horizon of 20 years before obsolescence would be generous, so this is being extraordinarily generous). That capitalizes to $1.8b per year. So the capital savings in not having to replace the transport service in the Northeast Corridor alone covers over half of the operating subsidy.

And of course, Amtrak was also defended by a large number of other usual liberal suspects, such as a pair of radicals from Pennsylvania (continuing from above source):

MR. RUSSERT: Senator Santorum, your Republican colleague from Pennsylvania, Arlen Specter, said the president's elimination of federal subsidies for Amtrak is unacceptable.

SEN. SANTORUM: Yeah.

MR. RUSSERT: Do you share that view?

SEN. SANTORUM: I would agree with--it's not...

MR. RUSSERT: So you're going to fight it?

SEN. SANTORUM: It's not acceptable to me, either.


The Amtrak Wedge

What was Resident George W Bush really attempting here? Look a little closer at the details of the proposal:

President Bush wants to push Amtrak into bankruptcy, and end its rail services. He proposes to set aside funds for a new train system to someday run only in the country’s northeast corridor.

Bush wants to "privatize" the rest of Amtrak by selling its assets, and let corporations make profits as they see fit.

Of course, what would "push Amtrak into bankruptcy" would be the mandates to provide service on routes that cannot be operated without a subsidy. Lift those mandates, and provide funds for the Northeast Corridor ~ where, as Biden pointed out, the cost of appropriating sufficient funds to replace that transport service with roadworks has a massive sticker shock effect ~ and Amtrak would operate in the NEC corridor that it partly owns, as well as in operating those state-subsidized lines where the state or states would be willing to replace the Federal subsidy.

It is, in other words, not primarily an attack on rail service New York, Connecticut, Massachusetts (etc), Virginia, North Carolina, Illinois, Washington, Oregon and California.

It is primarily an attack on rail service in West Virginia, South Carolina, Georgia, Indiana, Alabama, Mississippi, Louisiana, Arkansas, Missouri, Iowa, Wisconsin, Minnesota, North Dakota, Montana, Nebraska, Kansas, Oklahoma, Texas, New Mexico, Colorado, Utah, Nevada and Arizona.

Its primarily an attack on rail service in places where people can be convinced that the operating subsidies to Amtrak is a subsidy for some "them".

And the goal is, of course, not primarily in diverting the $2.5b in operating subsidies or $1b~$4b in capital maintenance and upgrades to the service of some more Republican constituency. It is, rather, the fear that Amtrak may be entering a period of sufficient success that it will be able to start expanding upon the skeleton backbone network. The "problem" is, after all, not that Amtrak is losing riders: the problem is that Amtrak is gaining riders even in "Red States":

WASHINGTON - Despite the lingering effects of the Great Recession, Amtrak ridership hit an all-time high in fiscal 2010.

According to the Georgia Association of Railroad Passengers, Amtrak carried 28.7 million riders during the fiscal year that ended Sept. 30, up 5.7% from fiscal 2009. Ticket revenue set an all-time record too, and all four Amtrak trains serving Georgia shared in the gains.

The Palmetto, running between New York, Washington and Savannah, showed the biggest surge: it carried 10.6% more riders, and ticket revenue was up a whopping 23.1%. The Silver Meteor and the Silver Star, both running between New York, Washington, Savannah and Miami, enjoyed ridership gains of 6.5% and 6.0% respectively, and revenue increases of 8.1% and 10.2%. On the New York-Washington-Atlanta-New Orleans route - which stops in Toccoa, Gainesville and Atlanta - the Crescent recorded a 4.2% ridership gain and a 8.3% revenue gain.

Looking at raw numbers, the Silver Star was the most popular Amtrak train serving Georgia, carrying 393,586 passengers during fiscal 2010. The Silver Meteor was next, with 352,286 passengers, followed by the Crescent with 298,688 riders and the Palmetto with 189,468 passengers. The Palmetto's revenues covered about 53% of its costs; the Meteor had a 49% revenue-to-cost ratio; the Star had a 42% ratio and the Crescent had 38% ratio.

So one fear is something like the system sketched to the right. While very heavily subsidized services like The Cardinal and The Hoosier could see very substantial increase in ridership with only a small drop in total subsidy, each 1% in revenue growth in services like the Palmetto and Meteor means a 1% or greater drop in subsidy per service mile.

Because of the way that the route performance is now tallied, it is most convenient to report this in terms of net operating ratio, where a negative net operating ratio under (-50%) is in the zone where subsidy drops as fast or faster than revenue:

  • Auto-Train, (-26%);
  • Empire Builder, Palmetto, (-50%),

However, ridership and revenues are growing, and the real risk is that all but two of the remaining trancontinental routes have net operating ratios in the (-50%)~(-60%) range:

  • Capital Ltd, (-53%);
  • Silver Meteor, California Zephyr, (-53%)
  • Texas Eagle, Coast Starlight, (-55%)
  • City of New Orleans, (-56%),
  • Lakeshore Ltd, (-57%);
  • Southwest Chief, (-58%),
  • Crescent, (-59%)
  • Silver Star (-60%)

With a series of oil price shocks likely to hit in the coming ten years ~ which is either, if you believe they are freely functioning competitive commodity markets, what freely functioning competitive commodity markets do when supply constraint, or if you believe the evil commodity traders are blatantly manipulating the market, an irresistible ploy for evil commodity traders in the face of supply constraints. Indeed, since we get a series of oil price shocks from the pure free functioning scenario and from the pure price rigging scenario, and since its somewhere between the two opposite extremes ~ we're getting a series of oil price shocks in the decade ahead.

And when they hit, ridership and revenue will only grow. And, indeed, when they hit it will be too late to spring this attack.

Best to ensure that as many people live in states with no intercity rail transport at all, so that pandering to their prejudices is not threatened by the dangerous facts of personal experience or face to face discussion with somebody with personal experience.

And that is only one fear ... there are also these:

If a kernel of Express HSR and Regional HSR corridors get established, and demonstrate that they can generate positive net operating ratios ~ as the Acela services already do ~ that is a serious threat, and so to would be the establishment of a network of 100mph oil-independent electric freight rail tollways.

Because the danger is the demonstration that the way we do things is not the way we have to do things, which threatens a vast array of yellow bellied surplus suckers with their snouts buried deep in the public trough. The fear is that national passenger rail will stop being a running joke, because when that happens, there are big chunks of the Great Rip-Off Economy that are under threat.


Responding to the Attack

It is very unlikely that the Republican House on its own will be able to eliminate Amtrak operating subsidies. Indeed, it seems unlikely that this is their goal.

The goal of the House Republicans is to force patriots who do not wish to sell out our national security to the profits of the oil industry and road building lobbies into a defensive, hunkered down posture, enabling them to gouge out some or all of the HSR capital grants and some or all of the Amtrak capital grants that are the serious threat.

After all, without capital funding, Amtrak will not even be able to buy enough new passenger cars to carry more than a fraction of the people who will wish to ride when the next oil price shock hits.

We need to push our Senators ~ both Democratic and Republican, wherever possible ~ to do more than to hunker down in a defensive posture. They need to go on the attack. And since objectively this policy of the Republicans is betraying the national security interests of the nation in the service of the profits of the oil industry and the road building lobby ~ they need to go all out, wrap themselves in the flag, and go on the attack:

  • Hearings that grill the Department of Defense on how we move vital war material and maintain logistical support for vital Defense Industries in case of an massive disruption of oil supplies, such as the Shutdown of the Straits of Hormuz or collapse of national government in Nigeria
  • Hearings that grill the Department of Defense on how we mobilize troops in the event of a massive disruption of oil supplies
  • Hearings that grill the Department of Homeland Security on how their evacuation plans for each of the top 100 US metropolitan areas in the event of a massive disruption of oil supplies

In other words, don't restrict ourselves to the standard ~ an perfectly valid ~ litany of external benefits ... environmental benefits, equity of access to transportation, massive subsidies being provided to alternative means of intercity transport. Those are all points well worth hitting, but    if that is the sole case, we are preaching to the choir.

We get the right 15 second sound bite from an Army General, we have the material for an ad hitting a Republican Congressman for being soft on national security.

Now, of course, I'm just an economist, so read this more as a general strategy than a specific tactic: getting the right messaging delivered in the right way is not necessarily going to come out of any one of these attacks, but if we push at the enough different edges of the established frame, we can dig up something that shakes people's perceptions. And with gas prices likely heading up again this coming summer, it puts supporters of sustainable transport in a position to gain increasing traction on the back of voter's everyday experience.


Late Update: The Fight to Save Caltrain in the Bay Area

See the California HSR Blog for More information.


Midnight Oil ~ Truganini

Extended (Optional)

Originally posted to BruceMcF on Sun Jan 23, 2011 at 07:17 PM PST.

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