In June, the U.S. Senate voted 64-36 to give Amtrak access to federal highway funds for the first time since creation of the Highway Trust Fund in 1956. Those federal dollars were collected from highway users in the form of gasoline taxes and other fees all Americans pay to use our highways. They are primarily intended to finance road and bridge improvements: a user-pays, user-benefits financing system.

Amtrak supporters, however, convinced a majority of Senators that it was reasonable for highway users to pay part of the subsidy necessary to keep the trains running. How? They argued that Amtrak helps alleviate highway and airport congestion and is the only available transportation for many Americans, especially lower income citizens.

In this report, noted economists Wendell Cox and Jean Love take a clear-eyed look at the national passenger rail system's contribution to mobility in America. They find that Amtrak has almost no impact on congestion, even on its busiest route between Washington, DC and Boston. In addition, nearly three-quarters of all Amtrak riders are middle- and upper middle-class Americans making over $40,000 a year.

The result? If the Senate Amtrak amendment becomes law, drivers will continue idling in congested traffic while they subsidize train service for passengers with a substantially higher average income.

With a $290 billion backlog of unfunded highway and bridge repair needs, taxpaying highway users can't afford to finance Amtrak, too.

1. Introduction: Public Purposes

Amtrak, the National Passenger Railroad Corporation, was established by federal law in 1970 as a for-profit company. Yet, over the years, Amtrak has required billions of dollars in taxpayer subsidies. Amtrak has now proposed it should be made an eligible recipient of highway user fees. This proposal has been made largely on the assumption that Amtrak is an essential mode Modes of intercity transportation include private vehicles (automobiles, vans and light trucks), buses, airlines, passenger rail, and, to a lesser degree, commuter railroads. of intercity transportation in some areas and is an alternative to air service in others.

This raises a fundamental issue -- what is the public policy justification for providing taxpayer subsidies to Amtrak or any other mode of intercity As opposed to urban. transport? In the United States, and increasingly around the world, it is generally accepted that taxpayer subsidies are not appropriate for sectors in which the competitive market is capable of providing services or products. There are two justifications for taxpayer subsidies:

Market failure: Where the competitive market fails to provide an essential service or product (or fails to provide enough of an essential service or product).

Social equity: Where the competitive market does not supply sufficient amounts of an essential service to disadvantaged people (especially people with low incomes). For a more complete discussion, see United States General Accounting Office, Intercity Passenger Rail: Financing and Conditions Threatens Amtrak's Long-Term Viability (Washington, DC: United States General Accounting Office, Resources, Community, and Economic Development Division, 1995).

This paper provides a summary of Amtrak's contribution to the intercity transportation market and the rationales for its taxpayer subsidy.

2. Amtrak and the Intercity Transportation System

Amtrak's market share is infinitesimal. The smallest of the nation's ten major airlines has double the intercity market share of Amtrak. Nonetheless it is often claimed that Amtrak usage provides considerable relief to highways (especially in Northeast Corridor, from Boston to New York to Washington, DC), In this document, the Northeast Corridor is limited to the Washington-New York-Boston route. All other routes are included in the national analysis. which is often cited as justification for substantial taxpayer subsidies, including subsidies paid by highway users. It has even been claimed that in the absence of Amtrak, new interstate highways would have to be constructed. It has further been claimed that Amtrak diverts a such a significant number of passengers from airlines that the air traffic system would not be able to accommodate them.

Amtrak in the Northeast Corridor

Amtrak's impact on the intercity transportation system is most significant in the Northeast Corridor, which carries approximately half of Amtrak passengers. The Corridor is unique in that it is the only portion of the Amtrak system that operates frequent intercity service. Moreover, in the Washington to New York market, Amtrak's fastest trains are time competitive, city center to city center, with airline services and considerably faster than automobiles or buses. However, an increasing percentage of intercity trips end or begin (or both) in the suburbs, rather than in the city center.

Two models were developed to estimate the volume of traffic carried by Amtrak that would otherwise be carried by other modes of intercity transport. The first -- the "Maximum Diversion to Private Vehicles Private vehicles include automobiles, vans, and light trucks (single axle, four tires). Model" -- assumes that Amtrak passengers would be diverted to other modes of transport in the same percentages that the other transport modes attract travelers for trips of similar lengths. The second -- the "Maximum Diversion to Airlines Model" -- assumes that a much higher percentage of Amtrak passengers who presently ride Amtrak's fastest trains would be attracted to airline services, while a higher percentage of passengers on other Northeast Corridor trains would be attracted to bus services (or commuter rail services, where available).

Maximum Diversion to Private Vehicles Model

Highway Traffic: Based upon national intercity travel data, For non-rail trips of lengths similar to that provided through Amtrak's Northeast Corridor, national data indicates that 97.5 percent of travelers would go by private vehicle, 1.4 percent by bus, and 1.1 percent by airline. Calculated from Patricia S. Hu and Jennifer Young, 1990 NPTS Databook: Nationwide Personal Transportation Survey (Washington, DC: US Department of Transportation, Federal Highway Administration, Office of Highway Information Management, 1993). it is estimated that Amtrak reduces traffic by at most 46.6 private vehicles per hour per freeway or toll road lane hour (between Philadelphia and New York) -- a reduction of one vehicle every 1.3 minutes (1:18).. At the least, Amtrak passengers are estimated to reduce traffic by 5.7 vehicles per lane hour (between Boston and New York) -- a reduction of one vehicle every 10.5 minutes. The greatest diversion occurs between New York and Philadelphia where a long section of the New Jersey Turnpike has only six traffic lanes. (Within close proximity are two alternate limited access highways, US 1 and US 130, which are not considered in this analysis.) Even so, this diversion of traffic accounts for barely two percent of lane capacity or six percent of a single lane's capacity in each direction -- considerably below the threshold required for construction of a new lane, much less a new freeway or toll road. Even if all Amtrak passengers were assumed to be diverted from single-occupant private vehicles, the traffic maximum reduction would be less than five percent of lane capacity.

It should also be noted that this New Jersey Turnpike section of the Northeast Corridor includes the only intercity section of interstate highway that has not been completed (and which has been cancelled): Interstate 95 from the Trenton area to the New Brunswick area. This segment would have completed the Interstate link between the nation's largest metropolitan area, New York (19.7 million) and the sixth largest metropolitan area, Philadelphia (5.9 million), the nation's densest intercity corridor. If Interstate 95 had been completed, freeway and toll road capacity would have been more than doubled. Some of the congestion in this corridor is the result of the political decisions in New Jersey to cancel Interstate 95.

Airline Traffic: It is estimated that 68 passengers daily would be diverted to airline services between New York and Washington and 21 passengers between New York and Boston. Both figures are well within the capacity of the present flight schedule.

Bus and Commuter Rail Traffic: Depending on the route segment, another 28 to 245 passengers would be diverted to buses or commuter rail, Primarily between Philadelphia and New York. again, well within the capacity of existing services.

Maximum Diversion to Private Vehicles Model: Northeast Corridor
Segment	New Vehicles per Lane Hour	Minutes Between New Vehicles	New Air Passengers: Daily	New Bus & Commuter Rail Passengers: Daily
Boston-New York	5.7	10.5	21	28
New York-Philadelphia	46.6	1.3	0	245
New York-Washington	32.8	1.8	68	89
For methodology see endnote. Includes trips made on trains operating over the Northeast Corridor to destinations beyond the Northeast Corridor.

Maximum Diversion to Airlines Model

The second model assumes a much higher diversion of passengers to common carrier (non-private vehicle) modes -- an airline market share that is typical of trips four times or more as long as rail trips in the Northeast Corridor.

Airline Traffic: Despite the large airline market in the Northeast, Boston to New York services account for less than 10 percent of Boston's Logan Airport volume, while Washington to New York services account for less than 10 percent of the volume at Washington's airports. Similarly, Boston and Washington air travel accounts for less than 10 percent of the volume at New York airports. Calculated from Air Transport 1995: The Annual Report of the U.S. Scheduled Airline Industry.

Under this model, the potential impact upon airline traffic is within the capacity of presently operating air services.

In the Boston to New York corridor, an average of 291 passengers per day are estimated to be diverted from airplanes or 93,000 passengers per year. Based upon airline industry averages, it is estimated that this passenger volume would consume only six percent of the unused capacity of existing flights in the Boston-New York corridor.

In the New York to Washington corridor, an average of 1,112 passengers per day are estimated to be diverted from airplanes or 356,000 passengers per year. Based upon airline industry averages, it is estimated that this passenger volume would consume approximately one-quarter of the unused capacity of existing flights in the New York to Washington corridor. Both calculations assume an airline load factor of 63 percent. Calculated using travel market data in Air Transport 1995: The Annual Report of the U.S. Scheduled Airline Industry. In each case, airlines could accommodate the additional passengers, maintain present load factors, and not increase the number of flights by substituting larger aircraft, such as Boeing 757s or Airbus 310s.

This finding differs from the conventional wisdom. It has been suggested that Amtrak Northeast Corridor passengers would fill 10,000 commercial airliners. In reality, if all Northeast Corridor Amtrak passengers were to fly Excludes Philadelphia to New York passengers, whose trip patterns are typical of commuters rather than intercity passengers. -- a wholly unreasonable prospect in that many such passengers travel distances that are well below the threshold for airline service For example, it is difficult to imagine a Providence, Rhode Island to New London, Connecticut passenger to make the 62 mile trip by air, or an Aberdeen, Maryland to Metropark, New Jersey passenger to make the 130 mile trip by air. Air service is simply not provided in such markets, because of air's inability to compete with highway travel times. -- Amtrak passengers would fill at most five additional Boeing 757's daily in the New York to Washington market Assumes none of the new passengers would be accommodated by the present unused capacity (which would be capable of accommodating one-half of the passengers). and would take less than one-half of present flight capacity in the New York to Boston market. Assumes each aircraft would operate nine daily one-way trips.

Highway Traffic: The impact upon Northeast Corridor highways is estimated to range from 4.7 to 39.8 private vehicles diverted per hour per freeway or toll road lane. This converts to a minimum 1.5 minute (1:30) interval between diverted private vehicles and a maximum of 12.8 minutes. This level of traffic diversion is approximately 1.75 percent of lane capacity, or approximately five percent of a single lane's capacity in each direction.

Bus and Commuter Rail Traffic: Under this model, elimination of Amtrak service would divert from 97 to 1,931 passengers to buses or commuter rail, well within the capacity of these operators. Commuter rail services in this corridor operated at only 15 to 20 percent of capacity. Calculated from Data Tables for the 1991 Section 15 Report Year (Washington, DC: US Department of Transportation, Federal Transit Administration, 1992). Commuter rail operators are New Jersey Transit and the Southeastern Pennsylvania Transportation Authority (Philadelphia). The increased commuter rail ridership would help to alleviate heavy taxpayer subsidies to transit agencies in Philadelphia and New Jersey.

Maximum Diversion to Airlines Model: Northeast Corridor
Segment	New Vehicles per Lane Hour	Minutes Between New Vehicles	New Air Passengers: Daily	New Bus & Commuter Rail Passengers: Daily
Boston-New York	4.7	12.8	291	97
New York-Philadelphia	39.8	1.5	0	1,931
New York-Washington	28.5	2.1	1,112	120
For methodology see endnote. Includes trips made on trains operating over the Northeast Corridor to destinations beyond the Northeast Corridor.

It is estimated that Amtrak's Northeast Corridor service diverts a small percentage of traffic from highways and the air traffic system.

Outside the Northeast Corridor

Use of Amtrak services has an even smaller impact outside the Northeast Corridor.

The highest diversion from private vehicles is estimated between New York and Niagara Falls, at 11.9 private vehicles per lane hour (one car every five minutes). This is less than one percent of a lane's capacity.

Maximum Diversion to Other Modes: Outside the Northeast Corridor
Amtrak Route	New Vehicles per Lane Hour	Minutes Between New Vehicles	New Daily Airline Passengers	New Daily Bus Passengers
Autotrain	2.3	26.3	18	2
Chicago-Carbondale	1.2	48.6	4	3
Chicago-Detroit/Toledo	4.4	13.5	15	11
Chicago-Grand Rapids	0.4	142.8	0	1
Chicago-Houston	1.0	61.7	14	1
Chicago-Indianapolis	0.7	88.7	0	1
Chicago-Los Angeles	0.9	65.3	107	1
Chicago-Milwaukee	2.1	28.6	0	4
Chicago-New Orleans	1.8	33.7	14	1
Chicago-New York/Boston	3.0	19.9	24	2
Chicago-Oakland	1.8	34.0	205	2
Chicago-Port Huron	1.3	47.4	4	3
Chicago-Quincy	1.0	61.5	0	1
Chicago-Seattle/Portland	1.2	50.6	138	1
Chicago-St. Louis	3.6	16.6	12	9
Chicago-Washington	1.5	40.1	12	1
Kansas City-St. Louis	1.1	55.5	4	3
Los Angeles-New Orleans-Miami	0.7	86.2	81	1
Los Angeles-Seattle	3.2	18.8	47	3
New York-Miami/Tampa	6.6	9.0	99	7
New York-Montreal	1.0	58.6	4	3
New York-New Orleans	2.1	28.4	31	2
New York-Newport News	10.5	5.7	36	26
New York-Niagara Falls	11.9	5.0	41	30
New York-Washington-Chicago	2.2	27.5	17	2
Oakland-Bakersfield	3.0	19.8	21	15
Philadelphia-Harrisburg	8.0	7.5	1	10
Philadelphia-Pittsburgh	2.7	21.9	9	7
San Jose-Oakland-Sacramento	2.7	21.9	2	6
Santa Barbara-Los Angeles-San Diego	9.1	6.6	7	28
Seattle-Portland	3.1	19.6	1	5
Washington-Charlotte	5.6	10.7	19	14
Washington-Montreal	0.6	100.0	6	1

Further, with the exception of Amtrak's Washington to New York services, Amtrak's passenger trains operate at terminal to terminal speeds that are sometimes faster and sometimes slower than intercity bus speeds and automobile speeds. For example Amtrak's Chicago to Los Angeles train requires 40 hours compared to 51 hours for intercity buses. The Chicago to Oakland train takes 52 hours compared to 48 for intercity buses. The Washington to Chicago train takes 23 hours compared to 18 hours for intercity buses. Amtrak is nearly one hour slower than intercity buses and automobiles in the Portland to Seattle market and nearly two hours slower than autos and buses in the Philadelphia to Pittsburgh market. Automobile travel times from Rand McNally, Road Atlas. Between Boston and New York, the fastest train and bus travel times are virtually the same.

The estimates above are for the weekly peak average. Amtrak ridership can be higher on particular days, but given the natural constraints of Amtrak resources (trains and schedules), even on its busiest days, Amtrak's contribution to mobility falls far short of what would be required to create "gridlock" in even its mildest form, if all Amtrak riders chose other modes of travel. Higher Amtrak load factors can be expected closer to large cities. There is also significantly more highway capacity near large cities.

In summary, Amtrak ridership has little impact on any portion of the nation's transportation system. Amtrak's six billion annual person miles are less than one-thirtieth of the unused capacity of scheduled airline services. Based upon airline load factors. Marilyn Gross and Richard Feldman, National Transportation Statistics: 1995 (Washington, DC: US Department of Transportation, Bureau of Transportation Statistics, 1995). In contrast, Amtrak services would need to be increased by atleast 35 times to accommodate the nation's air travel. Calculated from data in Marilyn Gross and Richard Feldman, National Transportation Statistics: 1995 (Washington, DC: US Department of Transportation, Bureau of Transportation Statistics, 1995). Amtrak load factor is estimated at 60 percent. Amtrak has a negligible effect on congestion of the nation's highway and air traffic systems only negligibly.

3. Amtrak and the Market

Market Share

More than 90 percent of intercity trips are made by cars and other private vehicles. Airlines contribute more than one-quarter of intercity trip mileage, while two-thirds of intercity mileage is provided by private vehicles. Intercity buses provide more than one percent of trips but contribute less than one percent of the mileage. Amtrak's share of intercity trips is the smallest of any mode -- 0.4 percent measured by person trips and less than one percent if measured by person miles: Based upon NPTS "longer trip" data. Patricia S. Hu and Jennifer Young, 1990 NPTS Databook: Nationwide Personal Transportation Survey (Washington, DC: US Department of Transportation, Federal Highway Administration, Office of Highway Information Management, 1993).

One justification for continued subsidies for Amtrak is that it provides intercity transportation for poor and middle income passengers who cannot afford airline tickets and who don't have access to cars. Yet, the poor are no more likely to travel by Amtrak than by most other modes. Lower income persons are 2.7 times more likely to travel by bus as on Amtrak, and they are just as likely to travel by private vehicles and airlines. And Amtrak passengers are far more likely to be affluent than patrons of other modes. Travel on Amtrak by persons with incomes above $40,000 is 3.5 times higher than buses and nearly 1.5 times higher than airlines.

Additionally, Amtrak caters to its comparatively affluent market through the provision of "luxury" services, such as sleeping car services and first class ("parlor car") services. Along the Northeast Corridor, Amtrak is the only major carrier offering first class service -- airline shuttles that operate between Washington and New York and between Boston and New York offer only "coach" class service. Further, unlike Amtrak's first class services, these airline services do not require advance reservations, and they guarantee a seat to any passengers reaching the gate by boarding time. Amtrak's first class fares in the Northeast Corridor are similar to airline shuttle fares. The highest weekday first class Amtrak fares from Washington to New York is $156 compared to $160 for airline shuttles, which do not offer first class service. Amtrak's highest Boston to New York first class fares are $72, compared to $160 for airline shuttles (as of September 25, 1995).

Accessibility

Americans are not dependent on Amtrak for mobility. Amtrak falls short of being a national transportation system. Three states in the contiguous 48 states, Oklahoma, South Dakota and Maine are not served by Amtrak trains. Amtrak trains do not serve 23 of the 100 largest metropolitan areas in the contiguous states.

Moreover, 10 other metropolitan areas are served by Amtrak train routes three or fewer days per week. These include four metropolitan areas with more than one million residents: the nation's ninth largest (Dallas-Fort Worth, Texas: 4,215,000), the tenth largest (Houston-Galveston-Brazoria, Texas: 3,962,000), the 19th largest (Phoenix-Mesa, Arizona: 2,330,000), and the 30th largest (San Antonio, Texas: 1,379,000). Other metropolitan areas among the top 100 with Amtrak route service four days per week or less are Austin-San Marcos, TX (901,000); Las Vegas, NV (971,000); Birmingham, AL (859,000); Tucson, AZ (690,000); El Paso, TX (628,000); Little Rock-North Little Rock, AR (526,000); Mobile, AL (496,000); and Spokane, WA (381,000). Grand Rapids-Muskegon-Holland, MI (964,000) has service only four days per week.

By comparison:

All 100 metropolitan areas are served by the highway system. All but two of the 100 metropolitan areas are served by the interstate highway system -- Santa Barbara-Santa Maria-Lompoc, California is connected to the interstate system by a freeway, while McAllen-Edinburg-Mission, Texas is connected to the interstate highway system by a four lane divided highway.

All 100 top metropolitan areas are served by intercity buses with service at least five days per week. Analysis of information in Russell's Official National Motor Coach Guide, September 1995 (Cedar Rapids, IA: Russell's Guides Inc, 1995).

All but three 100 metropolitan areas have scheduled air service at least five days per week (Canton-Massilon, Ohio, Lakeland-Winterhaven, Florida, and Stockton-Lodi, California have no scheduled air service). Analysis of information in Skyguide: The Pocket Guide to North American Airline Schedules (New York, NY: American Express Publishing Corporation, 1995).

Amtrak service is available to a relatively limited number of communities. There are one-and-one-half times as many airports with scheduled service as there are Amtrak stations and nearly 10 times as many bus stations.

International Passenger Rail Usage

Passenger rail services are used more extensively in some other developed nations than in the United States (especially European nations). US and European market shares for airlines and passenger rail combined are virtually the same. Highway travel in the US and Europe are similar, with European automobile dependence being more than 92 percent of the US rate. Europe's bus market share is 3.5 times that of the US. Comparison is for all travel, urban and intercity. US data has been adjusted to include light rail (tram) person miles in the rail figure.

A number of factors contribute to the higher US usage of airlines in comparison to passenger rail. It is to be expected that airline usage would be higher in the US because of greater distances and lower population densities. The airline industry in the US is far more competitive than in Europe; US airlines provide more frequent and less expensive service. Nonetheless, passenger rail's market share in Europe dropped by nearly 20 percent in the 1980s, while the airline market share increased by 60 percent. The Future Development of the Common Transport Policy: A Global Approach to the Construction of a Community Framework for Sustainable Mobility (Luxembourg: European Communities, Office for Official Publications of the European Communities, 1993). And, European automobile usage is increasing at a considerably faster rate than that of America despite much higher petroleum prices, higher automobile prices, higher population densities, more centrally oriented cities, shorter distances, and far more comprehensive public transit systems. People, Cities and Cars: An Analysis of Avoiding the Collision of Cities and Cars (Washington, DC: Highway Users Federation, 1994).

4. Amtrak and Energy Efficiency

Amtrak is often cited as being energy efficient in comparison to competing modes of transport. However, intercity buses are far more fuel efficient than Amtrak. Amtrak is more energy efficient than automobiles, but the circuitousness of Amtrak routes For example, Amtrak's Chicago to Oakland route is 2,425 miles. The highway mileage is 2,153 miles, and the airline mileage is 1,850 miles. and the energy losses attributable to generation and distribution of electricity considerably reduce Amtrak's advantage over other modes of intercity travel.

There is an average 70 percent energy loss as a result of a circuity for Amtrak, a 20 percent loss for highways (autos and buses). There is a further 20 percent Amtrak loss in energy efficiency attributable to electric power generation and distribution (most Amtrak Northeast Corridor trains operate on electric power). Data from Transportation Statistics Annual Report: 1994 (Washington, DC: US Department of Transportation, Bureau of Transportation Statistics, 1994). Depending on the choice of mode for initial trip origin and final trip destination, Amtrak may have no real advantage over the automobile. Unlike the automobile, Amtrak does not provide door-to-door service. Amtrak passengers get to and from the stations by walking or, more likely, by automobile, taxi, or public transportation. Except in the case of walking, these small trips add to total energy usage. Because most energy is consumed in stopping and starting a vehicle and operation at low speeds including idling, the auto or taxi trip to the station may eliminate any net energy saving from taking the train. Further, most forms of public transit at average levels of patronage are less efficient than automobiles at average occupancies. See Wendell Cox, Jean Love, and Samuel A. Brunelli, "The Liveable American City: Toward as Environmentally Friendly American Dream," The State Factor, Vol.19, No.3 (Washington, DC: American Legislative Exchange Council, August 1993).

A Congressional Budget Office study concluded that:

... even with future improvements in Amtrak's operating efficiency, the Northeast Corridor rail service will yield only limited energy savings, while the rest of the system will yield an energy loss. The (Amtrak) rail system as a whole will yield a net energy loss. United States Congressional Budget Office, Federal Subsidies for Rail Passenger Service: An Assessment of Amtrak (Washington, DC: Congress of the United States, Congressional Budget Office, 1982).

5. Amtrak Costs and Financing

Passenger Rail and Profits

All Amtrak routes operate at a loss. United States General Accounting Office, Intercity Passenger Rail: Financing and Conditions Threatens Amtrak's Long-Term Viability (Washington, DC: United States General Accounting Office, Resources, Community, and Economic Development Division, 1995). According to conventional wisdom, passenger rail services are not profitable any where in the world. This is increasingly not the case. See Reason Foundation's Privatization reports 1991 through 1995 (Los Angeles, CA: Reason Foundation, multiple years).

Japan's passenger rail system has been broken into six publicly owned operating companies; three earn profits on their total operations (infrastructure, capital, and operations). The other three companies sustain small losses.

New Zealand Railways has been privatized. It now earns a profit on passenger rail services and has begun to restore services that had been cancelled during public ownership. As is typical of government-owned railroads, New Zealand Railways had been significantly over-staffed and has reduced its staffing by two-thirds. When the railroad was government-owned, subsidies were required for both passenger and freight services.

A private company operates a profitable passenger rail service between Vancouver, British Columbia, Banff National Park, Jasper National Park, and Calgary, Alberta (600 miles). This recreational service might be thought of as a "land cruise," serving primarily recreational travel. Amtrak services between Chicago and west coast cities serve a similar purpose. Operated by the Great Canadian Railtour Company.

A number of European countries are restructuring their passenger rail systems through competitive strategies. Sweden allows private companies to offer competing passenger services over its government-owned tracks, This general approach is being adopted in other nations as well with competing rail services operated over the same tracks. It is similar in concept to the air traffic control system, which allows competing airlines to use the same airspace and airports. and, in response to the competition, the government-owned passenger railway has reduced its unit costs by 30 percent. The Netherlands intends to make most of its passenger rail services profitable and will minimize subsidies by competitively contracting with private companies to operate loss making services. Germany is preparing to privatize its passenger rail system with the objective of minimizing taxpayers subsidies.

But the efforts to eliminate or minimize taxpayer subsidies in passenger rail dependent nations came only after a heavy price was paid. Government-owned rail systems have a formidable propensity to incur huge losses. Under government ownership, Japanese rail systems incurred a debt of $350 billion -- nearly $3,000 per capita. The German federal government is assuming $45 billion in government railway debt -- more than $500 per capita. It is virtually certain that these government railway debts will be the responsibility of general taxpayers. However, where passenger rail services are converted to competitive strategies, general taxpayers will no longer face a future of spiraling subsidies.

Amtrak Cost Trends

Amtrak has vacillated between extreme cost escalation and cost control throughout its history depending on the availability of subsidies. From 1972 to 1980, federal subsidies more than doubled, while Amtrak unit costs (cost per passenger car mile) escalated more than 60 percent (inflation adjusted). From 1980 to 1992, however, federal subsidies to Amtrak declined, and Amtrak's unit costs declined by nine percent (inflation adjusted). It is likely that a substantial increase in taxpayer subsidies to Amtrak would be largely consumed by escalating unit costs, rather than providing substantially higher levels of service as is typical of unregulated monopolies, such as Amtrak. This dynamic has been noted in transit. A strong correlation has been shown between the rise in total revenues (fares, subsidies, and other revenues) among 109 US public transit agencies. (See Wendell Cox and Jean Love, "Controlling the Demand for Taxes through Competitive Incentives," The State Factor, Vol.17, No.12 [Washington, DC: American Legislative Exchange Council, December 1991].) A similar effect has been demonstrated among Canadian transit operators. (See Wendell Cox and Jean Love, "How the Competitive Market Can Make Canadian Transit Efficient and Effective," Essays in Canadian Surface Transportation, Filip Palda, ed. [Vancouver, BC: The Fraser Institute, 1995].) Generally, higher increases in costs per mile are associated with larger increases in total revenues, reducing overall efficiency. In response to this effect, a number of developed nations have or converting their transit systems to competitive contracting or other competitive strategies (Sweden, Finland, Denmark, Australia, New Zealand and the United Kingdom are examples). Unlike enterprises operating in a competitive environment, in monopolies, neither management nor labor have sufficient competitive incentives to minimize costs.

User Fees and Taxpayer Subsidies

Amtrak fares per person mile are higher than bus fares and slightly lower than air fares. Unlike the other modes of transport, Amtrak receives substantial taxpayer subsidies. In 1992, taxpayer subsidies included direct operating and capital grants of more than $700 million and a payment by the federal government of $150 million for employee retirement expenses. United States General Accounting Office, Intercity Passenger Rail: Financing and Conditions Threatens Amtrak's Long-Term Viability (Washington, DC: United States General Accounting Office, Resources, Community, and Economic Development Division, 1995). Amtrak total costs per person mile, including taxpayers subsidies, are approximately three times as high as airline and bus costs and more than double automobile costs. Amtrak costs include the federal government contribution of $150.2 million for employee benefits. Airlines provide trust fund subsidized service to more than 100 communities under the federal government's "essential air service" program, underwhich the federal government seeks competitive proposals from airlines to operate services to more remote communities (the present funding level is approximately $30 million). Airline public facilities are user financed. Public facilities for automobiles are financed by user fees (see below). Higher costs per automobile person mile are popularly cited, but generally apply to new cars. This calculation is based upon actual consumer expenditure data. All figures calculated from data in Marilyn Gross and Richard Feldman, National Transportation Statistics: 1995 (Washington, DC: US Department of Transportation, Bureau of Transportation Statistics, 1995). Airline advance purchase tickets and services by discount airlines tend to provide air service for even lower costs. According to a study by Nathan Associates Inc., the total federal subsidies per passenger trip, net of user fees, is over $54 for Amtrak, $6.48 for commercial air carriers but only $.05 for intercity buses.

There is a substantial difference between user fee financing and taxpayer subsidy financing.

Facilities and services that are financed by user fees are paid for by people who use them. For example, people who pay for groceries with their own money pay the equivalent of a user fee.

Facilities and services that are financed by taxpayer subsidies are at least partially paid for by people who do not use them. For example, people who pay for groceries with food stamps do so with taxpayer subsidies.

With respect to both highways and airlines, vehicle capital and operating expenses are fully paid by users. For example, see Rayola S. Dougher, Estimates of Annual US Road User Payments Versus Annual Road Expenditures (Washington, DC: American Petroleum Institute, March 1995) and People, Cities and Cars: An Analysis of Avoiding the Collision of Cities and Cars (Washington, DC: Highway Users Federation, 1994). Public facility costs are financed through user fees. Highway user fees are primarily excise taxes on fuels, truck weight-distance taxes, and vehicle registration and license fees. Airline user fees include airline ticket taxes, passenger facility charges and airport landing fees (included in ticket prices). By contrast, nearly 40 percent of Amtrak capital and operating costs are paid by taxpayers - $850 million by federal taxpayers and additional subsidies by state taxpayers. Public highway and airline facilities are financed through a quasi-market system operated by government. Federally-levied user fees are placed in trust funds for each mode. Each trust fund has accumulated a large balance ($12 billion in the air trust fund and $22 billion in the highway trust fund), which, like the Social Security Trust Fund, has been used to reduce annual federal budget deficits. Budget of the United States Government: Fiscal Year 1996 (Washington, DC: Superintendent of Documents, 1995). If all intercity travellers were subsidized to the same extent as Amtrak passengers, an annual federal taxpayer subsidy of $125 billion would have been required in 1992 -- as much as the nation spent on Medicare. (Applies the Amtrak taxpayer subsidy per passenger mile to all intercity travel. Based upon data from Patricia S. Hu and Jennifer Young, 1990 NPTS Databook: Nationwide Personal Transportation Survey (Washington, DC: US Department of Transportation, Federal Highway Administration, Office of Highway Information Management, 1993).

The Highway Users Federation traces its origins to 1932, when its predecessor organization was formed by General Motors President Alfred P. Sloan Jr. to advocate good, all-weather roads in every state to "get the farmers out of the mud." HUF continues to advocate safe and accessible highways. Many industries are dependent upon highways to be successful, including automotive, travel and shipping. Almost 80 percent of all U.S. expenditures for passenger and freight transportation -- $800 billion annually -- are highway-related. Highway passengers spend over $350 billion per year on their travel -- about 12 percent of the nation's GDP. And, freight movement over highways counts for 80 percent of all shipping.

HUF works for better, safer highway transportation through public policy analysis, public information and education, and legislative and regulatory advocacy. It believes that good highways are essential to a strong economy and the costs of improving highway transportation should be borne by the users. HUF also believes that taxes collected to pay for better highways should be spent for that purpose, and that purpose only.

HUF has over 200 individual and 100 corporate/association members, including the American Automobile Manufacturers Association, the American Automobile Association, the American Bus Association, the American Petroleum Institute, the Travel Industry Association of America and the American Trucking Associations.

Wendell Cox and Jean Love are public policy and transportation consultants with the Wendell Cox Consultancy. Both have worked on projects in the United States, Canada, Australia, Africa, Europe and New Zealand.

Mr. Cox was appointed to three terms (1977-85) on the Los Angeles County Transportation Commission by Mayor Thomas Bradley. He holds an MBA from Pepperdine University in Los Angles. Ms. Love earned a Masters degree in from Southern Illinois University in Edwardsville.

They are co-authors of many books and papers, including Moving America Competitively (1989) and The Livable American City (1993). Their practice is based in the St. Louis area.