With Amtrak Subsidy, Biden Takes Taxpayers for a Ride

If Acela is such a great business, why does the federal government need to loan it money?


Richard B. Levine/Newscom

Pretty much everything that's wrong with government is encapsulated in the recent announcement of what The New York Times described as a "$2.45 billion loan" to Amtrak to buy new Acela trains to replace the ones that currently ride the rails between Washington, New York, and Boston.

To start with, there is the lack of humility. The Times reports that "Vice President Joseph R. Biden Jr., a longtime Amtrak supporter who frequently travels by train between Washington and his home in Delaware, announced the loan at the station in Wilmington that is named in his honor." Sure enough, Amtrak in 2011 renamed the Wilmington Delaware station the Joseph R. Biden Jr. train station. Biden, in attendance at that event, reportedly protested, "the truth is, I don't deserve this."

The modesty implied by Biden's accurate statement apparently didn't extend to his either declining the honor or declining to appear at the event. Every once in a while a politician in Washington tries to pass a law preventing the government from naming things after living politicians, or at least those who are still in office. Adopting such legislation might make America feel a bit less like Stalingrad. But no such law has been enacted.

Then there's the lack of a stable dollar. The first set of Acela trains, deployed about 15 years ago, cost about $1.2 billion; the new set will cost about twice that. Is today's dollar worth half what it was worth 15 years ago? Or do these rapid price increases apply only to things the government subsidizes, like health care, college education, and passenger railroads, and not to the part of the economy in which many of us earn our wages?

If Acela is such a great business, why does the federal government need to loan it money? Why can't it raise funds the way other, competing, businesses, like airlines do, by selling bonds or issuing stock?

Instead what's happening is the government is backing one competitor in the market for travel between Boston, New York, and Washington.

It just so happens that, as someone who lives in Boston but travels frequently travel to New York and Washington for work and family reasons, I have some experience with this route. (I've also lived in New York and Washington.) I've tried flying on a variety of airlines. I've tried taking the bus. I've tried driving it myself. I've tried driving to New Haven, Connecticut, parking there, and then taking a MetroNorth commuter train. I've tried both the Acela and the slower "northeast regional" service, which seems a lot like what used to be Amtrak's faster and fancier Metroliner service.

Unfortunately, there's no perfect way to make the trip. If the plane works, it's faster, but if you get caught in a rain or snow or wind delay or miss the flight because of a ridiculously long security line, then the plane takes longer. Sometimes driving is faster door-to-door, but if you are driving it's harder to get much work done while traveling. The bus is the cheapest but it takes longest. Sometimes if you book in advance flying is even less expensive than taking the train.

The idea of putting any federal tax dollars at all to work to shave a few minutes off one particular method of making this trip seems, to me at least, to be an odd one. Arguably, I might be among the beneficiaries. But that brings us to a final flaw with government: unintended consequences. Government "investment" — the preferred euphemism for borrowing, taxing, and spending—in Amtrak may have the perverse effect of making it less profitable for airlines to run competing flights, and less profitable for private entrepreneurs to invest in competing technologies, such as a hyperloop. If that's the case, then Amtrak will be able to jack up its prices. The railroad already has the benefit of not subjecting its customers to the invasive security screenings that the government requires of airline passengers.

Acela passengers, in other words, may think they are getting a subsidy. But they're really being taken for a ride, deprived of the speed provided by the innovation and competition of a genuinely free market.

NEXT: No Innovation Without Regulation: 'Safety Experts' Alarmed by Uber's Self-Driving Cars in Pittsburgh

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  1. The gov't needs to lend it money so they can keep the trains so clean.

  2. Why are we the only first world country that doesn't have high speed rail? Why can't we have the nice things that other countries have, like free health care and free high speed trains? Because of you irredeemable gun nuts in your deplorable basket, that's why!

    1. Exactly. We need more free stuff so everyone can be happy and harmonic. If there are no people in want, then we have no more strife.

    2. A person that I know, who is otherwise mostly libertarian, can't think through this fallacy. She thinks that because trains work so well for her fellow Japanese, that it would make American transportation more convenient. The one difference is that the vast majority of Japanese trains are privately owned, though from what I've heard, that business is also full of cronyism.

      1. Have you ever asked her how it is that there could be a disaster of the proportion that was the Fukushima tsunami and how there was no looting at all? Can you imagine if that would have been Philly or Baltimore? Just saying, Asians as a society seem to be a little more orderly than Murikans, which might make things work in a more orderly fashion. Then there is the paradox of the Asian markets I shop at and how dangerous the parking lots are. I guess because those are American Asians and they've done went wild on us.

        1. That's a common perception that even she probably would buy, but I'm skeptical about it. As orderly as Japanese society is, the average standard of living and interior cleanliness seems to be much worse than here, at least in my opinion. I honestly think that the private train lines make a huge difference, because even with the local cronyism involved in creating the routes, businesses are still more flexible and do a much better job with scheduling and building lines that actually appeal to customer demand.

        2. Also, you're confusing the Japanese market from the Chinese market. Chinese market chaos is something to be seen to be believed.

          1. confusing the Japanese market from the Chinese market

            The idea that Japanese people and Chinese people can be collapsed to "Asian" is, frankly, racist.

            Their cultures and behaviors are very, very different.

            1. True Han are not Uyghur nor Mongol and they are very different which is why Nippon is still mostly hermetic and frankly the most bigoted and insular country I have lived in, though I've only lived in 4 outside the US. I think just like with Uniak people, race may be an open issue as opposed to ethnicity within race. When someone says "white" is a race I laugh my ass off at their ignorance and go-centrism.

    3. One our population dynamics and transit patterns do not support rail especially HSR. People in Europe and Japan mostly live in dense urbans areas with rural land in between. Meanwhile we live in smaller urban areas with suburbs mostly in between. Only in the Northeast corridor do trains make sense. Second those other lines all rely on government subsidies to run and they make it too costly to drive long distances. Americans like their cars where it is too far to drive you fly.

  3. "less profitable for private entrepreneurs to invest in competing technologies, such as a hyperloop."

    Except the hyperloop is the brainchild of the biggest subsidy pimp of all in Musk right?

    How about: Trains are nostalgic at best and went to the back of the line a long time ago for a reason.

    1. Thing is, if you have a hyperloop, the train is traveling at a very high speed and so is a great target for terrorists. So you get TSA lines while boarding the train. Now, it takes you 2 hours to get from DC to Philly on the train. With hyperloop, you get there in 15 minutes, but you just spent 2 hours in the TSA line with your shoes off getting an anal probe, and when you arrive, discover that TSA agents have stolen half the stuff from your backpack and you have no hope of ever getting it back. Sounds like a really brilliant idea, let's spend a few trillion on that.

    2. Hyperloops would probably be an even more expensive boondoggle than trains already are due to the types of materials necessary to build one and the lack of usable capacity relative to other forms of transport. Planes should be much more efficient and affordable, but on top of TSA, even deregulation didn't make that industry a free-market, and will not be unless international carriers like British Airways or RyanAir are allowed to fly domestically.

      1. And I am sure the government as grantor of rights would ensure not only are the routes weather insulated and geo-stable but resistant to access like our airport flightlines.

  4. We as a country are at a crossing. We must rail against runaway subsidies.

    1. Fist, you are going to push this thread into a dark territory.

      1. Fist is Casey Ryback?

        1. No, he is the guy who runs Grazer One. Grazer One is how Fist is able to post first. Think about it.

          1. And don't even get me started on the plot to Under Siege 3: Ryback in Space.

    2. This is wisdom posing as creativity

  5. I was recently on vacation in Europe with my wife. We used a lot of trains while there, and some countries were a little better, but the amount of time we wasted waiting was unbearable. It turned a 30 minute car ride into a 2 hour trip. Walking to the station, waiting, getting off, wait for a connection, walking to the destination. It just ate up a lot of time.

    We eventually just started using Uber, and it was a huge upgrade. We wasted a lot less time getting around.

    1. You rich Americans are disgusting!

      1. Disgusting and deplorable, and that's just the way we like it.

        1. You forgot ugly amercaine

    2. Years ago took a business trip to Germany and turned it into a family vacation- Euro Passes for all. Rode the the trains all over - It was great! We enjoyed it so much I requested (and got ) an assignment there. In six years we took the train maybe twice (and wished we driven). None of my German friends ever took the train anywhere.

      1. Huh. The trains were full of Germans when I lived there. Probably just losers like me.

        1. There is no contradiction there. Most people who take the train in Germany are German; most Germans don't take the train. As I recall, only 10-15% of all long distance trips are by train. The people who take the train within Germany are generally financially better off and not in a hurry.

    3. The old world doesn't waste anything physical. What it wastes is time and energy and life (the least renewable resource there is) - paraphrased from "the discovery of freedom"

    4. When i was stationed in Japan a train ride I took on the weekends was 4 hours while driving was 2. The problem was tolls alone were 45 bucks each way.

  6. My impression has always been that the Northeast Corridor (Acela's route) generally is fairly profitable. It's just that it's tacked on to a transcontinental rail service that sucks up a boatload of money. The political class won't ever let the profitable route be severed from the cash sinkhole because having the profitable line subsidize the rest of the monstrosity is the entire point of the system.

    1. No, it isn't profitable. Amtrak's revenues on the Northeast Corridor can cover operating costs, but they don't come close to covering capital costs (such as those shiny new Acela trains).

  7. RE: With Amtrak Subsidy, Biden Takes Taxpayers for a Ride
    If Acela is such a great business, why does the federal government need to loan it money?

    Acela is a great company. It only takes a few trillion dollars to ensure their executives and the politicians they have in their back pocket get sufficiently rewarded for their hard work. All us taxpayers have an unending flow of cash, so why not share it with the politically connected? Giving this company (and their bought off politicians) the correct message all the little people want to here, ie., cronyism is alive and well in country. Besides, I'm sure everyone here would have a guilty conscience knowing they didn't contribute their fair share for furthering cronyism and political corruption in our country.
    That would be un-Amerikan.

    1. Sounds like FannieMae and FreddieMac.

  8. I wonder how much money would be taken in if the 1040 forms had an additional line where your tax calculation goes: "I am increasing my taxes by $10 to help offset the ground transportation costs of all those who are afraid to fly but want to see the Rockies or visit Disneyland but are afraid to fly."

    1. I'd like to see it a step further...heres what you are paying to the national debt, to EPA, to DOE, to State, Defense, DOT, Treasury, GSE's (listed). Personalize it ya know?

  9. Why do they need new trains now? 15 years is nothing, especially for an electric locomotive. Amtrak had some old ones they inherited from the Penn RR that were built in the 1930s and lasted until the 80s. They still have passenger coaches that were built in the 70s that I see on the regional service all the time.

    I haven't taken Acela, the last time I took the regional was probably around 2002 and the cars smelled like open toilets and it was delayed 2 hrs.

    1. The subway cars I ride every day are 40 years old and serviceable enough. This is more like the "new stadium every 20 years" boondoggle.

  10. Also, one major reason why air travel between New York and DC is so congested and inconvenient is because the government slot-controls Reagan, Laguardia, and JFK. This means that two airlines, American and Delta, have a virtual duopoly on this route because other carriers don't have enough slot allocations to compete on frequency. It's an absurd system.

    1. So uhm....take Acela! LOL not that government picks winners and losers.

  11. It's been awhile and this may no longer be true, but where Acella beats flying is departure. No TSA. Just climb on board, find a seat (with leg and shoulder room), and shortly after the train just pulls silently away. Every time it's like - God that was nice!

  12. Biden coined the term 'drug czar' after he saw the movie Reefer Madness.

  13. This article is very interesting.

    1. Not really, no. So, where could I score a nice pair of sunglasses?

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  15. Boston -> DC, I frequently take American's flight from MHT-DCA, often as low as $82 each way. No way the train can beat that. And MHT is an easier airport to get into and out of than Logan. Boston -> NYC, GoBus. Picks up in Newton, drops you in midtown, and can be as low as $8 each way. (Around $20 if you book last minute). Slightly longer than the train, but you can work the whole way. It can take as long getting from La Guardia into Manhattan as the flight from Boston, so the shuttle is pointless.

  16. Amazing how the docents at Reason conveniently tell only half a story when it comes to how our transport system was actually built-and maintained-by public funds.

    When the concept of the common good was still believed in, Eisenhower evidenced how the Interstate Highway System was to be built and maintained from the public trough for the public interest. After several mid-air crashes, Eisenhower, followed by Kennedy, explained that for the common good the Air Traffic Control System would be built and maintained from the public trough for the public's interest. Both air and highway were provided by Congress their own, siloed, dedicated trust funds financed by their mode specific taxes, and now, general funds. Both air and highway infrastructure were financed by the public for the benefit of the privately-owned airlines, buses, truck, and autos--none of which ever has paid actual user fees to cover costs for construction and maintenance.

    Long before the free market, minimum government think tank promoters sounded their siren call against the federal subsidies to Amtrak (conveniently omitting alarm at significantly greater such subsidies to air and highway), they
    are perfectly accepting of subsidizing the pharmaceutical industry and its monopoly products; subsidy on sugar creating a monopoly and pushing out of our country practically all of the confectionary industry; our subsidies to oil, etc, etc?

    1. When the concept of the common good was still believed in, Eisenhower evidenced how the Interstate Highway System was to be built and maintained from the public trough for the public interest. ... (conveniently omitting alarm at significantly greater such subsidies to air and highway)

      Bullshit. The federal highway system is more than paid for by fuel excise taxes alone, let alone all the other taxes drivers pay; it isn't "subsidized". If anything, drivers subsidize non-drivers who benefit from the system.

      Furthermore, the fact that some modes of transportation are subsidized isn't an excuse to make the problem worse by subsidizing even more modes of transportation. Government should stop rescuing or subsidizing or propping up or regulating both air travel and rail travel.

      they are perfectly accepting of subsidizing the pharmaceutical industry and its monopoly products; subsidy on sugar creating a monopoly and pushing out of our country practically all of the confectionary industry; our subsidies to oil, etc, etc?

      Again, utter bullshit. It is idiots like you who make the same idiotic arguments about sugar subsidies, agricultural subsidies, telecom regulations, etc. as you do about rail. "Minimum government think tank promoters" are pissed off by all that crony capitalism.

      So, fuck off slaver.

  17. Screw the taxpayer being SOP, nothing to see here, move along.

  18. " the truth is I don't deserve this" is one of this truthier things I've heard come out of biden's blowjob hole. Traditionally things are named after the people who paid for them.

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