Bloomberg weighs in on reforming US rail travel

OneAmericaA few days after I proposed an expansive design to reform US rail travel, Bloomberg proposed some smaller scale reforms to help get Amtrak back on the rails.

Their first proposal, to stop funding Amtrak shortfalls and instead provide Federal matching funds for tickets sold, is such a practical and obvious idea that I’m a little surprised it has to be pointed out. Being careful about what you’re incentivizing is Economic Rule #1.

Their second proposal, to give Amtrak greater control over labor negotiations, is a bit of a mixed bag.  I agree that paying American railroad infrastructure workers more than twice what similar workers make in Europe is unacceptable; where else can working-class folks look west across the Pond for a such a sweet deal?  But, Bloomberg goes on to propose labor changes to enable shutting down money-losing routes.  Particularly after noting that Amtrak inefficiency can be traced back to the Feds enabling inefficiency by funding shortfalls, it is a bit myopic of Bloomberg to start chopping away connections that are in the red before a new business culture of efficiency can take hold.

A better vision is to recognize that rail travel is a subset of inter-city travel, and incentivize expanding the traveler base by scooping up customers from crowded freeways and airlines, by making rail travel easier to understand, expanding the point-to-point possibilities, and simplifying the often confusing process of getting from gate to seat. All of these are addressed in my One America proposal.

The third proposal, letting states pick up some of the matching funds tab per ticket, is sound in theory but informed by bad politics disguised as economics.  Bloomberg ties state-level subsidies with state-level decisions about what lines get shut down. The “local decisions” argument is one that only works in a localized and fully competitive market, which is simply not the case (and cannot be) in a national rail system. This is why automobile and air travel are both massively subsidized by the USG. States certainly could help rail travel by pitching in where possible, but decisions about a national infrastructure that supports a fluid national market cannot be left to the local vicissitudes of that market.  That’s like trying to get more soup by pouring soup into a bowl made of soup; you actually end up with less soup, not more.  The structure that enables the competitive interaction of various market ingredients—by ensuring the prerequisite of free market exchange, easing market friction, and managing externalities/accountability—must be solidly and singularly designed at the strategic level from a long-term, big-picture perspective.

It is telling that Bloomberg compares Amtrak to the Postal Service, saying that “the Postal Service is trying to save itself … Congress ought to let Amtrak do the same.” The US Postal Service—established by America’s Founders in Article I of the Constitution—is struggling because a Congress in the pockets of private delivery services sabotaged its bottom line with bizarre and unprecedented personnel costs. Similarly sabotaging America’s national railroad heritage by implementing pro-closure reforms is not the solution. If the idea behind Bloomberg’s suggestion to let states pick up part of the subsidy is to “let lower levels of government decide whether the service was worth the cost,” this would simply perpetuate the small-minded lack of vision that hamstrings Amtrak (and the entire USG) today.  States, already starved of resources by bending over backward to feed the insatiable appetites of private sector business, can hardly be expected to make rational, long-term decisions in the best interest of the nation’s economic infrastructure.

 

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