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Riding that Train

10:53 AM, Nov 29, 2012 • By GEOFFREY NORMAN
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In Washington there are two kinds of government expenditures.  Those that are too small to sweat and those that are too large to do anything about.  An example of something too large would be Medicare.  In the too small category, there is Amtrak, which gets a billion or so in subsidies every year. In Washington, that is chump change. Not worth the trouble it would take to pry it from the clenched fingers of those who receive it.  


Still, some Republicans in Congress are making the effort.  And, unsurprisingly, Democrats and Amtrak officials are resisting.  While it is hard to work up much of a feeling of suspense about the outcome, the arguments in favor of continuing the subsidies do have a kind of charm. According to reporting in the Hill, Laura Richardson, a representative from California, is arguing that the country should continue to subsidize Amtrak for two reasons.  First, because we give more money to other things:

“We spent more in one year with the oil and gas and energy companies and their industry than we have spent in the life of the program of Amtrak.”  

And then, Amtrak should continue receiving taxpayer money because it is doing to well.

“If Amtrak were truly as bad as some of the hearings have suggested, we would have seen headlines like ‘Amtrak has record low ridership,’ ” Richardson said. “Instead, Amtrak's ridership is booming this year, with 11 consecutive monthly ridership records. In each month of this current fiscal year, Amtrak has posted the highest ridership total ever for that particular month." 

One wonders why, if Amtrak is doing so well, it is still losing money and needs help from a government that is a cool trillion in the hole this year. Does it really make sense for a government that is broke to borrow money in order to hand it over to an operation that has been running in the red since 1971? Could Amtrak not raise its fares?  

Or, perhaps, find a way to make money on food service instead of charging $9.50 for a hamburger that it costs $16 to make.  The hamburgers are, incidentally, virtually inedible but this could, no doubt, be counted as a virtue according to Representative Richardson's sort of logic.  If the hamburgers were tasty, you see, then demand for them would be much higher and Amtrak would lose even more money by selling them.  By serving tasteless burgers, Amtrak is able to keep demand low, thus saving the taxpayers money.  

And, of course, any operation that can do that consistently, needs to be rewarded with subsidies. A billion a year is a bargain.

Milo Minderbinder economics in action.

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