DRI-168 for week of 5-17-15: Who Killed the Amtrak 8?

An Access Advertising EconBrief: 

Who Killed the Amtrak 8?

At 9:21 PM on Tuesday, May 12, 2015, Amtrak Northeast Regional passenger train 188 was proceeding northeast en route from Washington, D.C. to New York City. Specifically, it was traveling through Philadelphia a few miles north of 30th Street station in an area called Frankford Junction. Passing through a short stretch of eastbound track, it came to a fairly sharp northeast curve. The speed limit for a train entering the curve was 50 mph. According to the train’s “black box,” or data recorder, it was traveling at 106 mph as it entered the curve. The train’s engineer apparently applied emergency brakes immediately after reaching the curve, but a few seconds later – the point at which the data recorder stopped receiving data – the train had slowed only to 102 mph.

The reason the data recorder ceased operations was that the train derailed at that point. Seven people were killed at the crash site and one died subsequently; around thirty others were hospitalized with injuries of varying severity. The dead included the CEO of a technology firm and a naval-academy midshipman.

Reactions were predictable. Philadelphia Mayor Michael Nutter solemnly, somberly lamented the tragedy. Federal-government regulators stressed the desirability of transportation safety and passage of time necessary to decelerate a train. And, most predictable of all, politicians and political commentators placed blame on their political opponents.

Murdering Republicans Strike Again

An activist liberal policy group called “Agenda Project Action Fund” made a video giving their version of the events leading up to and including the derailment. It was titled “Republican Cuts Kill Again.” The “cuts” referred to were budget cuts by the U.S. Congress, a majority of whose members are currently Republican. An author named Josh Israel of “Think Progress” wrote an article titled “Currently Available Technology May Have Prevented Fatal Amtrak Crash, But Congress Never Funded It.” Politico.com chipped in with the headline “House panel votes to cut Amtrak budget hours after deadly crash.” Rep. Nita Lowey sententiously volunteered that “starving rail of funding will not enable safer train travel” – without, of course, mentioning that the combined federal and state Amtrak budgets have increased every year since 2008.

The immediate questions that arise are: What is this “currently available technology?” Why didn’t Congress fund it? But that doesn’t begin to exhaust the relevant sources of curiosity. How long has the technology been available? Why is Congressional funding even an issue in the first place, since Amtrak is nominally a for-profit corporation? Most importantly of all, what is the optimal framework for providing transportation services in general and passenger-rail services in particular – and how does Amtrak fit into that framework?

What is Amtrak and Why are People Saying These Terrible Things About It?

“Amtrak” is a hybrid name for the National Railroad Passenger Corporation. It is one of those centaur-like organizations common to modern big government – a nominally for-profit corporation that is nevertheless publicly funded. It receives annual appropriations from the federal government that have averaged around $1.4 billion in recent years. It also receives annual funding from various state-level sources, particularly about 14 state governments and the three largest Canadian provinces.

Amtrak serves 46 U.S. states and those three Canadian provinces. But the bulk of its business is provided in what is called the “Northeast Corridor” of the U.S. Although Amtrak’s routes comprise over 500 destinations, more than two-thirds of its nearly 31 million passengers come from the ten largest metropolitan areas in the U.S.; 83% travel routes of less than 400 miles.

Amtrak began operations on May 1, 1971. Today it runs over 300 trains per day across 21,000 miles of track. It has over $2 billion in annual revenue. But it has yet to turn a profit. It has always required subsidies. During the Reagan administration, these subsidies hit an annual low of $600 million before rising again subsequently. They have waxed and waned, but state-level subsidies have recently tended to compensate for cuts at the federal level. Government has also provided capital subsidies for investment; this explains why the left wing can call for Congress to fund safety improvements.

Although Congress provided limited authorization for Amtrak to deviate from labor-union agreements in the late 1990s, Amtrak has long employed union labor. It negotiates with 14 separate unions and has 24 separate agreements with those unions. For many decades under federal regulation by the ICC, the railroad business was a classic case of “featherbedding,” or the employment of superfluous workers in union-protected jobs. This remains true today with Amtrak. It is no coincidence that Amtrak’s national headquarters is Washington, D.C.

Amtrak is a lightning rod for political controversy. The left wing loves it because mass transit is a sacred cow of both the old left and environmentalists. The fact that Amtrak is horrendously inefficient is politically advantageous to the left because it means that it employs more labor than necessary to produce a given output – the very thing that outrages any competent economist delights the left wing.

It is true that left-wingers cite cost comparisons claiming that train travel is the most efficient form of passenger transportation. Unfortunately for their argument, the comparisons are bogus. They use “on-time” as a criterion for comparing airlines and trains while rigging the definitions to allow trains absurd margins of lateness. Even more telling is the fact that they completely ignore the element of consumer demand. The reason most people do not ride trains is the same reason that they prefer to drive automobiles – cars provide point-to-point transportation and maximum personal convenience. This economizes on the value of an individual’s time. Since we are all mortal and have limited hours in the day and in our lifetime, this is a vast benefit to us. But this is completely ignored in the cost comparisons claiming superiority for train travel. When economists conduct the comparisons and account for human time preference, this claimed superiority for mass transit vanishes.

The right wing hates Amtrak, but that doesn’t mean that it is unpopular with Republicans. Amtrak is popular in the most populous parts of the country, which means that most of the geographic U.S. (but a minority of the population) is subsidizing a relatively small part of the country (but a majority of the population). Consequently, Republicans – most of whom have the political backbone of invertebrates – tend to support subsidies. (This is particularly true in the House of Representatives, which is based on population.) How else have they continued, year after year after year? Instead of cutting Amtrak loose or voting for privatization, Republicans content themselves with rhetorical volleys against it and cosmetic measures designed to “make it work better.”

The “Currently Available Technology”

The “currently available technology” referred to by the liberal activist group is the Positive Train Control (PTC) system. It uses a combination of radio signals and GPS technology to pinpoint the position of all trains. Not only can slow speeding trains, it can also prevent collisions between trains, prevent trains from proceeding through wrongly positioned switches and prevent trains from entering work zones. In other words, PTC is an all- (or at least, multi-)purpose train safety system.

In 2008, Amtrak suffered a derailment in California with loss of life. Senator Dianne Feinstein (D-Cal), one of the most powerful Senate Democrats, did not let this crisis go to waste. She seized the chance to push through legislation mandating full installation of PTS for both passenger and freight railroad systems in the U.S. by 2015.

So what, many readers are doubtless thinking to themselves? Isn’t that the way the system is supposed to work? Isn’t this a victory for big government, the regulatory state?

Not hardly. Just the opposite, in fact.


To an economist, the first thing that pops into mind is the question: If PTC is the greatest thing since sliced bread, why does Congress have to mandate its adoption? After all, freight railroads have been an extremely successful industry for years. Those ads touting their success in squeezing efficiency from train fuel are not hyperbole. Warren Buffett didn’t buy Burlington Northern because he thought its management was brain-dead. Why in the world wouldn’t the industry rush to adopt PTC if it were the last word in safety, since safety is vital to any successful freight operation?

The answer to that question was provided by the Reason Foundation. Thanks to the expertise of its founder, Robert Poole, the Foundation has long been recognized as the ranking expert in transportation. Policy analyst Baruch Feigenbaum gave his readers the lowdown on PTC.

The Federal Railroad Administration performed a cost-benefit study on PTC technology. It found a projected benefit range (discounted present value) of $0-$400 million. But the cost was $13 billion. Whoops. That means that for every $1 of (maximum) benefit, it cost $20 to install.

But because Congress, in its infinite wisdom, forced both passenger and freight railroads to install it, the entire railroad business has been laboriously slaving away at it for the last seven years. Of course, nobody is too crazy about throwing money down this rathole. The use of radio signals requires coordination with the FCC, and Amtrak, which can’t even coordinate with itself well enough to make a profit, is finding that difficult. Then there are the various regulatory hurdles. Yes, that’s right – the same government which has legislatively mandated the adoption of PTC is throwing up regulatory hurdles to it in the form of environmental and historic-preservation review for each of the 20,000 required communications antennas in the system. This has led to a year-long moratorium on installation, according to Association of American Railroads’ CEO Edward Hamberger in a Wall Street Journal op-ed.

But..uh, well, at least PTC is better than nothing, right? Wouldn’t we be stuck with no safety at all if we hadn’t passed that unbelievably dumb, wildly wasteful law? Apparently that’s what the political left wants us to believe; that is its intellectual fall-back position when confronted with the facts about PTC. Presumably, that is as far as the average person’s thinking goes on the subject.

But the inherent meaning of cost-benefit analysis is that “cost” refers to foregone alternatives. When cost exceeds benefit, there are better, more beneficial ways of spending the money than on the project being analyzed because the foregone alternatives represent benefits available elsewhere.

And in this particular case, some of those benefits are alternative safety projects within the railroad industry itself.

ATC – A Better, Lower-Cost Alternative

Both Feigenbaum and Hamberger describe another type of railroad safety technology now in use. Amtrak and freight railroads currently utilize a type of safety technology that relates specifically to speeding trains. It is called “Automatic Train Control” (ATC). It is installed on the tracks and sends signals to trains telling them what the speed limit is, allowing the train to automatically slow itself before reaching the speed-change point. In short, it is a mechanism for eliminating the particular type of human (engineer) error apparently responsible for the Philadelphia derailment. It would have prevented the Philadelphia accident.

It is quite true that ATC handles only this particular type of error; it lacks the all-encompassing scope of PTC. But ATC has the advantage of being relatively cheap and easy to install. We know this because after the recent Philadelphia derailment, Amtrak quietly installed ATC on the section of track where the accident occurred. It accomplished the installation in one weekend.

Nor is this the only type of alternative safety improvement to ponder. Marc Scribner of the Competitive Enterprise Institute recently noted that about 270 people die every year in accidents at train crossings. Why not take some of that $13 billion and devote it instead to improving crossing safety in various low-cost ways, thereby saving dozens of lives every year instead of 8-10 lives every 7 years or so?

Both Amtrak and private freight railroads have installed ATC. Why haven’t they completed that installation? Well, they both labor under the burden of meeting mandatory legal deadlines for which they will eventually be fined when 2015 expires without completion of the PTC system. Hamberger estimates 2018 as the PTC completion date, with another two years necessary for “testing and validation.”

Who Killed the Amtrak 8? 

Given the facts as outlined above, it is obvious who killed the Amtrak 8. Big government and the regulatory state killed them. Even Amtrak might have had the corporate brains to install ATC throughout the Northeast Corridor – by far its biggest revenue generator and arguably profitable in its own right – were it not faced with the overwhelming burden of having to install PTC.

This verdict is seconded by Wall Street Journal columnist Holman Jenkins in his latest column (WSJ, 05/20/2015, “How Congress Railroaded the Railroads”). “Is there a more absurd technology than positive train control, which Congress imposed as an unfunded mandate on railroads in 2008, and which supposedly would have prevented last week’s Philly Amtrak crash? Except it didn’t since its implementation has been draggy and its design so clearly inferior to cheaper, faster, more up-to-date solutions.”

Even beyond this, though, is the decisive point relating to the fate of passenger rail had big government not established and continually sustained Amtrak in the first place.

A World Without Amtrak

When Lyndon Johnson succeeded John F. Kennedy in the White House, he recognized that Kennedy’s assassination had created an extraordinary mandate for change. Johnson was perhaps the century’s premier legislative spearhead, and he essentially created the regulatory welfare state that presides over the country today. Johnson predicted that it would take 50 years to determine the success or failure of his “experiment” in social policy. A half-century later, we can deliver the verdict that the welfare state is imploding not just in the U.S., but worldwide.

Similarly, forty-four years should be sufficient to pronounce Amtrak a failure. Its infrastructure is ramshackle, its finances are a mess and its organization is a shambles. Amtrak’s only positive feature is a core constituency that leaves open the possibility of a profitable passenger rail service. That constituency, in the “Northeast Corridor” of America, boasts a population density roughly ten times greater than the rest of the U.S. This makes it possible for a for-profit, private-sector business to identify and isolate this customer base. In no sense is passenger-rail service a “public good” in the classical economic sense; it is neither non-exclusive nor non-rival.

Thus, the obvious solution to the problems plaguing Amtrak, of which safety is merely the one occupying front-pages currently, is to end its public subsidies, acknowledge its bankruptcy and sell off its assets. This includes its rights of way, which would enable a privatized successor to operate passenger rail for the benefit of the large number of people in the relatively confined area where that business is economically feasible.

To be fair, it should be noted that some are skeptical of privatization not on principle but as a practical matter. Like Holman Jenkins of The Wall Street Journal, they think the profits of the Northeast Corridor are overestimated and costs of service underestimated. Variable costs should take into account incremental wear and tear on infrastructure, which are now obscured by capital subsidies. Congress has given Amtrak preferential right-of-way over freight traffic on lines owned by the freight railroads – another implicit subsidy that would vanish under privatization. Various regional commuter transporters now tacitly agree not to compete with Amtrak, which is still another hidden subsidy. Could a privatized rail carrier still serve the Northeast Corridor without these subsidies? The only way to know is to try it and see.

To be workable, privatization would demand relief from the killing mandate currently crippling Amtrak and greatly hindering freight railroads – namely, the 2008 law mandating the adoption of the already-obsolete and dreadfully expensive PTC. This would save hundreds, if not thousands of lives, and improve life for millions of people. The only losers would be regulators, politicians and, possibly, union members who would lose jobs and be forced to take lower-paying ones. The union members could be bought off through severance. The others would simply have to eat their losses. In fact, this is increasingly the choice that confronts us not merely in passenger rail but in the entire transportation system.

As things stand today, the American transportation system is a massive form of human sacrifice to the gods of government regulation and unionization. Tens of thousands of Americans lose their lives every year so that government regulators and union members can hold their jobs and earn more money than would otherwise be the case.

Let us hear from Holman Jenkins again: “Which brings us to another headline from the brave new world of self-driving vehicles. This month the truck maker Freightliner introduced a robotically controlled truck, licensed to operate on the roads of Nevada. Its onboard system, designed to relieve drivers of the monotony of motoring for hours down calm stretches of well-marked interstate, ‘never gets tired. It never gets distracted. It’s always at 100%,’ company executive Wolfgang Bernhard told the media.”

“Alas, Mr. Bernhard deflated expectations by predicting that, though the system is ready to roll today, deployment is likely five years off. ‘The biggest obstacle that we see is the regulatory framework'” [emphasis added].

“Five years may be optimistic: An unspoken burden for the future is the legacy of the Toyota travesty of 2010, in which congressmen and, most damningly, a head of the Transportation Department, whose agency knows better, preferred to allege an undetected electronic bug in Toyotas rather than acknowledge that drivers (i.e., voters) cause accidents by pressing the gas instead of the brake.”

“This scandal, hugely costly to Toyota and largely fabricated, has never been acknowledged or investigated by the government of the media…One big inconvenient precedent lies in its wake. As Toyota found, because it’s impossible to prove the nonexistence of a software bug, anytime there’s an accident involving a system in which software plays a role, the software will be blamed and the driver will be excused. Perhaps the only way forward, then, is to remove the driver altogether” [emphasis added].

Whether it is cars, planes or trains, the dirty little secret that nobody is willing to talk about is the driver – the source of almost all the deaths and injuries. Here we have a train traveling at 106 mph in a 50 mph zone and an engineer with a case of amnesia. Sure, there was a dent in the windshield and talk of a projectile. But the dent didn’t penetrate the windshield and there is no logical explanation for how a projectile would cause the train’s speed to double. Is a left-wing lawyer going to emerge claiming that the train’s engine was manufactured by Toyota? Or are we eventually going to wind up with “driver error” as the cause of the derailment? Once again, with trains as with planes and cars, self-driving is the ultimate way forward.

Holman Jenkins is now acknowledging what this space declared over two years ago with respect to self-driving cars and almost a year ago with respect to commercial aviation. Now the same chickens are roosting on the tracks of passenger rail. Big government and regulators are standing athwart technology and yelling “Stop!” while over 30,000 people are killed every year on the nation’s roads, hundreds die in each commercial air crash and hundreds more die annually in various forms of railroad accident.

Up to now, none dare call it murder. Yet Democrats get away with accusing Republicans of murder for the sin of holding a Congressional majority.

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