Wednesday, March 2, 2011

Rail: More Dishonest Arguments

Funding for Amtrak is getting interesting as conservative state officials have been taking a stand and rejecting federal funding for rail infrastructure projects. Governors in Wisconsin, Ohio, and now Florida have all rebuked the DOT by saying the state match required to accept the grants isn’t worth the cost. All three follow Democratic predecessors that originally accepted the planned transfers to their states. This is creating some delicious drama as two New York state legislators (a Dem AND a Republican) recently wrote a letter to (DOT Director) Ray LaHood requesting the money other states turned down, and the Governor of Florida is actually being sued by his legislative counterparts for refusing the federal project (also by a Dem/GOP combo).

However, this blog soars above political gossip. I serve merely to examine the economics of an idea. (Please ignore that my most common tag is politics.) And what myth am I here to dispel today? The idea that Amtrak should be shuttered because it’s not self-sustaining.

Assuming any mode of transportation should pay for itself is one thing, but we as a society refuse to apply this principle universally. The airline industry has become a public good due to heavy federal subsidization, and the government spends a few hundred billion dollars every year to provide the cheapest oil in your car and paved roads for public use. Your commute is not a self-sustaining entity – it is subsidized by millionaires paying taxes. In short: the airline industry isn’t self-sustaining. Commute by car isn’t self-sustaining. The idea that rail transportation should be is a blatant double-standard.

Once we acknowledge the fallacy offered above, we must still address the economic efficiency of rail versus roads. From an environmental standpoint, rail typically wins (and incurs nice health externalities in the process – saving us money on healthcare). But how well does it foster business? Roads facilitate the transportation of goods that allows our economy to grow. So does rail. They also allow travel for business and networking. Ditto for rail. The interstate provides opportunity for simple travel and leisure. Rail also gins the vacation industry.

End game: Rail and roads are kinda substitutes, with different people and businesses assuming preferences for one or the other. They both cost more than users pay for them. We justify federal welfare for each because we value connected communities and believe facilitating travel increases economic growth. I can demonstrate why our approaches to both should be changed, but that's a conversation for another day. What's important is recognizing the notion that we should stop funding one because it doesn’t support itself while ignoring the other’s failings is a rather dishonest starting point.

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