Another possible reason American rail sucks

Government accounting. From a commenter:

I read an interview with an Amtrak exec in the early 80's, I think it was the CEO of the time, Graham Claytor, but can't be sure. In any case, at the time, Amtrak was doing reasonably okay, and there was demand for more new routes that could have been profitable. But Amtrak, being a good government agency, didn't see them as profitable. Why?

The explanation had to do with that old bugaboo, marginal accounting. Any private business would look at an opportunity, calculate that if it would cost X dollars to run a train, and generated X+Y dollars in revenue, that would be profitable. Not Amtrak. They insisted on including a percentage of the corporate overhead in assumptions for any new business. If Amtrak were to run 50% more trains, they would want to cover a 50% increase in administrative overhead.... before even considering whether to run the route.

Of course, this accounting artifice eventually leads to no investment at all, and the lack of service is the true shame of having rail run by a government agency, not the money wasted.

In any case, our rail system is obsolete at this point, and there's no way to run true high-speed trains on the existing infrastructure. Even the Acela trains only beat the 1930's steam schedule by about 10%-15%. Any new solution has to built from the ground up. There's plenty of private capital out there, the political challenge is figuring out how to unleash it.

Obviously, I don't have the interview to hand, but this sounds right. Government accounting is ridiculous. Harken back to PJ O'Rourke detailing how the forest service accounts for the lumber it sells (as far as I know, this hasn't changed since the 1980s, but even if it has, the point stands). The forest service got to keep any revenue from selling its lumber as extra, on top of its budget. Thus a tree that cost $100 to grow might be sold for $2. In a private entity, this would be a $98 loss. For the Forest Service, it was a $2 profit.

Again, this is not a necessary feature of "government"; it is a pernicious feature of our government.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Why Is Google Making Human Skin?

Hidden away on Google’s campus, doctors at a world-class life sciences lab are trying to change the way people think about their health.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Videos

Why Is Google Making Skin?

Hidden away on Google’s campus, doctors are changing the way people think about health.

Video

How to Build a Tornado

A Canadian inventor believes his tornado machine could solve the world's energy crisis.

Video

A New York City Minute, Frozen in Time

This short film takes you on a whirling tour of the Big Apple

Video

What Happened to the Milky Way?

Light pollution has taken away our ability to see the stars. Can we save the night sky?

Video

The Pentagon's $1.5 Trillion Mistake

The F-35 fighter jet was supposed to do everything. Instead, it can barely do anything.

More in Business

Just In