(Editor’s note: I wrote this column some two years ago, detailing the woes of government enterprise, since that time things have changed: They have become much worse. For instance, owing to the breakdown of the New York City subways, the state government is trying to impose a heavy new tax on motorists coming into the city. Where would the money go? To the MTA, the state agency which has run up huge deficits and helped run the system into the ground. The MTA would be put in charge of spending billions of dollars in new revenue yet these are the same people who have demonstrated a perverse ability to mismanage the system. Indeed, the only thing some people learn from history is that they never learn from history).

Amtrak’s Penn Station in New York City, once one of the most glorious cathedrals of commerce built by one of the most successful transportation companies in history, the Pennsylvania Railroad, is collapsing. Many of the tunnels are in disrepair. That’s because they have not been properly maintained over decades since Amtrak, despite promises to the contrary at its founding in the 1970s, has consistently lost tons of money. By its own admission, it hasn’t been able to adequately fund even routine maintenance.

Look Out for That Train!

Trains have jumped the tracks at Penn Station. Trains for the national passenger railroad—the disastrous, deficit ridden Amtrak with its pathetic so-called high-speed Acela trains, which are anything but high speed in many places— have been delayed as have the commuter railroads also using Penn Station, New Jersey Transit and the Long Island Railroad. The latter two, in true government enterprise fashion, both lose tons of money and are deeply in the red.

These transportation companies seem to be run for the benefit of anyone but the long-suffering passengers and taxpayers who pay for this government engineered mess. That is making commuters and long-distance rail passengers groan; the same as those using the New York City subways.

Fewer tracks at Penn Station will be available because repairs, which should have been done years ago but weren’t because the money wasn’t available.

Why not?

Government “enterprise” consistently loses money unlike the glory days of the Pennsylvania Railroad, which once made tons of money. What happened to the latter? The Pennsylvania Railroad, along with many other private passenger lines, was regulated to death through price controls. They were like landlords prohibited from even recovering all their costs owing to ridiculous rent control laws, price controls that do what all government price controls do: Create mayhem and shortages.

Government Enterprise Hurts Everyone

The ripple effect from the woes of government enterprise has been felt through the Northeast of the United States. It affects the whole region’s economy in a number of ways, including the number of people who decide to drive and clog the government’s many poorly maintained roads and bridges.

(An aside: Is everything the government runs a mess? Probably. I had the misfortune of serving on a jury in New York State court in Jamaica, Queens. The courthouse, built in 1939, was not properly maintained and seemed like something out of 1839. The state system is so hard up that even carfare was not given to jurors. And the poor judge, a good man who wanted to do the best by the jurors and run a fair trial, frequently had to adjourn the case early in the day because of “budget constraints”).

Don’t Know Much About History

What is to be done to save this Penn Station, which is not the original one built by the long-gone Pennsylvania Railroad in the early part of the 20th century? That’s when that railroad was one of the most profitable enterprises in the world. It could afford to build the most beautiful stations and did.

It was the same with the subways. The early New York subways, built by a private management company, the IRT, also erected beautiful stations and was “an engineering marvel” until the government got rid of private management companies.

How to fix a government mess?

It’s an old story with a familiar answer provided by our career pols. Make the taxpayers pay and pay.

So most New York/New Jersey pols, many of whom hope their constituents have no knowledge of the egregious history of government enterprise are falling all over themselves proposing the same solution that they and their predecessors have been proposing for close to half a century: Still more tax dollars.

In effect they are saying: Reward government incompetence. They are betting that voters and taxpayers forget. They are hoping they forget that Amtrak is just one in an endless list of government enterprises that failed but only survive thanks to endless taxpayer geld. They hope the taxpayers and citizens of the United States will forget the promises of Amtrak.
Back in the early 1970s, when Amtrak took over from a group of private railroads driven into bankruptcy by over-regulation, Amtrak officials promised that “now we’re going to see the greatest turnaround in business history.”

I’ve Seen the Future. And It Doesn’t Work

Yet with lots of government resources—although Amtrak supporters will say that this flawed line never gets enough from the taxpayers—the railroad has become a disaster.

“Amtrak is a rolling Enron that should be allowed to go bankrupt,” said Ken Bird, a former Amtrak supporter as quoted in the book “End of the Line. The Failure of Amtrak Reform and the Future of America’s Passenger Trains.”

By the way, this excellent book by Joseph Vranich, the head of the High-Speed Rail Association, is a convincing indictment of Amtrak.

Why?

Because so many of the comments come from people like Vranich who once supported nationalized railroads and now readily confess that the experiment has been a failure for decades.

What’s to Be Done?

Most pols such as New York Senator Chuck Schumer say give more money to Amtrak, which runs Penn Station, and is a perpetually money losing and accident-prone national passenger train. They also still want to provide more taxpayer geld to the equally incompetent state-run New York City subways.

The logic of this idea is tantamount to saying that the drunk’s problem can be cured if we just give him one more drink (And in the case of Amtrak and the subways, it better be a string of breweries and the taxpayers better be ready to pay for lots of refills).

This is the wrong answer.

Send Government Enterprise to the Landfill

The right answer is to think creatively; it is in out of the box thinking. It is not to do what has been done with Amtrak for close to 50 years. It is to stop funding failure. It is to tell the Amtrak executives and their enablers in Congress and the presidency that enough is enough. It is to reach a logical conclusion. It is to say that the government should get out of the railroad business. It is to learn the lesson that government and business don’t mix.

It is to sell Amtrak and at the same time also the wretched collapsing New York City subways. It is to recognize the disastrous experiences of state governments trying to run railroads in the 19th century.

For example, the state of Michigan ended up getting out of the railroad after a terrible experience in which politicians tried to design railroads and made a mess cleaned up by the taxpayers (The next state constitution prohibited the state from getting into the railroad business). It is to get the government out of the businesses of running all enterprises.

Government has a role to play in society—a limited one I would say—but it is not in running businesses. Government enterprise should be sent to the ash heap of history.


Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post. The eBook version of his latest book "MoneySense" is available now for Free Download by clicking HERE

Leave a Reply

Your email address will not be published.