I don't understand economics of Amtrak and USPS. How do we value them?
May 20, 2015 12:36 PM Subscribe
Aren't they both congressionally mandated? How did this come about? They are not private, Congress sets the rules (like Saturday mail delivery) Isn't this like standing on someone's feet and asking why don't you run faster?
Where is the line between a private business operating for profit; and a government /public service that may benefit society? Is that benefit a 'profit'?
obDisclosure: Amtrak Select rider
Speaking as a Wisconsinite who witnessed the high speed rail debacle here in Wisconsin, I am left with the following impressions:
Most transportation is subsidized in some manner. We subsidize roads through gas taxes and other methods, airlines by providing airports and air traffic control infrastructure, etc.
Certain political operatives are perfectly fine with taking up intellectually dishonest positions in pursuit of political goals. For example, when a Democratic governor supported expansion of the Amtrak Hiawatha service and Obama funded a high speed rail upgrade and expansion to Madison, this turned into a political matter where Walker's supporters spun it as "high speed rail to nowhere". Well, yes, Madison would not have been a significant destination, but the funding was also to improve the existing Milwaukee-Chicago corridor, where the trains are in desperate need of it (one of the engines just caught on fire last week!). However, the real dishonesty is that the Madison extension was only a precursor to getting to the Twin Cities - and Chicago to the Twin Cities via high speed rail is a very reasonable thing. Yet that true goal was almost never brought up, and it was spun as "Milwaukee to Madison high speed rail - a train no one will ride."
So the irony is that the state turned down the money for new trains that were already half-built, and we're still on the hook for that, and now Talgo is selling those trains to someone else. Walker's administration even went back to Obama later on to see if they could still have some money to upgrade the existing Milwaukee-Chicago service, since that is desperately needed.
Services such as Amtrak certainly do have the potential to benefit society, but just as often they can be used to score political points.
I view our public services as things we buy with our tax (etc) dollars. We need them to be sensible, and I think it is always worthwhile to have some honest discussion of that, but the problem is that there's little desire to have honest discussion.
posted by jgreco at 1:15 PM on May 20, 2015 [5 favorites]
Speaking as a Wisconsinite who witnessed the high speed rail debacle here in Wisconsin, I am left with the following impressions:
Most transportation is subsidized in some manner. We subsidize roads through gas taxes and other methods, airlines by providing airports and air traffic control infrastructure, etc.
Certain political operatives are perfectly fine with taking up intellectually dishonest positions in pursuit of political goals. For example, when a Democratic governor supported expansion of the Amtrak Hiawatha service and Obama funded a high speed rail upgrade and expansion to Madison, this turned into a political matter where Walker's supporters spun it as "high speed rail to nowhere". Well, yes, Madison would not have been a significant destination, but the funding was also to improve the existing Milwaukee-Chicago corridor, where the trains are in desperate need of it (one of the engines just caught on fire last week!). However, the real dishonesty is that the Madison extension was only a precursor to getting to the Twin Cities - and Chicago to the Twin Cities via high speed rail is a very reasonable thing. Yet that true goal was almost never brought up, and it was spun as "Milwaukee to Madison high speed rail - a train no one will ride."
So the irony is that the state turned down the money for new trains that were already half-built, and we're still on the hook for that, and now Talgo is selling those trains to someone else. Walker's administration even went back to Obama later on to see if they could still have some money to upgrade the existing Milwaukee-Chicago service, since that is desperately needed.
Services such as Amtrak certainly do have the potential to benefit society, but just as often they can be used to score political points.
I view our public services as things we buy with our tax (etc) dollars. We need them to be sensible, and I think it is always worthwhile to have some honest discussion of that, but the problem is that there's little desire to have honest discussion.
posted by jgreco at 1:15 PM on May 20, 2015 [5 favorites]
My Pynchon reading and lazy history study says both the postal service and train service were once private ventures, and earlier (perhaps wiser) governors decide each was good for a modern nation to have, as "common carriers". Meaning, we could serve all citizens, without concern of who they were or where they wanted to go. It would be useful to have a way to deliver a message to anyone in the US, even if they lived in a place that is sparse enough that no commercial venture would go there. The trains, I know less of, but it was, IIRC, some struggling or legally grey companies that the USA nationalized and took over, with new rules and guarantees of service to those barren areas too.
So, they're both beholden to the congress, but the operate pretty much independently in day-to-day life, with the large steering controlled by the congress. They are both very careful not to infuriate the congress, and they live under a guillotine and threat of execution via the next budget bill, but rarely through actual charter revocation by killing the establishing Acts.
posted by cmiller at 1:18 PM on May 20, 2015
So, they're both beholden to the congress, but the operate pretty much independently in day-to-day life, with the large steering controlled by the congress. They are both very careful not to infuriate the congress, and they live under a guillotine and threat of execution via the next budget bill, but rarely through actual charter revocation by killing the establishing Acts.
posted by cmiller at 1:18 PM on May 20, 2015
Oh, of economics. This is less researched, but you can imagine most of it. These orgs are mandated to give service, but that doesn't stop short-sighted governors from taking bribes from constituents that don't want to compete with these government-run programs. It doesn't matter that the new for-profit business doesn't have any such common-carrier status or guarantee of service and doesn't serve every citizen, because those citizens aren't big campaign contributors. (Gosh, do I sound bitter and pessimistic?)
posted by cmiller at 1:26 PM on May 20, 2015
posted by cmiller at 1:26 PM on May 20, 2015
Amtrak is in the unfavorable situation of having to eek out routes which were once of interest to the nations railroads. Part of the once favor ability was 1.) passenger traffic and 2.) mail contracts. Once 1.) & 2.) went to airplanes and trucks on the shiny interstate highway system starting in the 1950's, the railroads only stayed in itfor a another two decades.
There is a political desire to keep them alive.. but still on life support. If Amtrak were cut free and allowed to stay profitable, it probably would only exist in the North East Corridor and western coastal routes. Trans continentals would most likely turn into only occasional tourist trains.
posted by nickggully at 1:31 PM on May 20, 2015
There is a political desire to keep them alive.. but still on life support. If Amtrak were cut free and allowed to stay profitable, it probably would only exist in the North East Corridor and western coastal routes. Trans continentals would most likely turn into only occasional tourist trains.
posted by nickggully at 1:31 PM on May 20, 2015
Are you asking for an explanation of the historical contingencies that led to both services being created or the economics of how they are run today? I get the sense that you're asking why do we bother to have these services but then fail to fund them better, which is complicated discussion but the shortest possible answer is that it's because their funding is the product of political battles and compromises between those who support the government running these services and those who'd rather privatize them. Essentially it's a clash over political priorities and values.
There was a great short essay in the New Yorker recently on the topic of underinvestment in public goods like rail service:
The Post Office has a nice little summary of its history and of the logic behind a government-granted monopoly on mail delivery here (PDF link) from which I will excerpt this key bit:
Amtrak dates only back to the 1970 Rail Passenger Service act, and has always been a bit of an albatross of an organization. With the advent of the interstate highway system and air travel by the 1960s passenger rail services, never profitable compared to freight service or government mail contracts, were pretty much all in financial trouble. Amtrak was intended to be a short term measure to manage this decline, but there was (and remains) enough support for passenger rail to keep it alive, albeit chronically underfunded.
I realize I've presented a somewhat biased commentary here in favor of the government running these two services. Check out the CATO Institute or similar libertarian and/or small government sources for plenty of arguments about why such government services are bloated and inefficient. (For a more compelling example than either covered here, imho, look up the legendarily inefficient state telecom monopolies from the mid 20th century, which often had little incentive to improve service.)
posted by Wretch729 at 2:35 PM on May 20, 2015 [2 favorites]
There was a great short essay in the New Yorker recently on the topic of underinvestment in public goods like rail service:
What we have, uniquely in America, is a political class, and an entire political party, devoted to the idea that any money spent on public goods is money misplaced, not because the state goods might not be good but because they would distract us from the larger principle that no ultimate good can be found in the state. Ride a fast train to Washington today and you’ll start thinking about national health insurance tomorrow.
The Post Office has a nice little summary of its history and of the logic behind a government-granted monopoly on mail delivery here (PDF link) from which I will excerpt this key bit:
To enable the Post Office Department to serve all Americans, no matter how remote, yet still finance its operations largely from its revenue, Congress gave the Department a monopoly over the carriage of letter-mail by a group of federal laws known as the Private Express Statutes. Without such protection, Congress reckoned that private companies would siphon off high-profit delivery routes, leaving only money-losing routes to the Department, which then would be forced to rely on tax-payers to continue operations.
Amtrak dates only back to the 1970 Rail Passenger Service act, and has always been a bit of an albatross of an organization. With the advent of the interstate highway system and air travel by the 1960s passenger rail services, never profitable compared to freight service or government mail contracts, were pretty much all in financial trouble. Amtrak was intended to be a short term measure to manage this decline, but there was (and remains) enough support for passenger rail to keep it alive, albeit chronically underfunded.
I realize I've presented a somewhat biased commentary here in favor of the government running these two services. Check out the CATO Institute or similar libertarian and/or small government sources for plenty of arguments about why such government services are bloated and inefficient. (For a more compelling example than either covered here, imho, look up the legendarily inefficient state telecom monopolies from the mid 20th century, which often had little incentive to improve service.)
posted by Wretch729 at 2:35 PM on May 20, 2015 [2 favorites]
If any US gov't measured 'Service' as a source of profit, much of national accounting would be different and likely more equitable to the general public. Maybe other non-monetary measures could be added to both sides of the balance sheets of public and private organizations (like physical health, pollution, education, discrimination?).
The Postal Service was given its mandate and service monopoly in Article 1 of the Constitution. It is sad that such a egalitarian and benign public good has become the political football of the 'drown gov't in a bathtub' party. (I know of no other federal org that has to pre-fund retirement costs for all current and potential employees.)
As noted, AMTRAK was given monopoly status in 1970. But it was created to relieve private railroads of the unprofitable but mandated task of providing passenger rail service. Once again, the profit was privatized, the unprofitable 'service' was socialized.
posted by TDIpod at 3:22 PM on May 20, 2015 [1 favorite]
The Postal Service was given its mandate and service monopoly in Article 1 of the Constitution. It is sad that such a egalitarian and benign public good has become the political football of the 'drown gov't in a bathtub' party. (I know of no other federal org that has to pre-fund retirement costs for all current and potential employees.)
As noted, AMTRAK was given monopoly status in 1970. But it was created to relieve private railroads of the unprofitable but mandated task of providing passenger rail service. Once again, the profit was privatized, the unprofitable 'service' was socialized.
posted by TDIpod at 3:22 PM on May 20, 2015 [1 favorite]
One way to think about this is, what is the cost of maintaining the Interstate Highway System, and what revenue is generated by it?
Another way to look at things like insurance, postal service, national rail service, etc, is that it's a way of maximizing economies of scale, while preventing (hopefully) monopolistic exploitation.
For lots of "utilities" like power, water, and hopefully soon, internet access, the fundamental idea is that requiring market competition is really expensive and inefficient, because it would require building multiple, parallel, redundant systems to deliver power, water, sewage service, etc. It's cheaper to build one set of water pipes and electrical lines, and then regulate how the operators of those networks can behave.
Yet another way to consider state-run mass transit is, what is the cost of the service offered vs the cost of replacing the service with something else. Like, if we did not have the NYC subway system, what opportunities would be lost (probably the city could not be anywhere near as dense as it is), and what would the cost be of the alternatives (building and maintaining more roads and highways, running surface bus services, etc). In the case of Amtrak, how much more highway capacity would be needed to replace the Northeast Corridor, and how much would that cost to deploy and maintain?
posted by rustcrumb at 3:42 PM on May 20, 2015 [1 favorite]
Another way to look at things like insurance, postal service, national rail service, etc, is that it's a way of maximizing economies of scale, while preventing (hopefully) monopolistic exploitation.
For lots of "utilities" like power, water, and hopefully soon, internet access, the fundamental idea is that requiring market competition is really expensive and inefficient, because it would require building multiple, parallel, redundant systems to deliver power, water, sewage service, etc. It's cheaper to build one set of water pipes and electrical lines, and then regulate how the operators of those networks can behave.
Yet another way to consider state-run mass transit is, what is the cost of the service offered vs the cost of replacing the service with something else. Like, if we did not have the NYC subway system, what opportunities would be lost (probably the city could not be anywhere near as dense as it is), and what would the cost be of the alternatives (building and maintaining more roads and highways, running surface bus services, etc). In the case of Amtrak, how much more highway capacity would be needed to replace the Northeast Corridor, and how much would that cost to deploy and maintain?
posted by rustcrumb at 3:42 PM on May 20, 2015 [1 favorite]
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