Obama administration tries railroading General Motors
By: Chris Stirewalt
Political Editor
June 1, 2009
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| President Barack Obama will give a speech in Cairo, Egypt, on Thursday. (AP photo) |
The Obama administration is dropping a cool $8 billion on improving long-distance passenger rail service in the United States.
President Barack Obama’s goal is to get back what America had decades ago — a large, reliable passenger rail network that kept people off overburdened highways.
It would be a propitious time for Obama to consider why America went from having the greatest railroad service in the world to having sorry old Amtrak creaking along, still managing to lose money despite a $1.5 billion annual subsidy.
As General Motors enters into an Obamafied version of bankruptcy, the company is suffering from the same ills that killed passenger rail service: over-powerful unions, excessive regulation and shortsighted management that make adapting to new competition impossible.
It wasn’t the airplane that killed passenger rail travel in America. The industry was smothered by the federal government.
From the dawn of U.S. rail travel in the 1830s until 1920, when railroads carried the all-time high of 1.2 billion passengers, private carriers kept laying more track and building faster, more luxurious trains.
But President Woodrow Wilson had nationalized the railroads during World War I. And the Railroad War Board, which guaranteed no losses for companies but capped profits, persisted until 1939. The railroads finally wriggled free on the grounds that the country needed private enterprise to get the system ready for the next great war.
Nationalization left trains in poor repair as the limited profits were culled rather than reinvested. Mounting competition from automobiles for shorter trips had cut into ridership badly even before the Great Depression, and ratty rolling stock and unreliable arrival times hurt long-distance travel too.
But the privatization effort, plus some loans from the Roosevelt administration to convert trains from coal to diesel, worked well enough that the railroads had enough capacity to handle the GI surge of 1941 to 1946.
But the railroads did not capitalize on the boom in personal travel in the postwar years, even though airlines travel was far too expensive for most families and the interstate system still left a lot to be desired.
The reason was that railroads wanted out of passenger travel desperately.
The 1926 Railway Labor Act was passed to allow the federal government to intervene to settle strikes in the name of reliable rail service. But throughout the New Deal era, the Roosevelt administration increasingly used the act to aid its political allies in labor unions at the expense of the newly profitable, privatized companies.
As long as the government was providing plenty of fares in the form of wartime military travel vouchers, the companies could endure the lopsided advantage the unions had in all their negotiations.
Pullman porters once rode for days on end and then took a week off at home. But new federally backed work rules demanded that the porters be home every other day or even every day. That sometimes meant $1,000 cab rides or, later, airline tickets to get porters home. And firing an unsuitable worker became an expensive battle against the federal bureaucracy.
Looking at those costs combined with the ballooning long-term obligations from the lavish pension programs that were put in place in the same period, railroads began a deliberate move to get out of the business of moving people.
You can move a trainload of coal or soybeans with far fewer workers than you can a train full of people, so the big companies got out of the business and the smaller carriers just folded, leaving no one to fund the pensions or provide the rail service on in-demand routes in the northeast.
Taxpayers got stuck with the tab for both.
The U.S. Railroad Retirement Board and the Pension Benefit Guaranty Corp. are sitting on billions of dollars in long-term health care and pension obligations for retired workers whose employers are long gone.
And despite more than $20 billion in subsidies, Amtrak has never been able to get on its feet because of bad management and political meddling since its birth in 1971. Routes that lose money but please members of Congress persist while overcrowding snarls corridors where people want to ride the train.
And Obama’s gift of $9 billion won’t fix it because the underlying problems will still remain.
As the president continues in his role as a taxpayer-subsidized corporate raider with his socialist swashbuckling at GM, he might profit from looking at how government ruined passenger rail.
