Amtrak's been in the news a lot recently for what's starting to look like one of the last times. President Bush recently starting making motions towards fulfilling the long-drempt Republican fantasy of dismantling the railroad, starting with a plan to spin off ownership and control of the Northeast Corridor (NEC) into its own operating company. The mere mention of this has sent Amtrak supporters and railfans into a tizzy. However, this plan isn't what it might appear at first, and to really understand what's going on it's important to first get a bit of context.

First, a smidge of history. Once upon a time, the USA was crisscrossed by the great private railroads. High iron stretched from one end of the nation to the other, and everywhere in between. If you wanted to move cargo, cattle, or yourself, the only way to do it was by rail. The railroad companies were powerful, controlling, mean, vicious, and wealthy, and people loathed them. They also provided a service which they loved and required. And so it went.

Things began to sour for the major railroads in the years before World War 2 between the depression and the advent of the personal automobile, but WWII knocked demand for rail travel back into the stratosphere. Once the war was over, the railroads found their business starting to slip. The federal government began to pour great big heaping gobs of taxpayer money into the highway system, effectively subsidizing the automobile and trucking industries, allowing them to greatly undercut the railroad's pricing. Air travel took the glamor out of traveling by the rails. Buses seized the low end of the passenger market, cars the midrange, and jets the high end. Trucking ate away at the freight business. The railroads began to fail.

At this time the railroad industry was highly regulated. Over a hundred years of governments taking a dim view of powerful railroad concerns had created massive tomes of regulations on the railroads, dictating what routes they would run and what prices they could charge. The railroads weren't allowed to cut money losing routes, nor could they raise prices to cover rising costs.

In 1968 two of the greatest of the railroad flags merged. The Pennsylvania Railroad and the New York Central combined to form Penn Central in what is now taught in many business schools as the textbook example of a failed merger. There was little to be gained by merging the companies; the competed almost directly on all routes. Merging didn't expand the network. Management fought itself. The corporate cultures clashed horribly. Management got distracted by diversions into real estate investing. The combination of the two failing railroads only failed faster, helping to drag down the rest of the industry with it. Only two years later, in 1970, Penn Central filed for bankruptcy in what was at that time the largest corporate failure in US history.

The federal government couldn't allow the US rail system to fail; the economy was far too dependent on it. In 1971, the federal government created Amtrak. Not formally a railroad, Amtrak owned no actual trackage, but operated trains on tracks belonging to other railroads. Then, starting in 1976, a series of laws was passed deregulating the railroad industry and nationalizing the burning remains of Penn Central and five other failing Northeast railroads into Conrail. Conrail then handed off its passenger operations to Amtrak. When the smoke cleared, Conrail and the other remaining private railroads were free to run their lines as they saw fit, free of the obligations of the old regulation. Those obligations has passed on to Amtrak.

Conrail was a great success. It started turning a profit in 1981 and was privatized in 1987 in the largest IPO in the nation's history. It was later split and divided in a complex joint merger with CSX and Norfolk Southern.

The problem was that passenger rail service had almost never been profitable. Even at the height of rail travel, freight had always made more money than passenger service. Railroads used the profits from freight lines to subsidize passenger service, seeing people moving as good advertising. Once the railroads were clear of their obligations, they stopped moving people around altogether, to concentrate on their core businesses. Amtrak had no freight business at all, and was given conflicting mandates: Turn a profit, and maintain intercity passenger service across the United States.

When Penn Central was reformed into Conrail, Amtrak acquired the Northeast Corridor, which to this day is pretty much all the trackage they own. It also carries the bulk of their passengers, and is the only location where Amtrak can turn a profit. In addition to Amtrak, a great deal of regional commuter service uses the NEC under agreement with Amtrak. It serves as the main backbone for essential commuter service into Washington, Philadelphia, New York City, and Boston.

And that's it for the history lesson. Whew.

Anyhow, Amtrak is unable to turn a profit while maintaining railroad service everywhere it is mandated to do so. Amtrak is therefor a huge target for Republican grandstanders, who wish to cut the federal budget. Amtrak received $1.2 billion in funding last year, and a long line of presidents would have loved to claimed that as an amount saved when elections roll around. However, Republican Congressmen and Senators have repeatedly blocked attempts by their own presidents to kill Amtrak, citing the damage their constituencies would suffer. On the other side of the aisle, Democrats point out that the money Amtrak requires is tiny compared to federal subsidies given to the trucking and airline industries. And so the battle has been fought on.

Bush's current plan, which is pending congressional approval, would create a new subsidiary for the ownership and management of the Northeast Corridor. Amtrak supporters have taken this to be the first step in the dismantling of Amtrak as a whole. If funding were cut to Amtrak, but remain with the NEC operating company, the operations of the local commuter rail lines would be unaffected by the destruction of Amtrak, muting a lot of the opposition to such a move. It is feared that this would mean the end of intercity rail transportation in the United States.

However, the sky isn't falling just yet. First of all, this plan, even if it is the first step in a larger dismantling, still needs congressional approval. Secondly, any attempt to completely dismantle Amtrak would run into large opposition from a great deal of Congressmen.

More importantly, the end of Amtrak does not mean the end of Amtrak. Amtrak service has been hampered by decades of barely-adequate funding and conflicting goals. Let's say that Amtrak were stripped down to a purely East-Coast NEC-based service. This would allow it to concentrate on a business where it could actually earn a profit. It could rebuild its debt structure and start to regrow its business organically. What's more, state-based subsidies might start to be offered to the major freight railroads or short lines to begin offering rail service independently. Major routes may be up for competitive bidding. New investment could result in service improvements, spurring demand. Killing Amtrak as we know it might mean that over the course of a decade, long-distance rail service could begin to grow again, on a much more firm basis.

It's a great myth in this country that rail service won't work in the US. The excuse most frequently given is that the nation is just too big, followed directly by us liking our cars too much. I think that this is an overly simplistic dismissal. No one's arguing that we're ever going to return to the days when there was a train station in every town. For short and medium-length trips, cars will always be faster and more convenient. And as long as we subsidize the automotive industry to the exclusion of the rail industry, they'll be cheaper too. Same goes for airlines. For the money we're pouring into propping up failing airlines, we could seriously push forward some high-speed lines and cartrains across this country. But as long as we do that propping-up, flying from one side of the country to the other will continue to be cheaper than what the airlines pay for gas.

When you look at the fantastic intercity and international rail service offered in Europe or Japan, it's important to note that they've been pouring money into infrastructure for the last 50 years. If they had trains that ran as frequently as Amtrak does, or as slowly as Amtrak does, or that get stuck on a siding for hours because they don't have priority on freight trackage like Amtrak does, they wouldn't ride them either. But they've viewed rail service as an important alternative to superhighways, and now it can compete on even ground.

Railroads in this country aren't dead, far from it. The big four US freight lines (BNSF, CSX, Norfolk Southern, and Union Pacific) are moving record amounts of cargo. Business has never been so good. It's so good it's bad - the rails are so congested they need to turn away business. They're turning profits, but barely enough to make the capital investments needed to expand capacity. There's a lot of trackage out there, and a lot of expertise. Maybe, just maybe a serious shakeup at Amtrak is what's needed to jolt some money, entrepreneurship, and people around enough to get some real motion going on intercity rail service.

Of course, I could be very wrong. The British privatized rail service in the 1990, with mixed results, and they had a lot more to go on. I'm not advocating the destruction on Amtrak, by any means. But a vertical split of the company into track-owning and train-operating could certainly be for the best. Through in a single mandate and a bit of competition, and we might have an interesting future here.

And - geeze, I've been at this for a while. I'm going to find something else to do with my evening.