Watchhttp://washingtonexaminer.com/amtrak-lost-800m-on-cheeseburgers-and-soda/article/2503832
Amtrak lost $800M on cheeseburgers and soda
Taxpayers lost $833 million over the last decade on the food and beverages supplied by Amtrak, which managed to spend $1.70 for every dollar that received in revenue.
“Over the last ten years, these losses have amounted to a staggering $833.8 million,” said Rep.John Mica, R-Fla., in a statement previewing a House hearing today. “It costs passengers $9.50 to buy a cheeseburger on Amtrak, but the cost to taxpayers is $16.15. Riders pay $2.00 for a Pepsi, but each of these sodas costs the U.S. Treasury $3.40.”
"Amazon.com is currently selling 24-packs of 12 ounce Pepsi cans for $8.94 -- which averages to about 75 cents per can."
Amtrak President Joe Boardman tried encourage House investigators by telling them that last year's losses represent an improvement over previous years. "Our ongoing programs have certainly delivered measurable financial efficiencies," Boardman told Congress in his written testimony today. "In 2006, our food and beverage service recovered 49 percent of their costs. In 2011, these services recovered 59 percent of their costs," he testified.
The food service is legally obligated to break even, but Amtrak lost $84 million just last year. “The rail service’s food and beverage operation has 1,234 employees, and taking into account Amtrak’s $84.5 million loss last year, that’s $68, 476 per employee," Mica said.
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This kinda stupid government sh!t has been happening for how long now, 50 years, 60 years, 70 years?
Here's how to solve the problem - privatize it and run it like a real business. Government is composed of non-business people, get it? All of their collective decisions are invariably wrong for that very reason. They have no clue what they are doing or how a real business operates. Even the president doesn't know who was or is responsible for building a successful business. Is it any wonder the economy is in the tank???
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zzyzzx says
How about:
"Taxpayers lost Billions on subsidizing the airline and car industries, which makes rail non-competitive."
Without the government paying for airports, air traffic controllers, airport security, and all kinds of write off and subsidies for the airlines, I wouldn't be surprised if Delta lost $2 on every headset they sold.
If trucks and cars paid all the costs of roads and traffic patrols, I wonder how much vehicles would really cost to own and operate?
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How is it that Government can't make money off of a $2 soda and other people can charge less and still make money?
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Rails cannot be operated as a purely private, for profit endeavor due to property ownership and other real world constraints. Not everything can or should be privatized. Those who promote those kind of solutions fall into the Libertarian ideologue category and would be well served to actually go read the works from which their ideology was founded.
The cross-subsidization issues, as thunderlips11 referred to, are the reason rails are a loss-loss proposition. The government should have divested from passenger rail altogether and held onto the right-of-way corridor rights so they could reactivate the system if necessary later.
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So why should the defenseless taxpayer be continually raped by their benevolent politicians? People have a hard enough time making ends meet as it is PLUS they have to throw their money down a black hole and subsidize a losing enterprise because their "wise" leaders say they should?
Run it like a business for god sakes. Don't keep sticking it to the taxpayer.
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The real question is how other countries' governments run their rail programs so much better than we do. All of Europe has vastly better GOVERNMENT RUN rail systems than we do.
Hell, even Canada has much better rail service.
They're not privatized, they're just better.
I suspect that the auto, oil, and highway construction industries make sure that our passenger rail system sucks.
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Patrick says
I suspect that things like unions and minority procurement requirements makes ours expensive.
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LIke I said, if the US government is going to continue to choose to favor automobile and air transportation then it should put rails on mothballs and quit investing there too. But selling it off to private owners would be the worst outcome of all. Just put it on mothballs. In fact, that *would* be running it like a business. Businesses tend to hold onto cash flow positive assets, and the rail corridor real estate is certainly not what's causing the losses.
I disagree about European rail being run *well*. It is run *better* in many countries, but none of them are run all that well. And they're pretty much all operating at a huge loss.
The difference between us and them is they recognize that certain things aren't profitable even though they are desirable. Infrastructure often falls into that category because the benefits are reaped by other endeavors that rely upon that infrastructure, but the infrastructure itself is a cost center.
The US highway system, for example, runs at billions upon billions of "loss" per year, but the economic activity it supports far outweighs those losses in terms of aggregate benefit. But left to private companies, we'd have no highway system.
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Someone is stealing from the coffers. Follow the money.
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Randy H says
$9.50 cheeseburger, $2.00 pepsi - and still in the red? Any large fast food player would be ecstatic to take over, food logistics are largely orthogonal to government support of competing industries. It would affect scale, but scale is not the issue here.
At these prices, you just can't explain negative margines by greater support for alternative transportations. You really need to work hard on screwing it up.
I'll remember it next time I hear how railroads suffer because government supports airlines more.
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lenar says
I can blow any profit the railroad makes, and so can you, not a problem. My point is that I think someone actually is working really hard on screwing up Amtrack.
Business in America has much less to do with creating a good product than with getting the government to eliminate your competition for you, so that the public just doesn't have a choice.
Like Randy says, government is supposed to be the one thing more powerful than the corporations. Once the government gets corrupted by business lobbyists, there is nothing protecting us anymore.
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Patrick says
There is a bleeding gap in the base of this observation (not that the observation itself is incorrect). The more powerful government is, the more it's a desirable goal for corruption. It stops being that when business and government become one (fascism is one example) - then corruption gets redefined.
Government more powerful than business, yet uncorrupted? Doesn't happen.
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Funny that people on the right complain about gubbermint' and spending then go on to wail when "Other" forms of government spending are cut. Its called a double standard.
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lenar says
Business more powerful that government, yet uncorrupted? Doesn't happen.
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lenar says
Cops more powerful than robbers? Yes, it does indeed happen, and it is the normal state of things. Corporate charters are granted by government and can be revoked by government.
Ruki says
I often wonder why it isn't that way. Seems like a good idea, just like airports don't own the airplanes.
You could even take it further and allow individuals to own rail cars that they drive across the country.
One huge advantage over air travel is that the train stations are generally in the center of town rather than way the hell out in some far suburb like airports are.
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Patrick says
Cops/robbers = government/businesses? It's a sorry state that draws this correlation.
No state have ever achieved success through the strategy of more controlling government. From engineering standpoint it makes perfect sense: with some exceptions, a complex system better be distributed than centralized.
P.S. Perhaps you are right. Perhaps there is a powerful lobby that works on running Amtrak into ground. But looking at this example - the food - I'd say that they get a lot of help from within Amtrak.
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lenar says
So far it seems to be working well for China.
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leoj707 says
Ah. China. The one that went from total control, which stomped the entire country into poverty, to relative liberalization of capital. I'd think it's an example of the opposite.
Notwithstanding that an average chinese mainlander lives a pretty miserable life, by Western standards. Just less miserable than before.
P.S. Interesting fact. Most politicians in China have engineering rather than legal/liberal background. That could also explain a thing or two.
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lenar says
Yes, China has loosened up a bit (but no less centralized), but they are still horribly controlling by any standard. Yet over the past few decades they have had huge financial success.
They are the perfect example of an incredibly centralized state that is highly controlling yet has had huge growth in GDP.
Or, is there some other sort of success measure that you want to apply to a state?
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You know, I cannot think of a single right wing argument whose entire basis doesn't crumble when this or that major factor, that literally hinges the issue, is taken into account. Amtrak sucks because America made up its mind in the 1940-50s that Railroads suck and petroleum will be cheap and plentiful forever.
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leoj707 says
I think that it's a correct observation followed by a wrong conclusion. Growth in GDP is fine (I'd prefer what an average Chinese can buy for an hour of work, but that's ok).
Q. GDP growth compare to what? A. to China of the past.
Can you point to a meaningful period of time when China government took more control, yet GDP went up? All I see is China going from planned economy to market, followed by GDP explosion (admittedly sustained still)
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Follow up.
There is an inherent problem with centralized social systems. They may be more capable in short term, due to better ability to mobilize. However, it doesn't work in long term. In long term, they are more error-prone.
USSR is a good example. What they did in 30-th is an economical miracle, and an example of mobilization by entire country (I won't go into price of making that miracle happen). But then a single mistake - political rejection of cybernetics - hindered technological development of the society for generations to come. Instead, Soviets poured resources into development of space programs, which turned out to be a horrible decision in retrospect.
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lenar says
Sure the cultural revolution. Through and post-revolution the GDP for China has increased. Granted the GDP pre-revolution sucked.
lenar says
Yes, China has gone to much more of a market economy over the years, but lets not fool ourselves into thinking that the governments eye on the economy is lax and that they would not at any time step in and do anything they want.
A little side story: A guy I know contracts with a factory in China to make candy that he then imports into Mexico. He used to order candy samples from Taiwan that he would then get the Chinese factory to knock-off. After getting a few packages from Taiwan he was contacted by the government who he then explained his business model to. The next package that arrived was delivered by two men in suits with whom he had to repeat his story and eat the box of candy in front of them.
If you are ever in China on business a fun thing to try would be to send emails back home where you criticize the Chinese governments human rights policies and their positions on Tibet and Taiwan.
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leoj707 says
It seems that my other post (short-term/long-term) is just on time then, eh? ))
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lenar says
On the other end of the spectrum I think that it would be difficult to say that countries like say Somalia and Liberia would not benefit from having a controlling central government.
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leoj707 says
Back to original point. It doesn't prove much as long as we are comparing China with China of the past. It's the largest world population, of course they'd have high GDP given even somewhat bearable business climate. The growth can also be interpreted as a manifestation of inefficiency of old ways.
If we look at GDP/person, things look bad. China occupies position 90-some. Hong Kong? 5-6. Similar people, different history.
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lenar says
I would say that there is a problem with too much centralized social system, but then again there are inherent problems with not enough centralization.
I don't think that there is a "modern" industrialized nation that does not operate on a combination of market economy and a "planned" central socialized economy. The trick is getting the right mix, not going with entirely one or the other.
China seems to be striking a balance that is "working" for their GDP at least, but their human rights and "freedom" of individuals is horrific.
And yes depending on the economic needs short or long term there needs to be flexibility in a system to allow for adjustments.
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leoj707 says
Yep. If there is no enforcement of rules of business and social engagements (also known as law), all talk about large/small government doesn't mean much.
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lenar says
Correction: There is an inherent problem with centralized systems. It does not matter if those systems are socialistic or capitalistic. It is the centralization of power and control that is the flaw.
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> Dan8267
Social, not socialistic. Social being an example of a complicated system.
As for the rest of your comment - not a whole lot of sense. Centralization is a cornerstone and fundamental property of a socialist (unlike capitalist) society.
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Patrick says
The US rail system is privatized. It is very profitable and successful at squeezing money out of captive freight customers. So while the system is antiquated and unsafe, it is very profitable for its owners.
Freight doesn't complain if it moves around at 30mph and stops for an hour or two while some piece of track is repaired. Shareholders are happy if they see decent profits this quarter, even if the management is failing to invest in maintaining infrastructure.
It is a classic case of making good short term profits at the expense of customer and long term stakeholders interest. American railroads are pure Merican capitalism.
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http://www.usatoday.com/news/washington/story/2012-08-02/amtrak-congress-food-beverage-losses/56719770/1?csp=34news
Congress examines Amtrak's food and beverage losses
Possible solutions include using café cars instead of dining cars on long-distance routes, replacing the food and beverage service with vending machines or food service carts, and contracting out the service to the lowest bidder.
It's that last one that's going to work. Laying off expensive union thugs is the answer. No reason why a dining car employee should earn a gold plated pension at taxpayers expense, for flipping burgers when a private employer can come in and pay market wages.
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There is also the possibility that it is impossible for anyone to make a profit (assuming "reasonable" pricing) running a dining car on a train.
There just might not be enough paying patrons on the train to hit the economies of scale required for the dining car to be profitable.
I think that the train food model is even more difficult than airline food service, and airline food has razor thin profits if any at all. On a train you have the same people stuck there for longer; food service on a plane "turns tables" quicker.
With airlines and trains you can not expect people to be trapped in your vehicle for hours without access to things like food, drink and toilets. So they need to provide something to eat.
Regardless of who ends up running them, I think that a profitable solution will probably be vending machines or perhaps a food counter with a single employee -- no burger flipping required, all per-packaged box meals.
All that said when I do take a long train ride I enjoy chatting with the other travelers I was seated with as I eat my mediocre steak.
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Patrick says
Not true - socialism works about the same throughout. Greek Finance minister not too long ago made the following statement: "it would be cheaper to put all passengers in Taxi instead of using our rail system".
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Patrick says
God Bless America.
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Randy H says
How do you know? Where has this been tried and not worked?
In fact, in the 19th century US, the only rail systems that made money were the completely private ones, that didn't receive any subsidies.
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leoj707 says
Wow Leo, you show your true colors. As much as America sucks, I don't really look to China as an example of how to do things.
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freak80 says
No neither do I. It was an observation not an endorsement.
leoj707 says