The National Railroad Passenger Corporation (also known as Amtrak) has been in a shaky financial condition ever since it was created by the federal government more than 30 years ago. Although Amtrak was established as a private, for-profit company, it has needed--and received--federal subsidies every year since it began providing service in 1971. Those subsidies totaled over $1 billion for 2003. However, according to Amtrak executives and independent analysts, that amount is insufficient for the railroad to sustain its current service safely and reliably over the long run.

Amtrak's authorization expired in 2002. In considering legislation to reauthorize federal funding of the railroad, the Congress will again face the issue--as it has throughout Amtrak's history--of what the goal should be for an intercity passenger rail program. Should service be operated only where it can make a profit (or at least cover operating expenses)? Or should the federal government also commit to subsidizing money-losing trains to meet a perceived need for public transportation? Given that some service is unlikely ever to be able to cover its operating costs, are there other organizational or institutional arrangements that could offer service at a lower cost to taxpayers?

This Congressional Budget Office (CBO) study--prepared at the request of the Senate Budget Committee--reviews past policies toward Amtrak and the fundamental economics of passenger rail service. The review suggests that there are only limited conditions under which passenger rail service in the United States could be economically viable without subsidies. This study also explores the implications of four options for future federal support of passenger rail, ranging from eliminating federal subsidies to funding a massive expansion of rail service. In keeping with CBO's mandate to provide objective, impartial analysis, the study makes no recommendations.

Elizabeth Pinkston of CBO's Microeconomic and Financial Studies Division wrote the study under the supervision of David Moore and Roger Hitchner. Many people reviewed drafts of the study and provided useful comments, including Francis Mulvey and Glenn Scammel of the House Committee on Transportation and Infrastructure; Mary Phillips of the Senate Committee on Commerce, Science, and Transportation; Louis Thompson, formerly of the World Bank; José A. Gómez-Ibáñez of Harvard University; Anthony Perl of the University of Calgary; Marcus Mason of Amtrak; Neil Moyer and Conan Magee of the Federal Railroad Administration; Jack Bennett, Thomas Marchessault, Jeanne O'Leary, Sherry Riklin, and Edward Weiner of the Office of the Secretary of Transportation; John Fischer and Randy Peterman of the Congressional Research Service; James Ratzenberger of the General Accounting Office; Paul Dickens; and Peter Fontaine, Rachel Milberg, and Carla Tighe Murray of CBO.

Christian Spoor edited the study, and Leah Mazade proofread it. Angela McCollough prepared the tables. Maureen Costantino designed the cover and produced the figures. Lenny Skutnik printed the initial copies of the report, and Annette Kalicki prepared the electronic versions for CBO's Web site.

Douglas Holtz-Eakin
Director
September 2003