Liquidate Amtrak

March 22, 2002 -- Amtrak’s financial hemorrhaging is so severe that it may be insolvent by summer. The railroad’s auditor, KPMG LLP, is holding back from declaring it a “going concern.” Rep. John Mica (R-Fla.) has flatly declared, “Amtrak isn’t broken, it’s bankrupt,” and he’s right.

The Amtrak Reform Council has found Amtrak incapable of surviving without continuing taxpayer subsidies and, following a 1997 law, sent a plan to Congress recommending Amtrak be reorganized. That finding triggered a requirement that Amtrak simultaneously submit a liquidation plan to Congress, which would choose among the plans or create a hybrid plan.

Then came a nasty surprise. Rushing to squash talk of liquidation were Senate Majority Leader Tom Daschle (D-S.D.), Senate Commerce Committee Chairman Fritz Hollings (D-S.C.) and Sen. Joseph Biden (D-Del.). They maneuvered passage of an amendment to stop Amtrak from spending funds to prepare its plan—a last-minute way to block a law that had been in place for five years.

The action perpetuates the hoax that Amtrak is salvageable. It also lets the railroad’s board of directors—made up of politicians, not business experts—off the hook for approving incredibly bad projects.

The liquidation plan became a feared document because it would expose the fraudulent nature of Amtrak’s public statements about its “good performance” and shine a light on the railroad’s record-level debt.

Daschle, Hollings, and Biden abused their positions in a premeditated attack on the public’s right to know about the public’s business. They achieved the same purpose Enron Corp. executives did with paper shredders—to hide from public view the details and scope of a financial disaster in the making.

Quashing a legally required document represents the worst in public officials—it demonstrates a lack of integrity, insults the marketplace of ideas that Americans cherish, and in this case disrespects a justified attempt to create a leaner and more responsible government.

Amtrak’s liquidation could start anyway. Unpaid creditors could force Amtrak into Chapter 11 bankruptcy. So could the Bush Administration, by performing the taxpayer-friendly act of declining to co-sign additional Amtrak loans.

Liquidation would unveil the railroad’s Byzantine accounting system and the extent of taxpayer obligations now hidden in countless loans. And the process would inject into the public debate how liquidation of a failed public enterprise is a healthy development.

Liquidation cures dysfunctional organizations because it saves useful parts and unloads useless parts. Amtrak’s value is restricted to a handful of busy short-distance routes (e.g., New York-Washington), while lightly used cross-country lines represent pork-barrel waste.

Fortunately, think tanks are examining how liquidated Amtrak assets could be reallocated to more remunerative uses. Proposals by Sen. John McCain (R-Ariz.) and Rep. Mica offer ways to replace Amtrak through privatization, competitive contracting, and franchising options similar to what has succeeded overseas. Private companies have expressed interest in bidding for Amtrak assets, allowing taxpayers to recoup some of their investment.

Amtrak’s operations constitute a tiny role in America today, so shutting down weak Amtrak lines would hardly disrupt travel. And inducing private operations on the busier lines would improve their chance of success.

Amtrak’s ravenous appetite for tax dollars—it’s gobbled more than $25 billion with no end in sight—justifies liquidation, which is a proven economic re-ordering tool used every day in the private sector.

Senators should show some integrity by agreeing to new requests that Amtrak prepare a liquidation plan. Trying to hide the railroad’s colossal problems from the public is beyond inexcusable—it’s condemnable.

The current Washington debate on Amtrak includes liquidation concepts outlined in Mr. Vranich’s book Derailed: What Went Wrong and What to Do About America's Passenger Trains (St. Martin's Press, 1997).

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