A Gunn to Their Head: The Amtrak bailout and its lessons.

National Review Online ^ | July 1, 2002 | Ronald Utt

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After several days of intense negotiation over the future of Amtrak, Transportation Secretary Norm Mineta and Amtrak's chairman, Meridian, Mississippi Mayor Bob Smith announced on June 26 the broad outline of a tentative, plan to keep the rail system afloat for a few more months until next year's appropriation comes through on October 1. Under the terms announced that evening, Mineta promised to give Amtrak $270 million to cover recently discovered losses, and Amtrak pledged to stop lying to the public and to government officials.

Aside from whatever this deal will or will not do for Amtrak's prospects, it does lead to the useful derivative objective of establishing "Honesty is the Best Policy" as a federal goal. In turn, this could come in handy as a backup slogan to "In God We Trust" in the event a California court orders this declaration struck from coin and currency.

But as for Amtrak's prospects, and for the more meaningful reform proposals the administration is reported to have wanted, including the resignation of its unqualified board of directors, ambitious cost-cutting goals, and the adoption of competitive contracting agreements common in European and Asian passenger-rail systems, Amtrak wouldn't budge. So Mineta conceded the field and offered to add another quarter-of-a-billion dollars to a budget deficit now approaching $160 billion this year alone. By this sacrifice of other peoples' money, Mineta spared the half of one percent of the traveling public who use Amtrak the need to seek alternative conveyance, and preserved the 23,000 mostly unionized rail jobs currently paying about 20 percent more than the mostly unionized jobs in the airline industry.

It is tempting for conservatives and pro-market types to see this unfolding drama as another failure of reform and a further drift toward bigger government, but that would miss the subtle, yet important, anti-government subplot in all of this, and the lessons it yields in tactics for success. The intriguing story of the Amtrak/Mineta struggle is not the predictable collapse of Republican will, but how an intensely determined S.O.B. with no apparent federal political experience comes into town from his Cape Breton hideaway, and in a few short weeks takes the measure of the thousand or so Washington officials who pose as national leaders.

Seeing them for the bipartisan collection of empty suits and dresses they are, Amtrak President Gunn threatens them with the immediate withdraw of train service from their constituents unless they give him $270 million to tide him over until October 1. And their response to the threat? Were they angry? Were they insulted and demeaned? Apparently not. By acclamation (with a few notable exceptions including Senator McCain and Speaker Hastert) they demand he be given what he wants, and the administration, through Secretary Mineta, appears willing to comply.

Of course the money made available is not without conditions. Agreeing not to lie to the public or to government will not rest easy on an enterprise and a board of directors that has spent much of the last five years misrepresenting its true condition to the public and to Congress. As recently as late 2001, Amtrak's former President George Warrington, in full knowledge of the board he served, claimed that Amtrak would still achieve financial self-sufficiency in 2003, as required by federal law. If they knew this not to be true, they should lose their jobs and be prosecuted for fraud. If they believed this to be true, they should lose their jobs for incompetence. Either way, they should be gone. But of course they are not, and what makes this negotiating process so bizarre — even by Washington standards — is that poor Norm Mineta must conduct his negotiations with these very same board members.

The irony, as well as the scandal, of this state of affairs, has been noted by others, and openly conveyed to Congress, most emphatically by Sen. McCain on February 15 when in reaction to Amtrak's belated admission that they were in big financial trouble, connected the dots for his colleagues in a speech to the Senate: "Ironically, while we are criticizing private auditors for failing to ensure disclosure of the true financial picture of Enron, Congress has had clear indication from public auditors that Amtrak was not financially solvent but chose to ignore those warnings." Congress chose to ignore this speech as well, deciding that the fault lies with President Bush.

Granted, the administration knew that Amtrak was a ticking time bomb, and did nothing, but congressional reaction to the abuse heaped upon their constituents by Gunn's threatened shutdown is something of a surprise, and certainly a tribute to the man's perceptive read of their sense of stature. In the Washington area alone, where Amtrak is paid by local governments to operate their commuter rail systems under contract, Gunn's threat would have needlessly stranded 6,000 Virginia commuters and 11,000 in Maryland. Yet Virginia's Governor Mark Warner and Congressman Jim Moran, and Maryland's Senator Barbara Mikulski turned their ire against the White House, rather than Amtrak's Gunn, whose bureaucratic terrorism held their commuting constituents hostage.

There is an important message in all of this, and it has less to do with the question of Amtrak's future than with how to get things done in Washington. And hopefully President Bush is taking notes. In a recent reaction to all of the budget-busting legislation floating his way from Congress, Bush observed that "I've got a tool, and that's called a veto." Problem is that he has not yet used it, and many in Congress are beginning to doubt he will given the nature of some of the legislation he has signed into law. By the same point in his abbreviated term, President Gerald Ford had vetoed 41 bills. Bush has vetoed none. Perhaps Gunn's demonstration of the magnitude of the benefits such obduracy can yield in Washington will change that. If so, the next costly piece of Amtrak bailout legislation might be a good place for Bush to start.

— Ronald Utt is a senior research fellow for the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.

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This may be a good idea "stranded 6,000 Virginia commuters and 11,000 in Maryland."