When is a hamburger not just a hamburger? When it costs Amtrak $16 to make. They sell it for $9.50, and taxpayers cover the difference — every time. Then it becomes a glaring symbol for spiraling costs, crippling deficits, and the inherent inefficiencies of big government.
Thirty years ago, the idea of Amtrak losing money on food sales was as outrageous as it is today. (Hungry customers on a moving train with nowhere else to go. How hard can it be?) In fact, it was so outrageous that Congress passed a law against it. The Amtrak Improvement Act of 1981 prohibits the government-owned company from selling food at a loss. Nice try. Today, Amtrak is selling more and losing more than ever before.
This month the Government Accountability Office reported that losses on food service exceeded $80 million last year and totaled $834 million during the past decade. Auditors blamed the staggering losses — most of which occur on Amtrak’s 15 long-distance routes — on waste, theft, and lack of oversight. That’s only a fraction of the total losses from long distance operations, but it’s real money nonetheless.
For many of Amtrak’s congressional overseers, a $16 hamburger is a juicy target — an opportunity to grill the company’s managers and rake the bungling operation over the coals. Rail boosters, meanwhile, will rush to the usual defenses — that these are simply the costs of maintaining passenger rail, that the services are essential, and that scaling back Amtrak means scaling back jobs.
During congressional testimony, Amtrak CEO Joseph Boardman tried to explain that, if Amtrak didn’t lose so much selling food, fewer people would ride the trains, and the company would lose more money on operations. Such tortured logic makes for a bad business plan. Ridership did reach a record last year, a 5 percent increase over 2010. Unfortunately, operating losses rose by 20 percent, cresting above $500 million.
But this fiasco exposes more than just a sea of red ink. It affirms the fundamental truth that government can’t do anything efficiently — not even make hamburgers. While there are many responsibilities that we need government to fulfill — like maintaining the national defense, regulating financial services, or managing public lands — even those endeavors come with their own embarrassing moments. Food service, however, is about as far removed from an essential government function as one can get. Contract it out, or eliminate it altogether, and the republic will survive.
Equally important, the distressing consistency of these losses demonstrates once again that government can’t reform itself. Blame the eternal optimism of Congress here. Like the 1981 law that prohibited losses on food sales, another that passed in 1997 demanded a path to profitability — without actually legislating specific changes to routes, head count, wages, or prices. If you leave all the decisions to a government-owned bureaucracy, you’re going to get the kind of decisions that a government-owned bureaucracy tends to make: poor ones.
Despite three decades of operational failures and over $25 billion in government subsidies, true believers still defend the system. For these hardy souls, no amount of economic reality will change their opinion — not the absurdity of running routes that lose $400 per passenger, not the idea of losing $200 on every long-distance ticket sold, and not the notion of losing $6.50 on every hamburger made.
But if Amtrak can’t make money on a hamburger after 30 years, what makes anyone believe that the government can effectively manage health insurance exchanges, control healthcare costs, or improve the quality of the medical care you receive? Stay tuned.
No one truly knows what the machinations of Obamacare will bring upon us; and a hamburger is a far cry from a heart bypass. But time and time again we have seen the consequences of federal bureaucracy, overhead, and lack of market incentives. And no amount of lofty ideals or good intentions can overcome the powerful inertia of the public sector. No one sets out to lose $80 million a year selling food. The government just happens to be good at that sort of thing.
The deep divisions over the health care law stack up much like those over Amtrak. Eventually, support simply becomes an article of faith: “Don’t worry, it will work.” And if it doesn’t, we’ll just pass a law that orders the government — and the insurers, and the hospitals, and the doctors — to fix it. Just like we did with those trains.