Summary: According to Rasmussen. only 26% of Americans applaud the GM bailout. (For reference, 17% favor boycotting GM cars as a form of protest.}
Why the low level of support? Perhaps because folks older than Obama remember a similar experience with Amtrak. Amtrak was supposed to turn a tidy profit, but taxpayers are still sinking billions of dollars into Amtrak—almost 40 years after buying it.
Economist James Langenfeld says the bailout of GM will be an even bigger disaster.
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Excerpted from The daily Beast, “Is GM the New Amtrak?”. James Langenfeld, June 5, 2009
Both Congress and the Obama administration apparently believe a bailout is best for GM, and that “what’s good for General Motors” is still good for America. So we taxpayers appear to be on the brink of owning most of GM. Do we know what we are buying, how long we will own it, and what it will really cost? Perhaps we can learn some lessons from another government owned company, the National Rail Passenger Corporation—aka Amtrak. The Amtrak experience raises many issues about the future of GM.
In the 1960s, private railroads wanted to dump their unprofitable intercity passenger service and concentrate on their more-profitable freight service. So in 1971 the U.S. government obliged them by creating Amtrak.
The talk then was all about becoming profitable, but the reality has been anything but. Amtrak is now 38 years old, and shows no sign of moving out of the taxpayer’s house.
The government gives Amtrak about $1.5 billion per year, not including an additional $1.3 billion from the recently passed American Recovery and Reinvestment Act. These figures may seem small compared to the $50 billion recently plowed into GM, but Amtrak subsidies amount to $85,000 a year for each Amtrak employee, or about $35 every time Amtrak sells a ticket.
Bottom line: It costs taxpayers about $1.40 for every $1 of revenue Amtrak takes in.
President Obama and his administration seem to understand that creating another Amtrak is not promising. They speak in one voice about not wanting to run a car company, not planning on micromanaging the company, and selling the government’s stake as soon as possible. All good thoughts, but these same officials cannot provide any timetable for getting out the car business.
Moreover, there are early signs that GM may have many of the same problems that Amtrak has faced and we may very well end up with GMtrak.
http://www.thedailybeast.com/blogs-and-stories/2009-06-05/is-gm-the-new-amtrak/?cid=bs:archive4
Dr. James Langenfeld is a director at the economics consulting firm LECG and teaches at Loyola University Chicago. Previously he was a senior economist at General Motors and an analyst at Amtrak.
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