Musk's proposed privatizing of Amtrak has the stink of taxpayer rip-offs throughout the history of U.S. railroads

With all the dark chaos being unfolded by the techbro supremo and his squad of young know-it-all software engineers at DOGE, some items understandably get lost to us in the overwhelming daily deluge of cruelty and incompetence. That was the case for a speech the world’s richest man gave at  a tech conference a dozen days ago.

Although Tim Balk at The New York Times gave it some pushback in a prominent space, it was pretty much forgotten the next day. Amid news of firings and threats of more firings, court-ordered rehirings, calling the neoNazi-filled AfD Germany’s “last hope,” strutting on stage with Sieg Heil-like salutes, and cozying up to Vladimir Putin, the fact that Elon Musk had yet again called for a privatization—this time for Amtrak—didn’t raise much more than a shrug. The pain being delivered to so many people and institutions right now across the federal government and programs it funds makes this privatization blather seem less consequential by comparison. But it’s all of a piece. 

Musk reportedly said to those attending the Morgan Stanley Technology Media & Telecom conference, March 5: “If you go to China, you get epic bullet train rides. They’re amazing.” That is a widespread view. Even among people who despise the Chinese leadership for other things, there is almost uniform agreement that the Beijing government has built the world’s premiere high-speed rail system, 25,000 miles of it done quickly once the top-level political battle fought over getting the first high-speed line built was ended just 17 years ago. In addition to everything else, China’s HSR system is a powerful tool for cutting emissions. Never mind that the folks in charge don’t have to worry about local zoning laws or citizen protests and lawsuits causing delays.

At the tech conference, Musk didn’t stop at praising China’s system, he called Amtrak "embarrassing," saying it is “a sad situation. If you’re coming from another country, please don’t use our national rail. It can leave you with a very bad impression of America.” 

And the solution? “I think we should privatize anything that can be privatized, just so you’ve got a feedback loop for improvement, which is what happens when something’s privatized,” Musk said. “Basically, something’s got to have some chance of going bankrupt, or there’s not a good feedback loop for improvement.”

The idea is hardly new, and definitely didn’t originate with Musk. Ever since Amtrak was created in 1971 as a solution to privately owned railroads’ unwillingness to continue providing passenger service in regions desperately needing it, the privatizers in Congress have been starving Amtrak, squeezing its efforts to provide high-quality 21st Century service with, in some cases, century-old infrastructure. Make it financially impossible to provide good service as politicians had done for years with Amtrak and people will assume it’s the operator at fault. Amtrak did get a much-needed injection of cash from the Biden adminstration — $22 billion from the Inflation Reduction Act, $4 billion of which has already been spent on belated upgrading. But Trump could ax whatever’s left in the pot to bring Amtrak up to snuff. 

MUSK CLUELESS ON CHINA RAIL

As so often the case, Musk needs debunking. Nobody better to do that than Jim Mathews, CEO of the Rail Passenger Association, who writes:

Since the early 2000s, China’s government has invested $1.5 trillion – yes, that's "trillion" with a "T" – in high-speed rail. What China has done is not even remotely connected to privatized enterprise, but instead is the result of intense, sustained, policy-driven state involvement, not just in dollars but in legal imperatives. In fact, if Amtrak got the same level of government support and decades-long sustained investment as the China State Railway Group has enjoyed since at least 2004, it’s quite possible we would have a world-class high-speed rail network reaching every corner of our country.

Let’s compare and contrast. Planning and approval time for new service in China? Between two and five years. In the U.S.? Twenty years or more.

Construction cost per kilometer in China? Between $17 million and $30 million per kilometer. Europe is not far behind at $25 million to $50 million per kilometer. In the U.S., what we’ve seen so far approaches $200 million per kilometer, although we’re really only starting now to build meaningful high-speed rail so it’s not a fair apples-to-apples comparison.

High-speed rail everywhere in the world is state owned and usually state operated. But in America, privatization has been a watchword of the Republic since its founding.

In 1975, the federal government created the Consolidated Railroad Corp. to take over potentially profitable passenger lines from the collapsing railroad system in the Northeast U.S. And it worked. Soon Conrail was upgraded with new infrastructure and rolling stock, became efficient, and started turning a profit. But in American ruling circles, the idea of a government entity so engaged is anathema. So in the autumn of 1986, President Ronald Reagan signed the Conrail Privatization Act, and five months later, in what up to that time was the largest initial public offering ever, the government-funded rail company was sold for $1.9 billion ($5.45 billion in 2025 dollars). This was far better than would have been the case had the Department of Transportation been allowed to sell off Conrail to one of its competitors, as was originally planned. However, American taxpayers who had sunk the equivalent of $28.7 billion in today's dollars into the operation still got, well, railroaded, getting a pitiful 7% of their investment back. 

The Treasury-dipping didn't perturb those who preached privatization of everything from public lands to Social Security. In their scheme of things, the government's role — then, now and forever — is to bail out money-losing corporations, not to show, as it did in Conrail's case, that it can operate them efficiently and profitably and in the public interest. Such proven ability would spark too many discomfiting questions.

Fact of the matter is, Conrail was just one more installment in the sordid saga of taxpayers and the railroads. 

America had a romance with the railroads that equaled its later affair with the automobile. It was embodied in the Iron Horse itself, the steam locomotive that made speedy rail travel possible. But the invention of this marvelous machine brought forth gangs of connivers and smooth-talking grifters with an aptitude for looting the public purse.

Greased with hefty bribes in the 1850s and '60s, Congress gave railroad companies land grants of 130 million acres (7% of the contiguous U.S.) and $12 billion in today's dollars of cash grants. The states granted 50 million acres on their own and passed bond issues to capitalize the companies laying track in their states. Municipalities went into deep debt to pass bonds that ensured the railroad planners would choose to come to their town rather than their rivals'. Nearly all the tracks laid came about as a consequence of special privileges. The companies got favored tax status, guaranteed eminent domain, and full red-carpet treatment. It was all done with the understanding that this investment in taxpayers' money would provide cheap, but excellent rail service — passenger and freight — for generations to come. Towns with rail service would prosper  civic leaders were assured.  

SCHEMERS LOOTED THE RAILROADS FROM THEIR EARLIEST DAYS

Instead, the subsidized buccaneers set up wholly owned dummy corporations that charged three times the actual cost of construction. Because each mile generated more bond money, roundabout routes were commonplace. Substandard construction was the rule. Stock was "watered" and manipulated into investment windfalls for a few and debacles for most. 

Once the railroads were in place, the silky corporadoes in charge proceeded to run them without repairs until, clickety-clack, equipment was exhausted and bankruptcy declared. 

Through it all, the townspeople and farmers, who had hocked their futures to provide bonded subsidies to the railroads, were charged outrageous prices to transport their goods. Passengers made out somewhat better because the railroad companies were eager to populate the towns they'd stuck on the edges of the millions of acres of land around their lines.

Eventually, this scandalous behavior, topped off by the Credit Mobilier affair, shocked even 19th Century believers in government-subsidized economic free-for-all into registering the "lobbyists" who handed out hundred-dollar bills like lollipops to Congressmen. Also created was the nation's first modern regulatory agency, the Interstate Commerce Commission. The railroad companies themselves favored this move since it freed them from myriad state regulations that they considered predatory and overly favorable to shippers. But, ultimately, the flawed ICC, which is a long story in itself, made matters worse, not better, a tradition it continued until the Staggers Act brought on deregulation a century later.

By 1917, the ruined railroads, their profitable bits fully looted, were unable to keep up with World War I transport needs. So the Feds took over, rebuilt track, ordered new railcars and locomotives, kept freight moving and made the railroads viable again with a huge investment for the time of $1.12 billion ($18.5 billion in 2025 dollars). After the war, despite objections, operations were returned to their private owners who began another round of their rip and run by immediately demanding that the government pay for alleged economic "damage" supposedly caused by federalization.

By 1936, Sen. Harry Truman — who often compared railroad companies to bandits — was moved to denounce them from the Senate floor:

When Jesse James and his gang robbed a train and got off with $3,000 down near Independence, Missouri, it was front-page news in the Independence newspaper. But today those trains are still being robbed. Now it's not Jesse James and his gang, it's holding companies formed by lawyers and accountants to strip the railroads of their assets — assets in the form of land grants which this country gave the railroads to build and maintain a railroad with.

The Pennsylvania Railroad wasn't a land-grant railroad, but in its final agony, a generation after Truman's speech, it acted like one. In 1963, the company's new managers refused to fix its dilapidated equipment, but eagerly siphoned its revenue into telecommunications, earth movers, health spas, an oil pipeline, coal properties, and 63,000 acres of prime Florida real estate.

Customer service collapsed. Profits tumbled. The road merged with the New York Central RR and became the Penn Central. More assets were stripped away. The downhill slide continued. When Congress nationalized the road in 1973, it was a rusty hulk losing $400 million a year. Nevertheless, the taxpayers shelled out $1.9 billion to renovate it, more than three times Penn Central's worth. And although Congress got the money-losing railroad, the newly formed Penn Central Corp. got to keep the profitable spin-off companies and title to $1.5 billion in the railroad's accumulated tax write-offs.

Penn Central and six other railroads were taken over by Conrail, which reduced "featherbedding" practices by cutting the labor force in half. Over the next few years, the system became efficient, well-managed, highly profitable, and 15% owned by its employees. Its continued operation saved tens of thousands of jobs in hundreds of businesses that would have gone under without rail transportation.

But a government-run railroad? Anathema to the laissez faire advocates who came to power with Ronald Reagan and now, of course, Musk. For three years in the 1980s, Congress fought an administration eager to sell Conrail on the cheap. The proposal to offer the railroad to high-bidder Norfolk Southern finally was scuttled in the summer of 1986 in favor of plan to sell public stock and get a somewhat better return on the taxpayers' investment.

But why sell at all? Why not keep Conrail in public hands? As South Dakota's former Republican Gov. Bill Janklow once put it, "We have public schools, public hospitals, public airports — so why not a public railroad?" Even when he spoke those words, in the days before the privatization assault got fully under way, such thoughts were heresy among most Republicans and not a few Democrats. And that attitude has only hardened since. The techbros in general and the techbro supremo have taken it to the extreme with all their Ayn Randian fantasies of comic book governance. They disdain civil servants as “low-productivity” workers and hope to replace many of them with humanoid robots.

Only when an essential cog in the nation's industrial or financial infrastructure goes sour do the taxpayers get to take title to any enterprise, pouring billions into keeping it alive until—the very instant profitability is restored—it is sold for a pittance compared with the investment. In the case of Conrail, the taxpayers got to see the government-funded operation wrenched back into efficiency before being forced to take a deal that returned only 10% of their investment dollars. In the case of rescuing GM two decades later, the government sold its shares at a $10.7 billion loss. But we need not speculate aimlessly. History tells us that if Amtrak were to be privatized, even though it’s a money-losing operation, one way or another would be found to rip off the taxpayers and penalize the passengers. It’s an American tradition.