Amtrak Joe Versus the Robber Barons: How Wall Street is destroying the promise of Biden's big bet on rail infrastructure.

• Author: Longman, Phillip
• Position: UNWINDING MONOPOLIES

As expected, when a chief executive nicknamed "Amtrak Joe" put together his signature infrastructure bill, it contained an unprecedented sum for expanding rail service across the country: $60 billion over 10 years. Perhaps more surprisingly, it attracted enough support from Republicans to pass the Senate in August. Though as of this writing Democrats in the House are divided over how and whether to tie the bill to other agendas, it seems likely that Biden will eventually realize his ambition to tilt far more transportation dollars toward rail.

It's a worthy goal. The bill promises to furnish a more convenient and environmentally friendly mode of travel between destinations that are far enough apart to make driving tedious but close enough together to make flying impossible, or at best impractical. You might never use these new trains yourself, but those who do will benefit you by creating less traffic congestion, cleaner air, and a cooler planet. Removing more freight from pavement-pounding long-haul semitrucks onto super-fuel efficient trains will make driving safer and more pleasant and would yield huge reductions in carbon emissions.

But for any of this to happen on any meaningful scale, the Biden administration will need to do more than just invest more public money in train travel. It will also need to reverse decades of deregulation, lax antitrust enforcement, and other policy blunders that have left modern-day robber barons in control of nearly all the nation's highly monopolized railroad infrastructure, just as they were in the worst days of the Gilded Age. Only this time, the financiers aren't presiding over an expanding rail system; they're selling it off and permanently liquidating its assets for short-term economic gain.

Unless Biden takes on the financiers, even maintaining Amtrak service, let alone expanding it, will become ridiculously expensive. Here's an example that shows why.

Amtrak for decades offered train service along the Gulf Coast corridor between New Orleans and Mobile, Alabama. In 2005, Hurricane Katrina badly damaged the tracks. The two giant corporate rail systems that own the line, Norfolk Southern and CSX, made the necessary repairs and within a year resumed running their own freight trains. But Amtrak service has never returned.

It is not that people in the region don't want their Amtrak trains back. A broad coalition of civic and business leaders, including Mississippi Republican Senator Roger Wicker, has been trying for years to persuade the railroads to let Amtrak resume operating. They point to a study by the Trent Lott National Center at the University of Southern Mississippi that says restoring Amtrak service will boost tourism significantly, greatly benefiting Mississippi's beaches and casinos. They point to the report of a special Gulf Coast Working Group, created by Congress, that estimates the cost of resuming Gulf Coast passenger service at $5.4 million. They point to the fact that the Biden administration, Amtrak, and the state governments of Louisiana and Mississippi are all committed to furnishing the necessary operating funds.

But after five years of negotiations, you still can't take the train to Gulfport, Biloxi, Pascagoula, or anywhere else along the Gulf Coast. CSX, which controls most of the track along the route, insists that restoring Amtrak service would interfere with the six to eight freight trains it runs daily along the coast. It's an argument that rail corporations often deploy against passenger service.

The objection is absurd on its face. During World War II, when troop and military freight trains crowded this route along with civilian freight traffic long since lost to trucks, dispatchers still managed to move 11 scheduled passenger trains per day between Mobile and New Orleans. These included the storied "Pan American" of country music fame. And they did it using telegraphs and hand-operated semaphores, not the efficient GPS technology available today.

CSX's recalcitrance is a negotiating strategy to get Amtrak to either go away or pony up for huge infrastructure investments that would mostly benefit CSX itself. The railroad says restoring two Amtrak trains requires a second main track, new sidings, siding extensions, yard bypasses, and modernization of drawbridges. At one point, CSX put the price tag at $2 billion--orders of magnitude more than estimates provided by the Federal Railway Administration and other independent experts.

Such maneuverings reflect the growing power of hedge funds and other "activist investors" over the railroad industry. In 2017, the financier Paul Hilal used his activist fund Mantle Ridge to buy a nearly $2 billion stake in CSX and win control of its board. Hilal used this power to depose CSX's long-standing management and replace it with a team of downsizing specialists committed to boosting short-term profits by shrinking the railroad's physical assets...