The government solution was to use the railroad taxes to build an interstate highway system.

The idea for a cross-country road system had been in In 1946 the New York Central Railroad spent $56 the works since WWI, but there had not been million (that's equivalent to $649,763,912 in 2012) money to fund it with the depression and then on new passenger cars and equipment. Eight years WWII. But in 1956 the Department of Transportation spent $114 million creating the later, it was dying. How did such a profitable Interstate Highway System. People could now business go under in less than a decade? drive from New York to Los Angeles in a car instead of taking a train. The interstate railroad In the post-WWII years, there were four major train passenger business took a huge hit. companies operating in the U.S. By 1970 they were all gone. There were several factors that led to their In the late 1940's General Motors was buying decline, but the common denominator was the government intervention in the markets. President electric trolley cars by the hundreds all across America. They took the cars, dismantled them, and Roosevelt saw the lucrative railroads as a new source of tax revenue and increased the taxes on scrapped them. The purpose was to kill the local trolley commuter trains. When they were hurting them while, at the same time, the Interstate Commerce Commission set severe rate regulations badly enough GM would buy the company and on the railroads cutting their profits. Then in 1947 destroy it making way for their cars and buses. This under President Truman, congress passed a slew of was facilitated by the tax policies that favored car pro-union laws. Combine that with wage fixing by ownership over private mass transit and the car the U.S. Railroad Labor Board and it was a recipe loan subsidies. The government later punished GM for disaster. The rate caps limited railroad profits, for engaging in monopolistic practices. The movie Who Framed Roger Rabbit was based on this the union laws limited their bargaining abilities, scandal. and the wage caps irritated the union workers.

The Death of the American Railroad

Together with the over-regulation of the Interstate By 1970, the railroads were dead. Only freight rails Commerce Department these circumstances led to survived and those didn't begin to make decent the railroads under-paying their workers and trying profits until years later after the regulations were lifted. The Nixon administration saw what had to cheat the system on pay, rates, and taxes. The happened to the railroads. They saw what would workers unions fought back and the railroads couldn't do anything about it because of the union become of America's oil addiction if it was left laws. Robert Young, who took over the New York unchecked. So Nixon created Amtrak, a private Central in 1954, committed suicide in 1958 becausepassenger train company, owned and controlled by the government. The idea was to get it running on of the hopelessness of the situation. its own and then to sell the stock to private investors. The reality was that Amtrak never turned The railroads were also having to deal with new a profit. In the 40 years Amtrak has been in competition from private cars and plane travel. business it has never once gotten out of the red. They probably would have survived if it weren't for The Clinton administration put an ultimatum on it government subsidized car loans (a l President in the 90's that said that it had to turn a profit by Hoover's progressive social policies). At the time 2003 or it would be dismantled and sold off. When the government defended their programs as they failed, the Bush administration allowed them fighting the railroad monopolies; they saw the to continue and upped their funding to $2.6 billion excesses of the railroad companies as a sign that a year (that's $2,600,000,000) and it still costs more they needed to be regulated and that their great to take the train than to fly in a plane. wealth would be better used when redistributed.

I considered taking a train from Atlanta to Orlando in 2009. The flight would have cost $120 and taken 3 hours including going through security and collecting baggage. The train-ride would have taken 18 hours and cost $250. The trip would have been routed through Washington DC for godknows what reason. Amtrak is a failure. Consider for a moment what might have happened if the government had not interfered in the railroad market. Post-WWII railroad workers would have been very well paid. People would have the freedom to travel across the country as they wished at less cost than with automobiles. Today we would have fewer cars (more short-range commuter cars and no significant need for cars to be capable of cross-country trips) and we would be able to take high-speed rails anywhere in the country for less than it costs to drive or fly. There would be less pollution since we would have millions fewer cars driving millions fewer miles all over the country. Lives could have been saved. 593,664 people would still be alive, in fact. That is the number of people who have died in traffic crashes on interstate highways between 1994 and 2009. Japanese railways have operated for 45 years without a major accident. More work could get done. Instead of driving across the country, businessmen could take the train and work on their laptops and smart-phones during the trip. We would be less reliant on foreign oil and gas prices would be less of an issue. Airport security would be less of an issue because trains (especially high-speed trains) are hard to hijack and you can't drive them into buildings. At the very least, we can learn a lesson from the railroad failure. Perhaps we can see that government regulation does not always lead to the best outcomes.