Cut Train Subsidies to Re-connect Rural Michigan

Michigan’s Indian Trails bus company has begun notifying some of the communities it serves that the bus may not stop there anymore. Indian Trails and the other principal bus line in Michigan, Greyhound, have gradually cut back their routes and service for decades. But the lack of intercity public transportation in most of the state is about to get worse because of more competition from government-subsidized rail service along some of the most populated bus routes.

The very survival of many bus routes, and of 130 jobs at Michigan’s long-lived, independent Indian Trails line, is in doubt. That’s because the most profitable part of the firm’s business is also served by Amtrak trains, which skim long-haul passengers from the bus company’s main route between Flint, Lansing and Chicago. Competition could be Indian Trails’ problem in any truly free market, but the Amtrak trains “compete” only because of huge federal and state subsidies.

Michigan taxpayers cover Amtrak’s losses on a daily train connecting Chicago with Flint, Lansing, and Port Huron. Another state-subsidized train connects Chicago with Grand Rapids. Federal taxpayers absorb Amtrak’s losses on three trains a day between Chicago and Kalamazoo, Battle Creek, Jackson, Ann Arbor, Dearborn and Detroit. These ten subsidized trains siphon off lucrative long-haul passengers, leaving the low-density feeder routes for private bus carriers.

Passenger trains are a very expensive way to move people. They are staffed with crews of four or five, are pulled by 3,000-horsepower diesels with a huge thirst for fuel, and require enormous capital and maintenance outlays. The Amtrak routes from Chicago to Port Huron and Grand Rapids consume a state subsidy of $7.1 million per year. That’s almost $10,000 for each train trip to Chicago and back.

Michigan taxpayers are shelling out almost $40 per rider on these two lines, on top of paid fares. No one has explained why it’s worth that much tax money to put a rider on a train instead of a bus or car. Without the Amtrak subsidy, buses could perform substantially the same function for a subsidy of exactly — nothing. (Perversely, Michigan taxpayers currently pay a small subsidy for intercity bus routes to help the buses compete with government trains.)

A provision in a Senate-passed budget bill would prohibit Amtrak from using its Port Huron-to-Chicago subsidy to undercut Indian Trails' pricing along the same route. The House has watered this down to require the parties to merely report on the subsidies’ effects.

Eliminating welfare for trains might also have the indirect benefit of restoring rural bus routes. These routes may never be profitable, but bus lines might offer them as a loss leader and feeder to their main-line routes – if those routes weren’t being cherry-picked by subsidized Amtrak. Given lawmakers’ preference for “revenue enhancements” over spending cuts, taxpayers may wind up also subsidizing rural bus service that connects with subsidized Amtrak trains. The ironic outcome of all these subsidies could be less-frequent service to fewer destinations than the bus industry could provide by itself if all the handouts were eliminated.

Yes, buses have fewer amenities than most trains. But more importantly for making public transit useful, buses could offer more frequent service than trains. Two hundred seats a day on each route could be spread over four bus departures, versus one train departure that doesn’t match most people’s travel plans. Plus, buses can stop where it’s convenient, not just along train tracks.

Train partisans and romantics say rail service is needed to lure drivers out of their cars, because buses are too “low-rent” to win converts. But few drivers are being converted to the subsidized trains. Even with the state paying half the fare, drivers stay away from trains in droves. Eliminating the subsidy could result in more options for the small number of transit-dependent people without forcing anyone to pay for choices they don’t want.

When foreign governments subsidize companies who sell below cost to U.S. markets in competition with American firms, critics call it “dumping” and demand action. We don’t have to look for an overseas culprit in this instance. Michigan’s own legislature is doing it with our money, and the victim happens to be a Michigan company that pays taxes too.

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Jack McHugh is a legislative analyst for the Mackinac Center for Public Policy, a nonprofit research and educational institute, and manager of the award-winning Website that monitors legislative action. Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.


The lack of intercity public transportation in most of the state is about to get worse because of more competition from government-subsidized rail service along some of the most populated bus routes.

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