Counterparties: The true cost of Amtrak’s burgers

By Ben Walsh
August 3, 2012

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Over the last decade, Amtrak has lost $834 million selling food and drinks, its president and CEO admitted Thursday in front of the House Transportation and Infrastructure Committee. The NYT reports that those losses were “largely because of waste, employee theft and lack of proper oversight”.

All of this comes on top of Amtrak’s complex status as perennial political football, anecdote fodder for pundits aiming to outdo their own previous attempts at self-parody, and of course vital national infrastructure. But never mind that: losing more than $80 million on food an beverage service a year is offensive to “anybody who’s ever boarded a train hungry and been forced to cough up the better part of $20 for a burger and a beer”.

Meanwhile, burgers have hidden costs of their own, among them greenhouse gas emissions, overuse of land, water and energy, environmental contamination, and health impacts. Consumers are protected from directly paying those costs by a myriad of agriculture, energy and health policies and subsidies. As a result, a quarter pounder at a fast food joint costs almost nothing, and in any case far less than its true cost to society.

An industrialized hamburger is a cruel combination of subsidies and externalities. By increasing the price to the individual and adding to the cost paid by society, Amtrak has remarkably managed to turn the hamburger into an even worse deal for us all. – Ben Walsh

On to today’s links:

Knightmare
Goldman unwinds Knight’s trades for $440 million – Knight is “scrambling for extra cash” to settle by Wednesday – CNBC
Knight is in talks to sell its futures brokerage unit with potential buyers – DealBook

Crisis Retro
US selling $4.5 billion in AIG stock… and AIG plans to buy $3 billion of it – Bloomberg

Primary Sources
US economy adds 163,000 jobs in July, beating expectations; unemployment “essentially unchanged” at 8.3% – BLS

New Normal
The scary depth and duration of the current jobs crisis in one, updated chart – Calculated Risk
“It was like we were in a funeral home”: unemployment workers get pink slips of their own – Huffington Post
“The true backdrop for Friday’s jobs report: an epic, decade-long stall in the national Jobs Machine.” – National Journal

Your Daily Outrage
“The existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis.” – Jonathan Chait

JPMorgan
Bruno Iksil was pushed by the CIO’s head of credit trading to inflate the value of his positions – WSJ

Politicking
Ezra Klein: “I can describe Mitt Romney’s tax policy promises in two words: mathematically impossible”.  – Bloomberg

Banks
Iceland, pioneer in banking reform – Bloomberg

Data Points
Pimco’s Mohamed El-Erian literally (figuratively) wears the same thing after every (three) good jobs reports – Business Insider

Comments
8 comments so far

Just a quick note to point out that Amtrak lost an average of $83.4MM/yr, not $800MM/yr there Ben.

Posted by GregHao | Report as abusive

And now for your – ‘Daily Dose of Melodrama’ –

“Your Daily Outrage
“The existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis.” – Jonathan Chait”

Good. If UE was 6% few would use the term ‘crisis’ to characterize it. An additional 2% does not a crisis make – a problem, yes (at 6% or 8%) – a crisis, no. The situation is largely stable, if not satisfactory. Correcting the problem demands first that the problem itself be accurately diagnosed, not just its symptoms. We’re a long way from getting that first job done.

Posted by MrRFox | Report as abusive

GregHao, due to Ben’s poor writing, it’s not clear if he’s referring to just losses due to food, in which case you’re right (and he’s wrong), or the overall annual losses of Amtrak, of which food is just a part. Although I thought annual losses were well over a billion a year.

As to Ben’s odd diatribe against hamburgers, that more or less applies to just about any agriculture product, and many industrial ones. It seems Ben just wanted to complain about hamburgers for whatever reason. Were they a special in the Reuters cafeteria this week, Ben?

Posted by Curmudgeon | Report as abusive

The “hidden costs of burgers” link is extremely biased. It goes on and on about the horrors of making burgers, and throws around lots of “millions” and “billions”, but the only number that’s directly relevant there is “$1.51 in hidden costs per burger”.

And do you know how they come up with $1.51? Fortunately, they offer an explanation (sort of) in footnotes. About half of the amount is “the health costs of treating overweight people and associated illnesses”. Nevermind that there’s no solid evidence linking red meat consumption and obesity. Yes, there is evidence linking red meat to cardiovascular mortality – but that does not necessarily mean higher cost of healthcare. (Generally speaking, people who die of CVD in their 60′s are much cheaper than people who die of Alzheimer’s or cancer in their 80′s.) Yet the article tries to make it seem that burgers are solely responsible for about $40B/year in added healthcare costs.

The second biggest item is water: 50 cents per burger. That’s roughly $200 per acre-foot of water in hidden costs. Almost the entire water footprint of beef is in the feed consumed by the cattle. This includes grazing on grass (typically grown using free rainwater) and finishing on corn. There might be some water subsidies hidden in corn, but they are not even on the right order of magnitude.

Posted by Nameless | Report as abusive

+1 to Nameless’s points

Posted by realist50 | Report as abusive

Absolutely, I’ve corrected the sentence in the second paragraph, it should have originally read, and I meant for it to read, “over $80mm”. Apologies for the mistake. The first sentence of the post makes it clear that the losses of $834mm were over 10 years and are from food and bev service alone, not Amtrak’s full losses.

Posted by Ben Walsh | Report as abusive

Nameless,
Advocacy organizations like that, even ones fighting for good causes are absolutely shaming in their abuse and of and outright lies regarding statistics/figures. Its the same with the homelessness organizations claiming that 1 in 8 US children is “homeless”. It is just transparently absurd on the face of it, and if you dig into the numbers at all the completely disintegrate (If you spent 1 night that year at any point say sleeping with a relative one night while you are moving between apartments then you are “homeless”. If you are living with your grandparents for years because you parents are in jail/irresponsible you are “homeless”.

A) Those people are not homeless.
B) The types of donations these organizations are asking for do nothing to stop that kind of “homelessness”.

Its funny even the research department at my non-profit does this. I push them and push them, but they just must twist the facts. They cannot help themselves, which is sad because on issues they don’t care passionately about they are all bright rational critical people.

Posted by QCIC | Report as abusive

How is fraud so rampant on the longhaul routes at Amtrak? Where is the culpability?

Posted by thispaceforsale | Report as abusive
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