XC Tower, you may misunderstand a few things.
First, to my knowledge, Conrail earned back every penny the government put in it between pre-IPO profits and then the proceeds from said IPO. Before the current administration, we did bailouts if they made sense, and they paid back. Same with the first two Chrysler bailouts. Both Conrail and Chrysler I and Chrysler II earned a return on investment for the gov't treasury.
Second, the Conrail surplus trackage abandonment had little to do with causing the downfall of cities like Sayre, Scranton, and Youngstown. While the closure of the Sayre shops was unfortunate, it sure didn't precipitate the greater northeast and midwest industrial collapse, though. The appearance of the "rust belt" as we call it occured earlier was precipitated by the following factors:
1. Much more friendly and inexpensive labor down south.
2. Overbuilt infrastructure in general - when Europe and Asia came back on line in the 70's, we had lots of surplus capacity.
3. Incredibly unfriendly labor relations, expensive payscales, and ludicrously low piece rates in factories up north.
4. The EPA.
What did happen, though, is that as industrial capacity left the northeast, starting in the 1950's, and the midwest, starting in the 1970's, we were adding roads and airports like crazy. At that point, the railroads lost a lot of business to roads and the south, and couldn't afford to provide the same level of service on such extensive trackage. The gov't wouldn't let them abandon, the unions wouldn't agree to two-man crews (why have a fireman on an SD40? for coffee?), the gov't kept building highways and airports, and the railroads eventually went under. PC, E-L, NH, RDG, CNJ, MILW, Rock, Annie, LHR, LNE, D&H, LV, B&M... It's like a wall east of the Missouri River and north of the Ohio River - or, consider it all of Ontario and Quebec.
So what you actually have is a case of the railroad being the victim of the growing rust belt, rather than causing the rust belt.
Canada didn't experience such troubles because their railroad network, for the most part, wasn't overbuilt. There was also a strong commodities business, leading to strength similar to that we saw in C&O and N&W at the time PC was collapsing. The only overbuilding, really, was BCR and ONR. It made sense during the war, but now your gov't wants to rationalize their investment and I can't blame them.
I'm just mad at myself for not riding the Northlander last summer. I took my then-girlfriend across the lake on the SS Badger when I wanted to travel ACR and ONR.
The new Acela: It's not Aveliable.