Re: So what should we do?
Well, the easy and obvious answer is privatize it, and don't dump huge restrictions on the new owners like forcing them to keep unprofitable runs. Then let the chips fall where they may. Don't hold your breath.
Freight train companies like Burlington Northern seem to do all right, moving millions of tons of goods every year without fanfare, and as far as I know, without whining to the government for help. They obviously maintain rail connections for freight purposes. If there turns out to be a real demand for long-range passenger travel, they may decide to do it as a sideline.