Transit Subsidies Not Cost-Effective

Rail subsidies drain coffers, harm poor

We’re used to members of Congress going on and on about transportation spending. Some want more for highways, some want more for transit, some just want to impress their constituents with the piles of pork they haul home. And talk of spending can easily slip into talk of subsidies.

If all of us – from motorists to transit users – are swimming in subsidies, it gets harder to separate good investments from bad. Why not, for example, take a stab at a new commuter rail line? But we shouldn’t let the political hurly burly confuse the issue.

Yes, politicians spend heaps of money on roads, but they have also insisted that (except in rare cases) we have no choice but to get roads from government. Since they’ve outlawed other options, government spending on roads is inevitable.

The fact that government spends money on all sorts of things doesn’t mean each project that gets doused with cash is equally worthwhile. If you’re going to spend a bunch of money on something, you’d better hope a bunch of people use it.

And nearly everyone uses roads. In Atlanta, more than 90 percent of commuters use them to get to work. Amazingly, even Americans who don’t own cars are much more likely to travel by car than by transit.

Most importantly, spending and subsidies are very different terms. A subsidy is the difference between the revenue a mode generates and what the government actually spends. It takes a lot of money to build and maintain highways, but because they pay gas taxes, highway users generate a lot of money. In fact, according to the U.S. Department of Transportation, they generate a lot of money, and then some.

Recently the DOT examined net federal subsidies from 1990 to 2002 and found that highways and transit are worlds apart. For every thousand passenger miles, transit got $118 in subsidy. What kind of subsidy did highways get? Negative $2. In other words, highway users paid in more than they got back.

Look at total dollar amounts of subsidy and the story is the same. Urban transit drained Uncle Sam’s coffers by an average of more than $5 billion per year. Meanwhile, our highway system actually replenished those coffers by more than $7 billion per year.

It’s one thing to subsidize transportation for the poor – few things pull people out of poverty like improved transportation – but it’s quite another to subsidize those who are comparatively wealthy. Sadly, that’s what rail transit often does.

Bus improves mobility for the poor better than any transit mode, and devoting a pot of funds to bus can buy much more transportation improvement than devoting the same pot to rail. Yet officials often favor rail because they (mistakenly) assume that only sleek rail cars can lure wealthy motorists out of their comfy sedans. And rail isn’t just expensive – chronic cost escalations make prices even steeper than initially advertised (Atlanta’s rail system shot up nearly 60 percent).

Local governments typically react by funneling money away from bus and toward rail, and so a bus system that probably wasn’t great to begin with gets even worse. Improved transportation for the transit-dependent is compromised for the nave goal of getting suburbanites to leave their BMWs at home. How nave? Ask Southern California.

Officials there recently discovered that nearly half of commuter rail riders not only fail to leave their cars at home, they use two cars to get to work. They drive to the “free” parking lot (subsidized, of course), travel on the subsidized rail line, and then arrive at the parking lot at the other end, where they climb into their second car (subsidized parking again) and drive the rest of the way to work. Transit can serve an important social purpose, but subsidizing those who can afford to use two cars for one trip isn’t it.

Ted Balaker is the Jacob’s Fellow at Reason Foundation.

Ted Balaker is an award-winning filmmaker, journalist, and founding partner of Korchula Productions, a film and new media production company devoted to making important ideas entertaining.