You Ride, I'll Pay: Social Benefits and Transit Subsidies
Pack, Janet Rothenberg, Brookings Review
The public subsidies underwriting the nation's mass transit bus and rail systems are enormous. In 1989 federal, state, and local governments contributed $7.1 billion to transit operating costs. Capital subsidies brought the total to more than $10 billion. For every dollar transit riders paid in fares, taxpayers paid two dollars in subsidy.
Not unexpectedly, during a decade of huge federal deficits, tax revolts in the states, and increased interest in privatization and public efficiency, the transit subsidies have been widely attacked. In 1985 President Reagan advised a group of Miami, Florida, county officials that they could have saved money by buying a limousine for each of Miami's transit users instead of building their new system. Tony Snow, in a 1986 article entitled "The Great Train Robbery" in Policy Review, estimated that Miami "could have purchased each passenger a $45,000 condominium for the cost of building the system - and would have been able to throw in a subcompact car with the first year's operating losses." In the case of the Washington, D.C., Metrorail system, Snow suggested that the city could have bought "a BMW for each of its daily passengers." (No one has addressed the question of whether it would be better to buy a limousine, a subcompact, or a BMW.)
The critical issue is whether there is any justification for the subsidies. The argument that transit systems should not run at a deficit assumes that riders are the sole beneficiaries and should be made to cover full marginal costs through their fares. As noted by Patrick G. Marshall in a 1988 report for Congressional Quarterly, "The key to achieving a more efficient transportation system, say many transportation experts, is to make sure that each mode carries its own weight, with users fully funding the infrastructure, and let the market decide which are the most efficient modes for given purposes."
But consider the implications of closing down the transit systems. Immediately more automobiles will take to the roads. Traffic accidents will increase, congestion will worsen, air quality will deteriorate, and more land will be gobbled up by parking garages. According to the Urban Institute, in 1988 some 14.8 million traffic accidents, involving 47,000 deaths and five million injuries, cost the nation $334 billion. If public transit systems helped avoid accidents equal to 1 percent of that total, the nation saved about $3.3 billion, nearly half the total public operating subsidy in 1989. And in his 1988 report, Marshall, quoting Robert A. Poole, Jr., of the Reason Foundation, noted that the time and gasoline wasted in Los Angeles County traffic jams each year could be valued conservatively at half a billion dollars. Even if public transit carries only a fraction of rush hour commuters - in the Philadelphia metropolitan area, for example, about 20 percent of the total, but about 70 percent of those traveling to jobs downtown - congestion and congestion costs would be substantially greater if transit riders got back into their cars.
It is too often forgotten that transit riders are not the sole beneficiaries of mass transit. Society as a whole benefits as well. The question is how the benefits and the subsidies measure up. With public budgets under increasing scrutiny, urban infrastructure aging, and demands for funding of social programs growing more pressing, the billions of dollars spent to subsidize public transportation will surely be a target for cutbacks. If the social benefits derived from public transportation are demonstrably smaller than the subsidy, it may be time to reallocate resources away from transit subsidies. If the social benefits actually outweigh the subsidies, a case can be made to defend the subsidies. (This is not to argue that the existing level of subsidy is warranted since it is also true that subsidies may promote inefficiency. With improved efficiency, the same level of benefits could be achieved with lower subsidies. …