A new industrial-policy initiative for domestic production of mass-transit products could help the United States overcome multiple economic challenges. It could provide high-wage jobs, generate tax revenue, expand exports, and reduce trade deficits. This mass-transit-production strategy requires a new kind of industrial and planning policy to overcome the limits of traditional public works. It's not enough to lay more tracks and upgrade rail facilities. The government has to support domestic production of trains, signals, and related transit hardware and software.
According to the Institute for Supply Management, U.S. manufacturing activity recently fell to its lowest level in 28 years. Manufacturing has also suffered across the globe. But overseas the downturn reflects mainly the recession, while in the U.S. there is a long-term manufacturing decline. Traditional public-works outlays alone won't restore American manufacturing--but they could supply new demand if we had industrial policies in place.
Mass transit could be the incubator far an industrial renaissance, based on new kinds of producers and processes. If public investment is connected to developing new industries, then government spending will not "crowd out" private investment. On the contrary, the public outlay could provide demand for new private investments. But when the market and existing firms fail to make the necessary investments, the government must fill the void.
There are important niche markets in subways (the primary focus of this article), high-speed rail, local commuter rail, and the growing light-rail industry. Consultants from the firm IBISWorld, a leading business consulting firm, calculate that today, about 45 percent of revenue within the U.S. train, subway, and transit-car manufacturing sector is tied to new and rebuilt locomotives and parts, and 27 percent of revenue is tied to street, subway, and transit cars.
Of all the non-defense products that government purchases, mass-transit goods are among the most technically advanced, and they rely heavily on manufacturing. Mass transit conserves energy and is one of the least polluting forms of travel. Government purchasing power, combined with heavy unionization in the transit service and producer sectors, also makes this sector amenable to public planning for good social outcomes. Government can support local production, particularly in highly unionized and population centers. The density of cities facilitates both union organizing and mass transit.
The economic and political circumstances and growing local public support suggest the time is ripe for such a national initiative. President Barack Obama has supported mass-transit products as part of his economic-recovery program. The American Recovery and Reinvestment Act passed by Congress in February will lead to $8.4 billion in public-transportation investments. In the recent state and local elections, voters supported some 23 mass-transit initiatives worth about $75 billion. This included $18 billion to expand Seattle-area mass-transit service and $10 billion in bonds to begin a high-speed-rail network in California. These public investments directly translate into privately organized jobs and export potential.
The scale of the mass-transit sector can be seen in the Metropolitan Transit Authority's (MTA) budget plans. This New York regional authority is the giant among U.S. transit agencies. The MTA board approved a capital program for 2005 to 2009 worth $23.7 billion. The MTA plan includes about $2.2 billion for subway cars, about $928 million for buses, and $385 million for cars for the Long Island Rail Road commuter line. Another big-ticket item was signals and communications, slated for $2.2 billion. Nationally, the American Public Transportation Association reports that 260 heavy-rail cars, 189 commuter-rail cars, 83 light-rail cars, and 12 "automated guideway vehicles," such as airport people movers, were delivered and used in service in 2008. …