Rob the poor to subsidize the wealthy.
The New York Times has a piece on how spiralling petrol prices are sending some commuters to government mass transit programs. What it inadvertently does is also show us what is the problem with such mass transit programs.
Basically the argument is that mass transit “are seeing standing-room only crowds”. One transit bureaucrat brags: “In almost every transit system I talk to, we’re seeing very high rates of growth in the last few months.”
Old transit systems see only a minor increase, perhaps 5 percent. But the new systems that are seeing larger increases.
Here in Denver, for example, ridership was up 8 percent in the first three months of the year compared with last year, despite a fare increase in January and a slowing economy, which usually means fewer commuters. Several routes on the system have reached capacity, particularly at rush hour, for the first time.
The paper notes that all around the country the high petrol prices are pushing up ridership.
So how does this expose the problem?
Even with large increases in riders these systems are losing money every day. The paper notes: “Typically, mass transit systems rely on fares to cover about a third of their costs, so they depend on sales taxes and other government funding.”
In other words one third of the actual cost of riding mass transit is paid by the commuter and the other two-thirds is paid by people who don’t commute. And even with increases in ridership some services are seeing shortfalls increase.
The reason for the increase is that rely on taxes to pay the bill. And in some places tax revenue is falling due to the economic slowdown.
But think about the system of subsidies and taxes. And think about the typical system of transit.
I think San Francisco is fairly typical and I know the system fairly well so I will use it as an example. The Bay Area Rapid Transit system basically is a series of train lines that run from the bedroom communities to the financial district of San Francisco. Of course, along the way they run through other areas. But the feed is to and from the financial district. Similarly the Loop in Chicago is the center of interest for mass transit.
I rode the trains to Chicago when I worked at the Merchandise Mart building and lived in the suburbs. So I know that system as well. And here is what I know. Commuters on these lines often held fairly well paying jobs in the city centers. Let us give an example that the New York Times uses.
“Michael Brewer, an accountant who had always driven the 36-mile trip to downtown Houston from the suburb of West Belford, said he had been thinking about switching to the bus for the last two years. The final straw came when he put $100 of gas into his Pontiac over four days a couple of weeks ago.”
An accountant can easily between $40,000 and $50,000 per year. Of course many of the people commuting to the financial districts of the various cities earn a lot more than that.
Here is the question. If the transits systems only charge commuters one-third of the actual cost who pays the other two-thirds? And how does the earning power of the taxpayers compare with that of the recipients of government generosity?
One of the great secrets of the American political system of redistribution of wealth that the political process tends to redistribute wealth up the ladder not down.
When I commuted in Chicago my commute was subsidized. I rode in from the well-to-do suburbs with lots of people who were earning a hell of lot more money than I did. At that time the gas tax was used to help subsidize the mass transit system. And what studies found was that those commuters who drove to work, and hence paid the subsidies, earned far less than those commuters who used mass transit. Working class people subsidize the comfortable train rides of workers from the financial district.
And the subsidies are very generous indeed. The Department of Transportation looked at subsidies and taxes in transit over a twelve year period (1990 to 2002) and found that mass transit commuters received subsidies of $118 per 1,000 passenger miles. For every 1,000 passenger miles of automobile commuters they lost money. That is the services they received were less than what they paid for in taxes.
The Times article says that the favorite way of funding such subsidies are sales taxes. Yet sales taxes are very regressive and impact the living standard of poor people far more than it does wealthy people. I am not saying that there are no poor people who benefit from such systems. Obviously some do. But the systems primarily feed wealth suburbanites to good-paying jobs in the city center and home again.
Where did he lower-income workers go? It usually isn’t the city center or financial districts. The factories, plants, steel mills and the like are not well served by mass transit. My grandparents lived near the steel mill because that was why my grandfather could get to work.
Certainly in the large cities one can take mass transit to almost any part of the city -- if you have a lot of patience and time. Take BART again as an example. I can catch a train to the city, during the day, within 15 minutes of arriving at the station, at the worst. I’m guaranteed a seat as well. By the time it gets to the poorer areas there simply are no seats and it is standing room only. At most I have a very short wait and a comfortable ride. But I also lived in the city itself at one point and there were times when I had to go to the poor areas of the city. One business I dealt with had a warehouse in the poorest area of the city. Transit to the warehouse was almost non-existent.
Typically as you move to the less wealth areas of the city the number of transfers one has to take increases. Instead of waiting 5 or 10 minutes for a comfortable train, in a protected station, these commuters stand on the corner, exposed to rain, snow and any foul weather and they wait. They can wait up to 30 minutes for a bus to arrive which then takes them to another bus stop where they often have to repeat the process with another bus.
As one who took buses frequently when I lived in the city I also know that frequently I ended up walking. Even knowing the bus schedule didn’t help. Too often the bus that was schedule for 10:15 just never showed. The people most inconvenienced by mass transit are the poorest people, the ones hurt most by the taxes used to subsidize the rides. They get the least amount of service in virtually all the systems.
Yet the poor continue to pay through sales taxes so that wealthy workers from the financial district have a comfortable ride to the city.
The poor end up driving. And they end up driving, when they can, because the service they get is unreliable. But if they need to be at work at 8:30 they can’t afford to have a bus show up 40 minutes late. I know that when I go over to the BART station for a ride that even if one train doesn’t show up when it is supposed to that another will be there within 15 minutes maximum. I also know that when the buses screw up it can delay someone as much as an hour. So what ends up a minor inconvenience for the wealthy becomes a major problem for the working poor.
Nor should we forget that in many areas the mass transit doesn’t service the areas where the working poor actually work. If I think back to Chicago the big mills and refineries that hired the average working sod were in places like the East Side (many people don’t know Chicago even had an East Side), Whiting, East Chicago, Hammond and Gary. But mass transit didn’t go there.
Generally when it comes to the State figure that the political process tends to reward wealth and influence. Poor people have no wealth and damn little influence. And that is why I argue that wealth and rights tend to get distributed up the wealth ladder and not down it. Poor people or the working poor tend to subsidize the middle classes and the middle classes tend to subsidize the wealthy.
In politics it is the Archer Daniels Midlands and Halliburtons who end up at the top of food chain. And when well-meaning reformers try to change the system by increasing State power what they end up doing is giving another means by which the poor are plundered to benefit the wealthy.
From the beginning liberals, by which I mean classical liberals, understood this. The great free market advocates of Richard Cobden and John Bright saw how government regulation was starving the poor and subsidizing the landed aristocracy of England. The first great working people’s movement was the one that pushed the repeal of the infamous Corn Laws and instituted free trade in grains. The net result was that the poor benefited and the rump of England’s feudal lords lost out.
Just move forward a few years from that to the Progressive Era in the United States and you will see example after example where the wealth special interest groups pushed for new regulations that limited competition. That guaranteed them profits and higher prices. Once again the poor ended up subsidizing the wealthy. But the wealthy had allies in that campaign -- so called “progressives” and “socialists” who foolishly believed that expanded State power meant the plutocracy would lose power. Yet the plutocrats have always thrived on the expansion of state power. It is by deregulation and limited state power that competition is encouraged and that hurts the old aristocracy and helps the poor.
If you assume that government is a Robin Hood that robs the poor to feed the rich you will be right more often than you are wrong. In the real world Robin Hood works for the Sheriff.