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Transport Subsidies Lead to Bad Decisions

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OltmanndThe builders of the IRT, BMT, and IND may have been motivated in part to build their systems because it would enhance their land holdings.  But the key point is that they developed and operated their systems for many years using funds raised in the capital markets as opposed to relying on taxpayer handouts.  Much of the money, by the way, came from Europe, since the U.S. was a net debtor nation until after the turn of the century.They were forced to sell the systems for a variety of reasons.  Fares became a political issue, as was the case in most cities, and the owners could not generate enough revenue to cover their costs.  Unions were another problem.  No business could have withstood their abusive labor practices.  I lived in New York during the Quill era and saw them first hand.  It was during this time - 1966 - that the transit unions brought the city to a standstill through an illegal strike.  The only thing that saved Quill from going to jail was that he died three days after the strike was settled.  One could argue that building the North River tunnels, as well as the East River tunnels, and Pennsylvania Station was done to further the interests of the stockholders of the Pennsylvania Railroad.  Of course!  That's what business is all about.  It is the best argument for the free market system.  It produces more winners than losers, but there are losers.  Conquering Gotham by Jill Jonnes, which I just finished, provides some valuable insights into the building of the tunnels (North and East Rivers) and Pennsylvania Station.  I recommend it.  I would eliminate all subsidization of commercial activities, as well as cultural and entertainment subsidies, with the exception of start-up activities that are essential for the welfare of the body politic as a whole.  I have been around long enough to realize, however, that this is unlikely to happen.  Subsidies are so deeply embedded in our system, especially transportation, that it would be nearly impossible to wean ourselves of them.  Too many vested interests!  And the absence of a true national crisis that would be necessary to bring about radical change!In a developing country, which is what the U.S. was when the National Road, Erie Canal, etc. were built, government subsidies were probably necessary to kick start these transport projects, which were probably necessary to open up the country, although there is no evidence that it would not have happened eventually.  But subsidies should always be a last resort and, if they are necessary, they should be terminated as soon as possible."Often a gov't entity will trade off some property tax to get a new plant that will increase income tax more than that lost by the property tax subsidy.  The net is positive even when all the piece parts aren't."  It can be positive or negative depending on where and how it plays out.  But for the nation as a whole, it is mostly a zero sum game.  Moreover, there is no evidence that plants would not be built if subsidies were eliminated.  If it is a good business proposition, it will be built.  Here are two examples of how tax abatements (subsidies) distort economic decisions. Arlington, Texas gave GM a slew of enticements to build an assembly plant there.  The effect for Arlington was just as you described it.  The tax abatements (subsidies) given to GM were offset by increases in property tax payments generated from the properties that were built to house the plant's workers.  The argument usually put forth by those favoring subsidies is the taxpayers, in the long run, will be winners.  Fair enough for Arlington's taxpayers.  But the Michigan community that lost its plant or the chance to get the plant would probably disagree.  A couple of years ago a major Dallas oil company, one of the richest in the U.S., wanted a new corporate headquarters.  Management implied that it would leave Dallas for one of the suburbs if the Dallas City Council did not come up with more than $100 million in tax abatements to stay in Dallas. A goodies war between Dallas and the suburbs erupted.  Ultimately, Dallas forked over the subsidies.  Whether the Dallas taxpayers will remain whole is arguable.  It depends on how long they live in Dallas.  The James boys would have been proud of this holdup, except they would have pointed to the fact that they had the decency to stick a gun in their victim's faces when robbing them.
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