Under "What Would You Build" I was asked whether I would eliminate all transportation subsidies. Discussed below in some length, because the subject is complex, is my answer.
Over a reasonable period, say five years, all transport subsidies, with the possible exception of some start-ups, should be eliminated. Doing so would result in a better allocation of scare economic resources and help rationalize transport choices.
Subsidies may be appropriate for new commercial activities that benefit society as a whole, but once they have been weaned, the subsidies should be phased out. Unfortunately, those who receive them, as well as the politicians who grant them, become addicted to them. It is nearly impossible to get rid of the subsidies.
Users would be required to pay the taxes and the fees, which are mainly embedded in the price of fuel, to cover the cost of the facilities and services that they use. The earned income tax credit would be expanded to help the working poor, as well as the mobility impaired, etc. offset the burden of higher transit costs.
Airports, train stations, bus stations, transit systems, etc. would pay property taxes. There is no rational reason why they should be exempt. Most of them use local services, i.e. police, fire, sanitation, etc.
Subsidies frequently send the wrong pricing signal. As a result, buyers and sellers make sub-optimum choices. Most motorists, for example, don't know how much it really costs to drive. As a result many of them buy larger than needed gas guzzling vehicles that contribute to a chain of negative outcomes. They cause the U.S. to import more foreign oil. This acerbates the balance of payments problem, which is a factor in the decline of the U.S. dollar. The weakened dollar is a significant factor in the dramatic run-up in the cost of petroleum, which in turn feeds inflation. It hits the poor and elderly the hardest. This is just one example of the upstream and downstream impact of subsidies.
The matrix of subsidies in the U.S. is so complex that few people understand it. Here is an example. Motorists pay federal fuel taxes and fees to fund the federal highway system. But the taxes and fees don't cover the cost of the system. So the Highway Trust Fund is subsidized by transfers from the general fund. In 2007 it was nearly $34.5 billion. Well, actually it was approximately $39.1 billion; the difference being for public transit, etc., which has little to do with highways. But this is only the beginning of motorists' subsidies.
The price of gasoline and diesel does not reflect the cost of maintaining a naval presence in the Middle East, which is there, at least in part, to keep the oil sea lanes open. Nor does it include the cost of the environmental damage or incremental medical costs associated with burning prodigious amounts of fossil fuel for transport. Moreover, the price of gasoline does not reflect the cost of building and maintaining county roads or city streets. Nor does it include all of the costs of policing the nation's roadways or picking up the pieces after a traffic accident or the free parking for some employees in large cities.
Wow, motorists get a lot of government subsidies. Or do they?
In 2007 there were an estimated 204 million licensed drivers in the United States. The majority of them paid personal federal income taxes. And almost all of them paid at least a small portion of the business federal income taxes. Businesses, as a general rule, don't pay taxes. Their customers pay them. Every time someone buys a good or a service from a business, he or she helps pay the entity's federal taxes.
Income tax revenues go into the general fund from whence the Highway Trust Fund shortfall is drawn. Thus, motorists as a group subsidize themselves, although they don't know it, because the subsidy is not reflected in the price at the pump. There is, however, a caveat in this. Wealthier motorists pay more in federal income taxes than less affluent motorists and, therefore, cross subsidize poorer motorists.
In effect, because of their large base, motorists pay the cost of driving one way or the other. The same is largely true for the 678 million airline passengers carried in 2007. In the case of rail passengers, including transit riders in most locations, a relatively small percentage of the population uses the trains or public transit. Accordingly, they are more dependent on funds paid by people who do not or cannot use the system. Amtrak's long distance trains are the worst example. Their passengers get one of the highest subsidies of any common transport carrier in the United States.
If users paid directly (at the pump or ticket counter) the full cost of their transport mode of choice, they would know what it is really costing them to go. What they want and can afford would bubble to the top of the transport priority list. Although no one knows how the elimination of subsidies would change the transport scene, there are probably three or four plausible scenarios. In the most likely one for commonly used public transport, airplanes would be used for long distances, trains for relatively short high density corridors (commuter and intercity), and buses in lightly populated areas. Personal vehicles would remain the choice for most trips, e.g. commuting, shopping, leisure activities, family vacations, etc.
If the full cost of driving was rolled into the price of gasoline, it would push up the cost significantly. How much? I don't know. Nor I suspect does anyone else. But let's assume that it went to $5.50 per gallon. This would push the estimated direct cost of operating my Toyota Corolla to more than 35 cents a mile.
Light rail riders in Dallas pay $1.50 per ride and get an average subsidy of $3.66 per trip. If the subsidy was rolled into the fare, it would be $5.16 a ride. That's pretty steep. But on a per mile basis it could be less than driving. For a passenger riding from Plano to downtown Dallas, which is approximately 19 miles, the cost would be 27 cents per mile. Hm, that's considerably less than driving, especially for people who drive big SUVs and pick-ups. In fact, the end points differential might be great enough to attract private investors, since they could earn a return without charging as much as the per mile cost of driving. Of course, load factors, labor costs, parking variables, politics, mind sets, etc. would have to be factored into the question of whether a private operator could make money on the system.
Would shifting all of the costs of driving to the end user result in a light rail line instead of another lane of highway even if the cost was less? Not necessarily. People are motivated by more than cost. In a nation as rich as the U.S., at least in the aggregate, the people might opt for another highway lane, even though it would cost considerably more than building a rail line, because they can afford it. But without the mish mash of subsidies they would have the data to make a true cost comparison of the options and hopefully make a rational choice.
What is the probability of eliminating or reducing the matrix of U.S. transport subsidies? Not very high! Too many entrenched interests in the current system! But change is possible.
Melbourne, Australia privatized all of its commuter rail, tram (streetcar) and bus services approximately 10 years ago. The contract operators are able to deliver a better service than the government provided. They still require a subsidy, but the red ink is less than before privatization. How did they do it? The contract operators created a business like work environment that resulted in better productivity. How do I know? I lived in Melbourne from 1999 to 2004. I saw the results every day.
Samantha:
The vested interest that would oppose your idea the most is the tourist industry. At those prices I would never visit our national parks and other attractions. (another subsidized item).I am afraid that without subsidized transport that what cheap transport has enabled would disappear and a gradual balkanization would occur.
Blue Streak
Entrance fees do not cover the full cost of running the National Park Service. It gets an infusion of general funds. It should. It is not a commercial enterprise, and I don't think that it should be, although one could make an argument for privatizing it.
My concern is masking the true cost of commercial activities with subsidies and, therefore, distorting the price, which frequently leads to sub-optimum behavior as per my post.
If you are a middle class person who pays federal income taxes, owns a home and thus pays property taxes and owns a car, or at least drives one; you are paying the full or nearly full cost of driving. If you don't pay federal income tax, or pay a very low rate, then your driving is subsidized by more affluent motorists.
If the powers that be rolled the federal subsidies, cost of county roads, cost of city streets, etc. into the price of gasoline, as opposed to hiding them in transfers and other taxes, the price of gasoline would reflect its true cost. But governments would be able low their tax rates, i.e. a very small lowering of federal and state income taxes, a more substantial reduction of county and city property and sales taxes, that would offset the increase in the price of gasoline.
If the price of transport reflects the true cost of each transport mode, users are likely to make better decisions about which one to use. A likely outcome would be increased of rail use in short corridors with a corresponding decrease in driving and flying.
Higher fuel prices would result in some poorer citizens being unable to drive to tourist attractions, including the national parks. If society agrees that everyone should be able to travel to these sites, less affluent persons could be given a tax credit so that they could get to them.
Heaps of people would oppose changing the current system of subsidizing transport. The only way that it could be changed is through a process similar to the recent military base closings. A commision would have to be formed and the process would have to be taken out of the political sphere. What is the chance of it happening? Not very good! But that does not mean that it shouldn't.
Samantha-
An interesting idea - though I'm not sure how well it would go down with cities and states. There's a lot of history of direct subsidization of transportation - particularly construction - by cities and states.
The Erie canal was built to enhance commerce at the port of NYC. The Boston and Albany RR was built to keep Boston in the game with NYC. The disateroust Main Line canal in PA was built to keep Phila in the game.
The National Road was built by the Feds to open the west to development.
Every toll road in the east prior to the interstate system was built by a state authority. Every major bridge in the country was build by a state or joint gov't authority.
All of these were done to enhance commerce in the area - the idea the net commerce increase less the cost of doing the project was a net "win" for the state, city, area.
Would you cast a fairly wide net in capturing costs? i.e. would you try to capture environmental and health costs directly with the user fees/taxes?
Would you try to get the user fee to be exactly proportional to the cost or would "what the market will bear" be the guide?
How would you apply emminent domain to a parallel start-up, private venture toll road or airport? Would you charge a fee to compensate those who wind up near the wake of the road, railroad or airport?
Would this prohibit a city/state/region from undertaking a subsidized transportation project to improve local commerce? e.g. "you built your auto plant here and we'll build you an interstate interchange for free".
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
I think from a good economics point of view subsidies to any industry always create bad decisions. They are awarded to prop up inefficient industries and distort the market so I understand where you are coming from. I would see the problem with transport however is that we have moved so far away from a free market that I'm not sure we could ever get back to it. Of course you could simply just remove subsidies (phased of course) but due to subsidies our entire transport infrastructure is lopsided. How do we take account of history? I am personally in favour of spending money to correct mistakes. I view government subsidies in the past that have made countries road dependant as a mistake. Perhaps that's just becuase I'm a rail fan!? I hope not. Anyway I feel that the best way to respond is to invest in rail to correct past mistakes. By investing significantly rail can capture enough of a market share (it is a great way to travel after all!) to be profitable to some degree - you'd have to eliminate all subsidies to make it truely profitable. This is the case in Britain where more and more rail companies are moving towards profitability. An amazing example is my local Scotrail. The company has routes which would make your Amtrak long distance look like the honey pot. However they have a good mix of routes which allows an overall balance. However the key point is to get to a stage of no subsidies you have to put in serious money to really make the rail network viable. I think it's worth it based as I said on the unfairness of past policies. I don't however see anyone in America who is willing to spend that kind of money and until they do it will always be a conflict between subsidies and no service at all.
Let me see if I understand your meandering logic.
Businesses don't pay taxes, their customers or clients do by virtue of being the business' source of revenue. Therefore, the customer is actually paying their share of road subsidies when they make a purchase.
That means that my purchase, which also pays the salary of the checkout clerk, therefore is paying the checkout clerk's income tax, so I am paying the clerks share of the road tax that comes from the general fund. That isn't fair.
But wait. Some other poor schnook is paying MY salary by virtue of their purchases, so I am not really paying MY own taxes, or for that matter the profits of the store.
But then THAT person ... oh never mind, my head hurts.
Mass transit benefits society in general. It is an apropriate use of tax dollars.
Dave
Lackawanna Route of the Phoebe Snow
Samantha is taking the Libertarian position of "let's start with a clean slate and try and reduce all subsidies, in transportation and other industries, in an effort to reduce market distortions, rather than throwing up our hands that 'all modes are subsidies', placing subsidies on top of the existing subsidies to try and correct those distortions."
I was going to respond that I don't subscribe to the pure, Libertarian, subsidy-free view, if for any other reason that as long as the government provides some services, through taxes, through grant of regulated monopoly, or other means, there is probably enough interdependence in the economy that the Libertarian ideal of purely free markets is a theoretical construct.
On the other hand, I feel confident enough in presenting this opinion that I don't have to ask "if I understand (Samantha's) meandering logic" when I don't really believe that Samantha's logic meanders at all, merely that I am uncomfortable with it because it challenges my world view. I would not say "oh never mind, my head hurts" when my head isn't really hurting from mental exertion, but again, were my head to hurt in some metaphorical sense, it would be from guarding my head from the entry of thoughts against which I am prejudiced rather than have reasoned arguments.
What is so complicated about anything Samantha, Paul Milenkovic, Don Oltmann, or Phoebe Vet is saying? Samantha takes a hard line against subsidies, Paul and Don are more accepting of subsidies but want to take a critical look at how they are spent, and Phoebe and others take the view that an entirely inadequate amount of subsidy is directed to trains. There are arguments pro and con on each of those positions, no one's logic meanders, and no one's head hurts from any of this.
I am certainly not against Amtrak subsidies, but when I am in the train advocacy circles where the "All modes are subsidized" argument comes up and the view is expressed that all "Amtrak reform" proposals reflect either ignorance about the rail mode or malice towards it, my hand reaches to cover my wallet. After the give and take between Samantha and Phoebe, I started out in the middle, but the fact of the matter is that Samantha is keeping her head about this and Phoebe is starting to spit pins, which suggests that Samantha has the facts on her side.
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
Paul:
I didn't say a word about subsidies.
The logic with which I took issue was the claim that businesses don't really pay taxes because their revenue comes from their customers.
Unless they are counterfeiters, everyone's revenue comes from someone else. I just carried it to it's absurd conclusion.
Perhaps the sarcasm made it hard to understand. I will try speak more clearly in the future.
Phoebe Vet wrote: Businesses don't pay taxes, their customers or clients do by virtue of being the business' source of revenue. Therefore, the customer is actually paying their share of road subsidies when they make a purchase.
Whether business customers pay their share of the road costs or subsidies depends on their tax bracket and lifestyle. If they buy goods and services from a viable business, they are paying a small portion of the entity's tax liability, which goes into the general fund, from whence transfers to the Highway Trust Fund, in the case of federal taxes, are drawn.
Salaries, wages, interest, etc. are taxable to the recipient. If a person works for a business, as an example, his salary is paid by the entity's customers, as are all business expenses. He is responsible for filing a personal income tax return for the compensation received. Employee compensation has nothing to do with the taxes paid by a business, other than it is a deductible expense.
Businesses with taxable income; that is to say, those that make a profit, pay federal income tax and state income tax in those states that levy a business income tax. They pay other taxes as well, e.g. inventory taxes, payroll taxes, franchise taxes, etc. With one exception the tax, which is a business cost, is included in the price of their goods and services. Thus, the customers really pay the tax.
If a business has an inelastic price curve, the owners (stockholders, partners, proprietors, etc.) pay the taxes. An inelastic price curve means that the business cannot raise its prices high enough to cover the taxes and pass them on to its customers. There are many reasons why a business might not be able to raise its prices. One could be loss of market share in a market where a minimum market share is necessary for survival. This happens, but it is rare.
One of the worst ruses perpetrated by politicians is the assertion that businesses, especially corporations, pay taxes. Most of them know that the public doesn't understand the difference between personal income taxes and business income taxes. Or who really pays them. So they hang the burden on corporate America because they rightly believe that they will get less push back from the public.
If all transportation subsidies were eliminated, public transit systems, e.g. Charlotte Area Transit System, etc. could be sustainable without public monies. If motorists were required to pay the full cost of driving at the pump, they would be shocked at the cost. Transit would be a viable alternative for many of them, as per my example of Dallas Area Rapid Transit, which would cost less per mile than driving. The biggest challenge for such a system would be low income people. It could be managed by raising the earned income tax credit, which would give them the money to pay the higher transit fares.
Until the late 1940s most transit systems in the U.S. were owned and operated by private enterprise. The New York City subway system was built by private enterprise. And the North River tunnels that made possible Pennsylvania Station, not to mention the station itself, were built by the Pennsylvania Railroad. After the 1940s, because of subsidies paid to alternative modes of transportation, as well as a variety of economic and social pressures, private transit systems failed, and they were taken over by local governments.
Samantha wrote: Phoebe Vet wrote: Businesses don't pay taxes, their customers or clients do by virtue of being the business' source of revenue. Therefore, the customer is actually paying their share of road subsidies when they make a purchase.Whether business customers pay their share of the road costs or subsidies depends on their tax bracket and lifestyle. If they buy goods and services from a viable business, they are paying a small portion of the entity's tax liability, which goes into the general fund, from whence transfers to the Highway Trust Fund, in the case of federal taxes, are drawn. Salaries, wages, interest, etc. are taxable to the recipient. If a person works for a business, as an example, his salary is paid by the entity's customers, as are all business expenses. He is responsible for filing a personal income tax return for the compensation received. Employee compensation has nothing to do with the taxes paid by a business, other than it is a deductible expense. Businesses with taxable income; that is to say, those that make a profit, pay federal income tax and state income tax in those states that levy a business income tax. They pay other taxes as well, e.g. inventory taxes, payroll taxes, franchise taxes, etc. With one exception the tax, which is a business cost, is included in the price of their goods and services. Thus, the customers really pay the tax. If a business has an inelastic price curve, the owners (stockholders, partners, proprietors, etc.) pay the taxes. An inelastic price curve means that the business cannot raise its prices high enough to cover the taxes and pass them on to its customers. There are many reasons why a business might not be able to raise its prices. One could be loss of market share in a market where a minimum market share is necessary for survival. This happens, but it is rare. One of the worst ruses perpetrated by politicians is the assertion that businesses, especially corporations, pay taxes. Most of them know that the public doesn't understand the difference between personal income taxes and business income taxes. Or who really pays them. So they hang the burden on corporate America because they rightly believe that they will get less push back from the public.If all transportation subsidies were eliminated, public transit systems, e.g. Charlotte Area Transit System, etc. could be sustainable without public monies. If motorists were required to pay the full cost of driving at the pump, they would be shocked at the cost. Transit would be a viable alternative for many of them, as per my example of Dallas Area Rapid Transit, which would cost less per mile than driving. The biggest challenge for such a system would be low income people. It could be managed by raising the earned income tax credit, which would give them the money to pay the higher transit fares. Until the late 1940s most transit systems in the U.S. were owned and operated by private enterprise. The New York City subway system was built by private enterprise. And the North River tunnels that made possible Pennsylvania Station, not to mention the station itself, were built by the Pennsylvania Railroad. After the 1940s, because of subsidies paid to alternative modes of transportation, as well as a variety of economic and social pressures, private transit systems failed, and they were taken over by local governments.
Not quite. Most of the transit lines in NYC, and likely elsewhere, were built or at least funded by developers looking to make money developing land they bought. The viability of the transit line, by itself, was a questionable venture, but when summed with the profit from real estate development, the sum was positive. Once the transit lines started losing money - which they did rather quickly - the owners sold them off, often to the local gov't.
This is why I asked about how wide a net you'd cast in capturing the true costs. 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 postive even when all the piece parts aren't.
Oltmannd
The 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.
Well, we have connected all the subsidies in a very complicated set of linkages that no one of us can understand. For example, transportation subsidies connect to real estate subsidies (using tax policy to subsidize individual home ownership), which yields a map of where people live and work that makes efficient transportation much more difficult.
Maybe we are looking at it from the wrong way. Maybe we should ask for less transportation in general, rather than seeking more efficient transportation.
What would happen if the govt somehow encouraged people to live near where they worked? Or encouraged businesses to build near where they knew there were available workers?
What happened to the "cluster" concept from 1950, where we would live and work in huge skyscrapers and take an elevator to work? To visit other clusters we would take a train. To visit areas between clusters we would pass a debit card over an unattended car and "borrow" it, with fuel and insurance, etc., to self-drive us. The space between clusters would be woods/desert/farms/parks/mines/lakes/airports/etc.
Why do all cities/counties aspire to "growth" in the face of universal historical evidence that larger cities/counties impose ever larger taxes/fees on their people for ever less satisfactory services/living conditions?
Don Oltmannd
Outlined below are my answers to the questions shown. I addressed the others in another post.
User fees should capture all the costs associated with a commercial type activity, whether it is run by private enterprise or a government enterprise fund. They should include the incremental environmental and medical costs associated with the activity. They should also include other ancillary costs, e.g. gasoline should include the cost of the U.S. Naval presence in the Middle East that is devoted to keeping the oil sea lanes open.
If the activity is a not for profit operated for the benefit of society, i.e. highways, airways, transit systems, etc., because private enterprise cannot make money on it or government won't permit it, user fees should be sufficient to recover the cost of the facilities, including local property taxes, environmental impact fees, etc.
A commercial activity, i.e. airplanes, buses, trucks, trains etc., should pay user fees, usually embedded in fuel taxes, that are commensurate with the shared cost of using any common facilities. The facilities should pay local property taxes, etc. if they are not otherwise captured in the user fees.
How would you apply eminent domain to a parallel start-up, private venture toll road or airport? Would you charge a fee to compensate those who wind up near the wake of the road, railroad or airport?
Utilities in most states use eminent domain to obtain the easements necessary to construct power lines, gas lines, water lines, etc. They have to make a convenience and necessity case for the rights of way to the regulators. The largest electric and gas utilities in the U.S. are investor owned.
The same concept would apply to anyone that wants to build a private toll road, airport, etc. In fact, it applies in Texas, were toll roads are sprouting like weeds.
The Pennsylvania Turnpike, New Jersey Turnpike, etc., as well as Texas' toll roads were built by quasi government bodies, usually an authority set-up build and operate the toll facility. They are responsible for financing, building, and operating the facility. They are usually independent of the sponsoring state government(s), except the state guarantee's the authority's bonds, and usually has representatives on the oversight board. It also enables the authority to issue tax free municipal and authority bonds. Taxpayers only get stuck with the cost of these projects if they are financed with general obligation bonds, as opposed to revenue bonds, which would be rare for a toll road, bridge, etc., and the issuer defaults on the interest or principal of the bonds.
Interestingly, the original stretch of the Pennsylvania Turnpike was built on a right of way constructed in large part by the New York Central Railroad. Management of the Central, I have forgotten the year, was ticked off at the Pennsylvania Railroad, and it decided to build a competing rail line through southern Pennsylvania. Much of the right of way was graded and, if I remember correctly, some of the tunnels, which later became the accident prone tunnels on the PA Turnpike, were bored in preparation for the rail line. Ultimately, peace was made and the NYC abandoned the project.
I spent decades in the electric utility business. When I began my career the company was a regulated monopoly. It had no meaningful competition. As a result, it was the epitome of inefficiency. But in 2000 deregulation and competition came to Texas. It had dramatic impacts on the company and its customers. They were too numerous to discuss here, but one statistic is telling. Employment dropped from more than 17,250 employees to less than 10,000. And the lights did not flicker. Competition forced management to become more efficient.
The unnecessary employees were a hidden tax on the company's customers. Their pockets were picked daily to support the company's inefficiencies. And in doing so the customers lost a bit of their freedom to decide how to spend their money. This is exactly what subsidizing transportation does. It robs the people who don't or cannot use it of their freedom to decide how to spend their dollars.
What is to say that accomodation for the elderly and the disabled is restricted to trains. What is to say that a given amount of subsidy dollar spent on lower seating densities to accomodate the wheel-chair bound or simply less able might go farther on airplanes or perhaps buses. What is unique about trains that makes a low seating density affordable in the rail mode?
A good measure of the advantage ascribed by the advocacy community to trains over even buses is the low seating density. It seems you get what you pay for. Trains, by historical tradition have much more leg room, a little more elbow room, considerable room to "stretch your legs and walk to the lounge car for a snack." Trains with these amenities, however, cost multiples of what bus travel does, and even with traffic congestion, the schedule keeping is only better in rare instances (NEC, maybe the Hiawatha).
People keep coming back to how much nicer trains are than buses, but maybe thats because trains are subsidized at a dollar for every dollar in fare, and the fare is still higher than the bus. Maybe if we subsidized buses the same way we might even get more seats with more legroom for the same subsidy dollar?
blue streak 1 wrote:I am really worried about the trend of some posts that only give the the well off ability to travel and use transport. The eldery who can no longer drive, Handicapped poeple including a lot of Iraq veterns. The veterns are taking enough bad treatment and neglect. This is not my problem but I never know if it could or any of you posters.
Pure capitalism, which some of the posters seem to advocate, is survival of he fittest and is controlled by natural selection. The example cited in this thread would be the demand that each form of travel should be totally paid for by the individual people who actually use it.
Concern for the life quality of others get's immediately labeled "Socialism".
MOST, but not all, of us realize that a humane and workable society actually exists somewhere in the middle.
Phoebe Vet wrote: blue streak 1 wrote:I am really worried about the trend of some posts that only give the the well off ability to travel and use transport. The eldery who can no longer drive, Handicapped poeple including a lot of Iraq veterns. The veterns are taking enough bad treatment and neglect. This is not my problem but I never know if it could or any of you posters. Pure capitalism, which some of the posters seem to advocate, is survival of he fittest and is controlled by natural selection. The example cited in this thread would be the demand that each form of travel should be totally paid for by the individual people who actually use it.Concern for the life quality of others get's immediately labeled "Socialism".MOST, but not all, of us realize that a humane and workable society actually exists somewhere in the middle.
My original post contained the following sentence: "The earned income tax credit would be expanded to help the working poor, as well as the mobility impaired, offset the burden of higher transit costs."
If society decides that low income people, seniors, mobility impaired, etc. should be able to travel anywhere via whatever mode of transport is appropriate, there are a variety of mechanisms that can be implemented to make it possible. The earned income tax credit is one way to do it. Another way is to discount the price for select groups, i.e. seniors, students, mobility impaired, etc. Most common carriers, e.g. airlines, bus companies, Amtrak, transit systems, etc. give discounts to seniors, students, as well as the mobility impaired.
The advantage of discounts is that they are not hidden in the cost structure, thereby keeping the true cost and price of a service in view. Subsidies mask these vairiable and promote inefficiencies.
Pure capitalism refers to a lassie fare economic system that most people gave up on generations ago. Socialism is an economic and political system where the government owns the principal means of production. It has nothing to do with transport pricing.
Concern for the quality of life of others can be termed "social justice" and the primary method of achieving it is debatable. Is it the will of the people working thru gov't or is it the will of the people working directly ala Habitat for Humanity, World Vision, United Way, Red Cross, etc or is it a hybrid - gov't as the catalyst for direct action?
The how, why and who of social justice in the realm of transport is an interesting question...
Phoebe Vet wrote: blue streak 1 wrote:I am really worried about the trend of some posts that only give the the well off ability to travel and use transport. The eldery who can no longer drive, Handicapped poeple including a lot of Iraq veterns. The veterns are taking enough bad treatment and neglect. This is not my problem but I never know if it could or any of you posters. Pure capitalism, which some of the posters seem to advocate, is survival of he fittest and is controlled by natural selection. The example cited in this thread would be the demand that each form of travel should be totally paid for by the individual people who actually use it.Concern for the life quality of others get's immediately labeled "Socialism".MOST, but not all, of us realize that a humane and workable society actually exists somewhere in the middle. Concern for the quality of life of others can be termed "social justice" and the primary method of achieving it is debatable. Is it the will of the people working thru gov't or is it the will of the people working directly ala Habitat for Humanity, World Vision, United Way, Red Cross, etc or is it a hybrid - gov't as the catalyst for direct action?The how, why and who of social justice in the realm of transport is an interesting question...
I have never advocated a pure capitalistic approach, and I have never advocated doing away with Amtrak subsidies. Perhaps Samantha is the one person advocating a somewhat more capitalistic, Libertarian, or laissez-faire approach, but Samantha can address and defend that viewpoint as required.
But I somehow on these pages have gotten lumped in at times with the heartless, the delusional, or the Concrete Lobby in discussing pros and cons to various approaches to trains. There is a Party Line within the advocacy community, and if I even try to address where an Amtrak critic may be basing their opinion, I get lumped in with the Lumpen Faction (lumpen is a German-language word for rag -- Karl Marx wrote of a lumpen proletariat, I guess we would call that class the working poor, and I have been accused of not having the right attitude towards the working poor and I have been threatened that fortune and luck could make me part of that class because my support for train and transit subsidies is not unconditional).
At one level, there are people who think cars are really cool and they ooh and aahh and drool over the new kinds of cars and fantasize driving some "hot" car, other think that airplanes are exciting (really, there are indeed people who enjoy flying), and there are a lot of people here who think trains are cool, some of whom have given up on passenger trains as most people have given up on the steam locomotive, others who are still pushing the passenger train idea, and an even smaller minority who hasn't quite given up on the steam locomotive. There are even some people who think that over-the-road trucks are cool, and there may even be a minority who think buses are cool, although I don't know anyone who has scale models of buses filling up their basement.
At another level, once the novelty has worn off, an airplane is just another kind of bus, and even the same could be said for a train for many people who have to ride one every day, crammed in 150+ fellow commuters to a gallery bilevel. But the driver for a lot of passenger train advocacy is that trains are intrinsicaly cool, and a lot of arguments are advanced between trains are cool and trains are a worthy object of public subsidy.
NARP long talks of "balanced transportation system." OK, we have highways with their private cars and public buses, we have airways with airline service and GA, why can't we have trains to round out the transportation choices?
So what do we know about trains? Well, everyone knows that the steel wheel on the steel rail has much lower rolling resistance than a rubber tire, and combined with the wind blocking effect of each train car on the next, a train whether electric or Diesel should be energy saving and a great thing with $4+ gas. Trains have wider seats than planes of buses with much more leg room, and trains have special sections or special cars that allow you to get up, stretch your legs, and walk over to where you get a meal or a snack. Some trains even have special sections with large windows to see the majestic scenery of the Mountain West and many other parts of the country. Trains run up to 80 MPH are even faster in some places while 65 or less is a common highway speed limit, and trains are not subject to road congestion. Train cars cost less to build and operate because they don't need to be built ultra-lightweight to narrow design margins like an airplane, and if a locomotive quits, it is merely an annoying inconvenience, not a life-endangering emergency. Passenger service doesn't recover enough in fares to make a profit, either here or in Europe or elsewhere, but every other mode gets some form of direct or perhaps indirect subsidy, so it all works out anyway.
Guess what. Amtrak trains are only marginally more fuel efficient than cars and planes. Part of that has to do with trains needing to be heavy to give a smooth ride since the steel wheel on steel rail doesn't have the give of the rubber tire on concrete, part of it has to do with trains needing to be heavy to withstand collisions, especially when operated around even heavier freight trains, and part of it is that combination of cheap fuel and Amtrak subsidies means no one has taken a hard look at train fuel consumption as a major operating cost, or at least until now. Another part of it is that trains offer the amenities of leg room and "walking around to stretch your legs" not found on intercity buses, which are by far the fuel economy champs on account of the high seating density that is a byproduct of their labor cost structure.
Amtrak trains could be made more fuel efficient by cramming in more seats, but then an Amtrak train would not offer any advantage with regard to the elderly or disabled with respect to buses. As to the subsidy, it is masking the effect that Amtrak is a high cost way of providing seat miles relative to the airline and bus competitors. Strictly on the basis of cost, for hauls over a couple hundred miles, airplanes are by far the low cost way of moving people, even at today's increased fuel prices, and this fact was known and discussed in Trains in issues from the early 1960s. As to congestion, the highways are jammed up, but passenger trains suffer from the congestion of competing for track space with the booming freight business.
But there must be other economies to train travel. One train driver can operate a train with hundreds of seats while a bus driver is limited to 40 or so seats. But when you work out everyone else associated with operating and staffing Amtrak, on train and off train, Amtrak labor costs are multiples of any bus company,
But these things can't be right, even though all this ground was gone over in the old issues of Trains magazine and other places. Trains are cool. The American people must be shown that they like them, that America needs trains. We must direct our train advocacy groups to become anti-road construction groups -- gas is so expensive and the public must be made to understand the need for trains.
There has got to be some kind of catch. The critics of trains must all have connections to right-wing think tanks or the Concrete Lobby. Critics of trains are heartless people who don't care for disabled war veterans.
I'm sorry if you thought my reply to blue streak, which you quoted, was directed at you.
It was not.
So, I'm hearing that all customers will be better able to decide the relative advantages of each mode of transportation when the user fees include all the costs, and that we should subsidize a certain class or classes of users, if needed, with tax credits, instead of subsidizing a certain mode of transportation (passenger rail).
It sounds reasonable, but I'm having trouble figuring out how it would be any easier to do. Consider airline tickets in the 1950s, when only the rich could afford them. Adding in all the hidden costs for the growing commercial airline business would only have made airline tickets less affordable. Same for air freight, which already was pretty much limited to perishables (e.g., lobsters) and special government shipments (things like aircraft parts and missile parts).
Do you think that train and bus tickets, as well as automobile costs, would also have been much more expensive if all the costs were included?
Getting back to the present, how would society decide whether or not I need a subsidy to ride the train or to fly in an airplane? I wonder if the process to do that might be just as complex and hard to understand as the current process of subsidizing modes of transportation is.
cordon wrote: I'm having trouble figuring out how it would be any easier to do. Consider airline tickets in the 1950s, when only the rich could afford them. Adding in all the hidden costs for the growing commercial airline business would only have made airline tickets less affordable. Same for air freight, which already was pretty much limited to perishables (e.g., lobsters) and special government shipments (things like aircraft parts and missile parts). Do you think that train and bus tickets, as well as automobile costs, would also have been much more expensive if all the costs were included? Getting back to the present, how would society decide whether or not I need a subsidy to ride the train or to fly in an airplane? I wonder if the process to do that might be just as complex and hard to understand as the current process of subsidizing modes of transportation is.
I'm having trouble figuring out how it would be any easier to do. Consider airline tickets in the 1950s, when only the rich could afford them. Adding in all the hidden costs for the growing commercial airline business would only have made airline tickets less affordable. Same for air freight, which already was pretty much limited to perishables (e.g., lobsters) and special government shipments (things like aircraft parts and missile parts).
If the true cost of each mode of transport was passed directly to the user, i.e. in the price at the pump or ticket prices, they would have better knowledge of the cost of each. Of course, there are other variables that make up the transport value package, e.g. time, comfort, safety, etc. that would still be part of the decision matrix. They are subjective.
The true cost of each transport mode would be reflected in its pricing mechanisms. This includes train and bus tickets. And it would have been included in the 50s if we had not started down the slipper slope of subsidies.
Determining the amount of direct subsidy, i.e. intergovernmental transfers to Amtrak, Aviation Trust Fund, Highway Trust Fund, etc. would be easy. Without difficulty they can be included in the gasoline tax, which is a user fee, as well as the ticket (haulage) prices for all commercial modes of transport. The sticky wicket is the indirect costs.
If fossil fuels wear their true cost, as reflected in the taxes or user fees, the cost should include a component for cleaning up the environment because of the damage done by burning fossil fuels. How much damage does each mode of transport do? That's the 64 dollar question, and it would be difficult, although not impossible, to determine.
If each mode of transport reflected its true cost in the user fees or ticket prices, several significant changes would probably occur. There would be a rush out of SUVs and large pick-ups for more fuel efficient vehicles, a decrease in short haul flights, an increase in passenger trains in relatively short high density corridors, more use of public transit, etc. These are only a few examples of the changes that would likely occur.
The 1950s is not a good comparative base for airline fares or who could afford them. During that era the most common commercial airliners were propeller driven; relatively slow airplanes that carried a smaller passenger load than today's airplanes. The economics of flying, as well as government regulation, dictated the relatively high fares.
The jet airplane has changed the game. It is a far more productive machine than the 1950s flying machines. This fact together with a paradigm shift in pricing, i.e. yield management, is what makes it possible for the average person to fly today. And it would remain the case if the subsidies were removed, because the per seat mile subsidies for the airlines are less than a penny a mile, excluding the so called subsidy from the tax free financing of airports, which is arguable. Of course, if aviation fuel was priced to reflect its true cost, i.e. the cost of the naval presence in the Middle East to protect the oil sea lanes, etc., the price would increase more than it has recently. And this increase would have to be factored into the fares, which could have a significant impact on who flies and from where.
Here is an example of the difference in productivity between the DC-6B, which was in common use during the 1950s, and the Boeing 767, which is typically used for cross country flights.
The 6 could carry up to 102 passengers in economy class at 315 miles per hour at a cruising altitude up to 25,000 feet. It required a cockpit crew of three. A typical flight from New York to Los Angles would require about 10.5 hours. This means that the airplane could fly to LA in the morning and turn around for a red eye back to New York in the evening.
The 767 can zip along at 530 mph with up to 375 passengers at a cruising altitude of 35,000 feet. The 767 requires a flight deck crew of two. A typical flight from New York to Los Angles requires approximately6.0 hours. This means that the bird can fly from LA as an early morning flight, turn around as an afternoon flight to New York, and return to LA as a late night flight.
Modern airplanes have another advantage over 1950s airplanes. They require less maintenance, and they are more reliable, which reduces the cost of flying.
In 2006 the median household income in the United States was $48,201 a year. This means that half the households in the U.S. had annual incomes of less than $48,201. The amounts differed significantly between regions, e.g. Northeast, Midwest, etc., and urban, rural, etc. Depending on family size, actual income, etc., many of those with incomes below the median household income can take the earned income tax credit on their federal income tax return. So the mechanism to subsidize transportation costs for low income people is built into the tax system, at least for people who have income. Expanding it would not be a great challenge. This is one way to do it.
Another way to do it would be to use the current system of granting discounts to select classes of people. For example, most transit systems grant discounts to students, seniors, mobility impaired, etc. Similar discounts could be extended to low income people. However, doing so would require a means test, which many Americans consider demeaning, so it could be a hard sell.
Government would not determine whether people could fly or take the train. It would simply provide an income support for people below a threshold income level, and they would decided whether they could afford it.
Here is another important point to keep in mind. If the cost of country roads and city streets, which is embedded in county and local property taxes, was included in the price of gasoline or other end user fees, property taxes, which affect everyone, would go down.
Direct pricing as opposed to burying some of the cost in subsidies would not be a panacea. There would be plenty of issues that would need to be sorted out. But at the end of the day it would be a better system than we have now. And it would be better for rail passenger enthusiasts, because it could put rail in a more competitive position in select markets.
Your repeated proposition that gasoline should be taxed at a high enough level to pay for our ongoing military interference in the middle east makes it very hard to not turn this into a political conversation.
I won't mention it again if you don't.
It's a very attractive concept. We may as well throw into the "automobile costs" the costs for that portion of your police department and court system devoted to traffic safety.
We don't have to speculate about politics here, but I don't think that the politicians will sign up to any new principle unless they understand how it will affect them in every detail.
I also feel that some people are concerned with costs and benefits that we don't ordinarily measure in monetary terms. For example, I frequently gladly pay more for a product "Made in the USA" than for an identical product made elsewhere because I see an American job at the other end of that product line.
Phoebe Vet wrote: Samantha:Your repeated proposition that gasoline should be taxed at a high enough level to pay for our ongoing military interference in the middle east makes it very hard to not turn this into a political conversation.I won't mention it again if you don't.
My latest post did not say anything about gasoline wearing the cost of our military interference in the Middle East. You must be referring to a previous post.
What I have said, in essence, is that the price of fossil fuels should wear the cost of maintaining a naval presence in the Middle East to keep the oil sea lanes open. I did not mention Afghanistan or Iraq, which I would dub military interference.
The U.S. has maintained a naval presence in the Middle East for more than three decades. Doing so has been supported by Republican and Democratic administrations. The military analysts that I have read say that it is there to protect, in part, the sea lanes through which Middle East oil flows to Europe and the United States. There is nothing political about this observation.
cordon wrote: It's a very attractive concept. We may as well throw into the "automobile costs" the costs for that portion of your police department and court system devoted to traffic safety.We don't have to speculate about politics here, but I don't think that the politicians will sign up to any new principle unless they understand how it will affect them in every detail.I also feel that some people are concerned with costs and benefits that we don't ordinarily measure in monetary terms. For example, I frequently gladly pay more for a product "Made in the USA" than for an identical product made elsewhere because I see an American job at the other end of that product line.
The price of gasoline should reflect the cost of policing our highways; it should also reflect the cost of responding to an accident and cleaning up the mess. Amtrak's costs include the cost of cleaning up a train wreck and repairing the equipment.
Economics and politics go hand in hand. After all, if it had not been for politics, Amtrak would not have seen the light of day. That said, the probability of changing the current system is very slim. It would not happen unless the U.S. hits a major economic crisis, and the politicans determined that rationalizing the price of transportation would be crucial to solving it.
Today's paper carried an announcement by GM that it is shutting down four SUV and pick-up truck plants because people have stopped buying GM's big vehicles. With $4 gasoline, many people realize that they cannot afford to drive them. If gasoline had been priced properly, as per my argument, they would have realized this decades ago, and they would probably have opted for more fuel efficient vehicles.
As I mentioned, cost is only one compenent of selecting a transport mode. Other factors, such as convenience, safety, dependability, comfort, are equally important. But most economic models suggest that cost is a major driver. One only needs to look at the success of Wal-Mart to verify this fact. Its business model is the envy of the retail and marketing world.
I also did not mention Republican, Democrat, the current administration, Iraq, or Afganistan. I cited our long standing military interference in the middle east. I was not refering to the current fiasco. That is a whole different argument that is unrelated to railroading.
Oil is the primary source of wealth in the middle east. They don't need to be intimidated into selling it. We are the only country on the planet that feels the need to have a military presence all over the world to demonstrate how tough we are. We have hundreds of military bases in 130 foreign countries. Incidentally, I was in the Navy during the Viet Nam Era (1966, 67,& 68). It is not about defense, it is about projecting power.
The cost of that bully attitude has nothing to do with any form of transportation unless you want to count the fact that the Eisenhower Defense Highway system, usually called the Interstate Highway System, was built so that the military could move quickly to any place in the US on short notice. Therefore I do not believe that any form of transportation should be taxed to support any portion of the miltary.
Typing this has given me another thought. Perhaps we could get the Feds to use the same military motivation to take a clean sheet of paper and build a rail system similar to the Interstate Highway system for the same reason.
Samantha wrote: cordon wrote: It's a very attractive concept. We may as well throw into the "automobile costs" the costs for that portion of your police department and court system devoted to traffic safety.We don't have to speculate about politics here, but I don't think that the politicians will sign up to any new principle unless they understand how it will affect them in every detail.I also feel that some people are concerned with costs and benefits that we don't ordinarily measure in monetary terms. For example, I frequently gladly pay more for a product "Made in the USA" than for an identical product made elsewhere because I see an American job at the other end of that product line. The price of gasoline should reflect the cost of policing our highways; it should also reflect the cost of responding to an accident and cleaning up the mess. Amtrak's costs include the cost of cleaning up a train wreck and repairing the equipment.Economics and politics go hand in hand. After all, if it had not been for politics, Amtrak would not have seen the light of day. That said, the probability of changing the current system is very slim. It would not happen unless the U.S. hits a major economic crisis, and the politicans determined that rationalizing the price of transportation would be crucial to solving it.Today's paper carried an announcement by GM that it is shutting down four SUV and pick-up truck plants because people have stopped buying GM's big vehicles. With $4 gasoline, many people realize that they cannot afford to drive them. If gasoline had been priced properly, as per my argument, they would have realized this decades ago, and they would probably have opted for more fuel efficient vehicles.As I mentioned, cost is only one compenent of selecting a transport mode. Other factors, such as convenience, safety, dependability, comfort, are equally important. But most economic models suggest that cost is a major driver. One only needs to look at the success of Wal-Mart to verify this fact. Its business model is the envy of the retail and marketing world.
...or look at what torture flying can be....the Walmart of transport!
I read recently that it's not only the high price, but the persistence of it that gets changed behavior. With that in mind, and knowing that these wild price variations are what we can expect in the future, it might not be a bad idea to tax production a varying amount in order to keep prices more or less stable - a negative price support - in effect. That would do a couple of things:
1. Give incentive for consumers to change their long term behavior.
2. Reduce risk for development of alternate energy/fuels.
The revenue could be used to fund basic research and expensive, long term development of alternate energy.
Ross Perot's 50 cents per gallon deficit reduction tax he proposed about 20 years ago is seeming pretty tame, these days....
oltmannd wrote: Samantha wrote: cordon wrote: It's a very attractive concept. We may as well throw into the "automobile costs" the costs for that portion of your police department and court system devoted to traffic safety.We don't have to speculate about politics here, but I don't think that the politicians will sign up to any new principle unless they understand how it will affect them in every detail.I also feel that some people are concerned with costs and benefits that we don't ordinarily measure in monetary terms. For example, I frequently gladly pay more for a product "Made in the USA" than for an identical product made elsewhere because I see an American job at the other end of that product line. The price of gasoline should reflect the cost of policing our highways; it should also reflect the cost of responding to an accident and cleaning up the mess. Amtrak's costs include the cost of cleaning up a train wreck and repairing the equipment.Economics and politics go hand in hand. After all, if it had not been for politics, Amtrak would not have seen the light of day. That said, the probability of changing the current system is very slim. It would not happen unless the U.S. hits a major economic crisis, and the politicans determined that rationalizing the price of transportation would be crucial to solving it.Today's paper carried an announcement by GM that it is shutting down four SUV and pick-up truck plants because people have stopped buying GM's big vehicles. With $4 gasoline, many people realize that they cannot afford to drive them. If gasoline had been priced properly, as per my argument, they would have realized this decades ago, and they would probably have opted for more fuel efficient vehicles.As I mentioned, cost is only one compenent of selecting a transport mode. Other factors, such as convenience, safety, dependability, comfort, are equally important. But most economic models suggest that cost is a major driver. One only needs to look at the success of Wal-Mart to verify this fact. Its business model is the envy of the retail and marketing world. ...or look at what torture flying can be....the Walmart of transport!I read recently that it's not only the high price, but the persistence of it that gets changed behavior. With that in mind, and knowing that these wild price variations are what we can expect in the future, it might not be a bad idea to tax production a varying amount in order to keep prices more or less stable - a negative price support - in effect. That would do a couple of things:1. Give incentive for consumers to change their long term behavior.2. Reduce risk for development of alternate energy/fuels.The revenue could be used to fund basic research and expensive, long term development of alternate energy.Ross Perot's 50 cents per gallon deficit reduction tax he proposed about 20 years ago is seeming pretty tame, these days....
Spot on! A couple of years ago I proposed to my elected representative pegging the cost of gasoline at $4 per gallon, using the federal gasoline tax to keep it there. The tax would be adjusted inversely with the movement in the underlying commodity. Needless to say, they did not agree with me.
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