Transit & the American Dream

The automobile has provided an incredible level of mobility to more than 90 percent of American families. But not everyone can drive. The first job of America’s transit systems should be to provide effective, efficient mobility to transit-dependent people.

Unfortunately, this priority has often been forgotten as transit agencies have adopted another goal: that of attracting people who can drive out of their automobiles, supposedly because transit is more “sustainable” than automotive travel. Like selling air conditioners to Eskimos and heat lamps to North Africans, the cost of achieving this goal is much higher, per transit passenger, than the cost of improving service to transit-dependent people.

Worse, the two goals are not always complementary. Conventional wisdom in the transit industry holds that transit-dependent people will ride a bus, but people who can drive will only be attracted to rail transit. Rail transit costs far more than bus service, and to pay for the rails, many transit agencies cut back on their bus services.

The real problem with transit agencies is that they face the wrong incentives. Passenger fares cover little more than a third of transit operating costs, and only a quarter of operating plus capital costs. Transit agencies thus are more beholden to federal, state, and local appropriators than to their customers. It is easier for agencies to build their empires by convincing Congress to give them “free” federal dollars for rail transit than to do the hard work of figuring out how to better meet the needs of transit riders.

This problem is compounded by perverse incentives in transit budgeting and operations. First, the federal government dedicates most of its funds to capital improvements, not operations. Transit agencies come to ignore the high capital costs of certain kinds of transit, favoring large buses over smaller ones and rail over buses.

Second, most states have granted transit agencies legal monopolies in their markets. Though private entrepreneurs could often provide better transit services, they are forbidden from doing so except for airport travelers. The lack of competition means that transit agencies can neglect transit-dependent people with impunity.

Thus, reforming transit means more than just rerouting transit lines or emphasizing buses or other low-cost transit instead of rails. True reforms would introduce competition into transit markets. One way of doing so would be to give subsidies, in the form of vouchers, to transit riders instead of transit agencies. Riders could spend their vouchers with any transit provider, and the providers would turn the vouchers in for cash.