The Case for Privatizing Transit

November 17, 2010

A new policy analysis from Randal O’Toole eviscerates the “one industry [that] has unquestionably been socialistic for decades: urban transit.”  

Prior to 1964, transit in the United States was largely private and profitable. Yet within a decade following the passage of the 1964 Urban Mass Transit Act, which gave federal subsidies to public agencies to operate transit, almost all transit systems were government operated. The government took over transit in America, and today most transit systems are dependent on subsidies, mired in debt, and plagued by deteriorating infrastructure.  

From the paper: 
America’s experiment with government ownership of urban transit systems has proven to be a disaster. Since Congress began giving states and cities incentives to take over private transit systems in 1964, worker productivity—the number of transit riders carried per worker—has declined by more than 50 percent; the amount of energy required to carry one bus rider one mile has increased by more than 75 percent; the inflation-adjusted cost per transit trip has nearly tripled, even as fares per trip slightly declined; and, despite hundreds of billions of dollars of subsidies, the number of transit trips per urban resident declined from more than 60 trips per year in 1964 to 45 in 2008. 
O’Toole argues that instead of wasting more taxpayer dollars on subsidies – as politicians, unions, and other special-interests continually agitate for – the solution is to return transit to the private sector.
O’Toole offers the following as reasons to privatize transit:
  • Public transit managers have an incentive to maximize their budgets rather than ensuring revenues cover costs. The result has been declining transit productivity. 
  • When the economy is sound and tax revenues are strong, politicians expand operations that aren’t financially sustainable in the long-run. During an economic downturn, a government-run operation cannot adjust as nimbly as a private business. 
  • Public agencies focus on the short-term. As a result, they run up unsustainable debts and make unaffordable benefits promises to employees. 
  • Politicians like to fund expensive and highly-visible capital projects, but shirk when it comes to the less politically appealing task of maintenance. 
  • “The failure to innovate and the tendency to turn to social engineering when people will not behave the way planners want are inconsistent with the values of a free society.” 
See this Cato essay for more on urban transit subsidies.




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