Transportation at the Speed of Government

Transportation at the Speed of Government

June 6, 2016

Stories on mass transit have appeared in the media lately that at first glance are not connected but when taken together illustrate important differences in how government and the private sector approach economic development.  All politicians like to have their names attached to so-called public works programs and transportation is especially susceptible.  It is an opportunity to stand before working men and women, cut a ribbon, and give the appearance of doing a public good in front of media cameras.

But what is good for the political class is not necessarily good for the tax-paying public.  The examples of waste are numerous but more recent ones include the troubles with the DC metro system, a DC Streetcar program, and the California high speed rail project.

As residents of the DC metropolitan area know, the metro system is an inefficient unreliable mess.  Conceived in the 60s and launched in March of 1976, it was hailed as a shining example of what mass transit could be.  A recent Washington Post story described it thus:

“America’s subway,” which opened in 1976 to great acclaim — promoted as a marvel of modern transit technology and design — has been reduced to an embarrassment, scorned and ridiculed from station platforms to the halls of Congress. Balky and unreliable on its best days, and hazardous, even deadly, on its worst, Metrorail is in crisis, losing riders and revenue and exhausting public confidence.

Metro was, according to the Washington Post, “heralded as a marvelous creation that would usher the capital area into the future, advancing the region economically and socially” but is now is in a crisis of failing performance and serious safety concerns.  What is the reason for the breakdown in the now 40-year-old system?

The politicians who held the purse strings seemed happy to invest in laying new tracks and opening new stations, where they could tout development at opening ceremonies. But they cared less about spending for maintenance to prevent breakdowns years later, when they might no longer be in office.

Why isn’t there enough money to fix the Metro?  The system has always been reliant on governments contributing funds to keep it going.  The fare box ratio for the system (the percentage of expenses covered by passenger fares) was only 62.1% in 2010.  Since that year DC metro ridership has declined 5 percent despite a growing population.  The reduced revenues means the regional governments (DC, VA, MD, and Federal) have to subsidize the system to bridge the gap.  The four governments argue about who should pay how much and everyone suffers as the system crumbles.

That the trains can’t run without constant infusions of government cash should tell us that perhaps they’re not economically viable to begin with.  And this reality brings us to the fundamental truth that things undertaken by the government, even well meaning mass transit systems, are riddled with waste and mismanagement.  This is because in the back of their minds these quasi-governmental transportation agencies know they can rely on government funds to bail them out.  There are certainly small businesses that could succeed if they only needed to make 60% of their expenses while taxpayers cover the rest, but that option is not available to them.  In the private sector if you are not efficient and reliable you go out of business.

Now Metro’s continuation, like many other projects, is justified by its existence.  It is just as Ronald Reagan once said, “a government bureau is the nearest thing to eternal life we'll ever see on this earth!”  There are jobs at stake and the system does help some people as all government programs do.  This means the tax funds will be continually poured into it as ever-larger numbers of people pay for the transportation of ever-fewer numbers of people.  No one would consider shutting it down for fear of alienating those who rely on it, even though emerging technologies might make its future obsolete.

Despite the tens of billions poured into California’s (continually delayed) high speed train or the bizarre revival of streetcars in DC which are essentially buses with limited range, poor maneuverability and a much higher price tag, the future is not government-run light rail, but where it has always been: in the hands of entrepreneurs and the private sector.

Uber has recently formed a partnership with Ford and Google to help bring self-driving cars to the market.  Unlike trains, which require huge financial investments to lay down hundreds of miles of track and build sprawling stations, the roads for self-driving cars already exist (with the already occurring maintenance costs).  A company that has already revolutionized transportation and overthrown taxi monopolies in cities across the world is about to make transportation not only on-demand, but autonomous.  In a recent USA Today story the Uber CEO hints at the profound ramifications:

CEO Travis Kalanick has made reference on a number of occasions to the fact that the driver is the most expensive part of its financial model, not to mention being the source of an ongoing fight over whether such drivers should be employees or contractors. Uber recently agreed to pay $100 million to settle a lawsuit over driver status.

"When there's no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away," Kalanick said at the Code Conference in 2014, shortly after Google unveiled its self-driving car prototype.

Commercial self-driving cars “bring the cost below the cost of ownership for everybody” while government run systems raise the cost for everybody.  If we allow these innovations to occur, the not so distant future’s transportation will be cheaper (with no driver to pay already low rates become lower), use less pollution (carpooling options mean less congestion), and will drive down medical and insurance costs as the 6.1 million current annual car crashes become a thing of the past.

Transportation is just one area where the problems we face are being solved by private industry.  Rather than shackle the innovation that companies like Uber bring or spend tens of billions of dollars on large inefficient light rail systems, government should get out of the way and allow private industry and the free market to take us on a ride into the future.

It's Time for an American Encore