It's been in the news a lot lately: public transit systems are being forced to cut service, even as they hit record ridership levels. This has come as a bit of a surprise to your Cap'n, since I know that transit can be profitable under some circumstances.
I had assumed that the subsidies were necessitated by unfair competition from subsidized private car travel, and that if ridership were high enough they could at least break even. In other words, that it was the inefficiency of operating almost-empty buses, trains and vans that necessitated such high operating subsidies.
It turns out that I was wrong, and that even at full capacity it is impossible to make a profit on many of these routes. This is why people are asking for operating subsidies to be part of the stimulus package being debated in congress.
It still rubs me the wrong way. Impossible to make a profit? You mean that if a private company set up on that route they wouldn't be able to break even, even with full buses? Then why do many buses in New Jersey make a profit even though they're not always full?
What's that I remember from Econ 101? Oh yeah, it's impossible to make a profit at that price. Those private buses in New Jersey are allowed to raise their fares, and to set them at a point where they can make a profit. So if the bus isn't breaking even with 50 people paying $1 each, maybe it would with 25 people paying $3 each. If the economy is really driving people towards transit, why not make some money off of that?
I can just hear the squawking now. You can't raise fares! Poor people have to feed their children! You'll hit them in the pocketbook! How else are they going to get to work?
So this is what's actually going on with the transit operating subsidies. They're not for keeping transit systems going - the demand is probably great enough for them to do that - but for keeping the transit fares within reach of the poor. In other words, a welfare system.
Let me say that I am sympathetic to that point of view. To me, "welfare" is not a bad word. I was once a college student without much income, and later worked at low-paying jobs with lots of student loans. I don't want to price basic transportation out of the reach of poor people.
My beef is that somebody is being less than honest here, and I think we can ill afford to do that. Transit is critical for lots of reasons, and getting large numbers of people to shift from cars to transit would bring tremendous benefits to society at large. But we can't do that if we can't afford to run the buses and trains where and when people want to go. What are we actually trying to do, and how can we accomplish that?