Austerity and State Support for Transit

The debt ceiling deal between the administration and Senate Democrats on one side and House Republicans on the other includes significant discretionary spending cuts, though not as much as the Tea Party had hoped for. It is not clear yet which programs will be cut, but since all discretionary spending is fungible, money for transportation is going to become much tighter.

In a climate of austerity, and one in which transportation is not considered as untouchable as Social Security, transit agencies must find alternative sources of funding. Multiple transit blogs have proposed state and local government support instead, including The Transport Politic and Portland Transport; on the Infrastructurist, commenter Progressive Capitalist suggested the same with respect to the gas tax, which is about to lapse independently of the debt ceiling.

Let me pour some cold water on this idea: in a climate of austerity, states will lose federal support, and need to cut spending or raise taxes, of which the former is more likely. The AP wire documents some instances of state budget gaps that will get worse under the new austerity program; even in Connecticut, one of the biggest per capita tax donor states, 16% of non-transportation funding comes from the government. In other states, which are poorer and sometimes net tax recipients, the problem is much larger. Although the drying of federal aid may well skip transportation, states will still be under pressure to cut everything. Money is fungible like that.

Simultaneously, the New York Times published an article documenting Rhode Island’s transit service cuts, in its attempt to plug its own budget hole. Although the article’s tone is very politically pro-transit, noting that it’s critical for small business, and spends much time uncritically quoting job numbers from APTA as well as Brookings’ shoddy transit accessibility study, one can glean the political priorities in Rhode Island from it. I’ll come later to the technical side of Rhode Island’s service cuts, but for now note that there seems to be no political will to raise taxes to keep buses running, although the state is very liberal.

At the above-linked Portland Transport post, Engineer Scotty went further and said that austerity would actually change transportation priorities, perhaps even making transit better off in the long run by making people less able to afford cars. He says the following consequences are likely:

  • A lower standard of living overall.
  • Higher prices for fuel, especially petroleum products. Most of the oil we use is imported; and a devalued dollar would make oil more expensive. A reduction in US military presence could affect the stability of oil shipments, and the continued rise of emerging economies such as China, who will have their own increasing needs for oil, will further increase prices.
  • Fewer funds for capital projects. In an austerity-focused economy, there would be less money available for infrastructure projects–or for anything other than debt service, for that matter.
  • More migration to urban areas.
  • Wage adjustments in the public sector. This section is above and beyond any reductions in wages to affect the broader economy.
  • More people unable to afford cars. The combination of increased fuel costs and decreased overall disposable income will likely increase the number of households unable to afford an automobile, or cause wealthier households to cut back, perhaps to a single family car rather than one per driver.

As a result, he suggests, there will be more local and private-sector involvement in transit, regulations will be relaxed in order to reduce costs, investment in highways and rail will decline in favor of on-street BRT (of the kind that only requires paint), and an end to the transit stigma.

My analysis is a good deal more pessimistic. States do not have money for transit operating subsidies, or even for the in-house expertise required to reduce the amount of subsidy required without enormous fights with the unions. Declining gas tax revenues mean less money for transit rather than more; although the marginal rider who switches from driving to riding the bus produces a net increase in revenue to the agency, other drivers who respond to lower incomes by traveling less produce a much larger net decrease in revenue. Furthermore, the stigma that only poor people ride the bus is not going to change merely because more people are poor.

On the contrary, the situation is going to force even more federal involvement in transportation, assuming that all else is equal, i.e. that the bipartisan austerity plan to be released at the end of this year does not specifically target transportation funding. The states are genuinely cash-strapped. Their revenues come from income taxes and from sales taxes that exclude basic necessities, of which the former are quite cyclical and the latter extremely so. They can only issue bonds for so long before they get their credit rating downgraded.

In contrast, the federal government can borrow at a negative real interest rate, and is embarking on an austerity plan for purely political reasons. I fully expect states to start begging for more federal help a year or two from now. This will be especially egregious if after the 2012 election one party takes control of the White House and both houses of Congress, in which cases all promises of austerity will be a distant memory. But even if austerity persists, a few self-serving reports by the construction industry saying that infrastructure requires even more trillions than previously thought are all it takes. At the end, the federal transportation bill may well stay the same size, while state transportation funds are certain to shrink.

33 comments

  1. EngineerScotty

    To clarify a few things…

    * I don’t believe that austerity is desirable, at least as far as the US is concerned, just that it’s likely coming. It should strike one as amazing and outrageous that wealthy sovereign states permit themselves themselves to be treated by the financial markets the way loan sharks treat delinquent junkies–at least until one realizes who controls the levers of power in said sovereign states. Of course, we the people collectively put these clowns into office.
    * Likewise–and just to be clear–I don’t consider a poverty-driven increase in transit mode share to be a positive outcome. There are some on the internationalist left who occasionally make the argument that the US standard of living is too high and that an American decline would be a good thing for the world–that argument makes me cringe whenever I hear it, and I am not making that argument.

    Certainly, in an austerity environment where there is a significant abandonment of the automobile, there will be an increased demand for transit–but as you note, the political environment may not be able to supply it. To put it another way–there may be an increase in transit’s patronage without an increase in its quality.

    Longer term, how the US polity will respond to an extended period of time is uncertain. Even the outcome of the 2012 election is pretty uncertain right now–I could see things going in any direction, including a scenario where the Democrats retake the House of Representatives but Obama loses his re-election bid.

    • Alon Levy

      Well, there’s going to be an increase in transit demand, but it’s not the same as an increase in patronage. It depends on whether it’s possible to construct service cuts that rationalize rather than reduce service. In 2009, it was clearly possible; I don’t know if it’s possible today.

      • EngineerScotty

        Ideally, an increase in demand will produce an increase in farebox recovery, allowing more service with the same subsidy–a death spiral in reverse. Usually death spirals are hard to reverse, as riders switch to other modes that require a larger up-front commitment (such as buying a car, even if a clunker)–and then see no reason to switch back.

  2. betamagellan

    I think you overestimate the clout of outside actors pushing for more infrastructure spending–between pressure to increase the size of the transportation bill (from reps wanting projects and likely industry groups) and political pressure to keep spending down, Mica’s been more responsive to political pressure. And by the standards of the current Republican congress he’s pretty moderate, so I doubt that a more-Republican government would clamor for more investment in transportation (austerity would certainly be abandoned, but for the sake of tax expenditures, not discretionary spending).

    To be fair, I’m not sure what the Dems would do, either–they might want a return to 2008-09, or they might feel like they have to continue with austerity (albeit with more progressive taxation and closure of tax loopholes) and mightn’t be inclined to do much either.

  3. Zmapper

    Alon Levy, have you heard much about Ron Paul? How would the possible election of him as president affect US transportation policy?

    Thinking out loud here…

    -The FRA would be eliminated. Good thing.
    -Buy America would be gone. Good thing.
    -Energy subsidies would end for all companies. Potentially a good thing.
    -Wars over oil ended. Very Good thing.
    -Greater focus on local governments for funding on infrastructure. Mixed bag.
    -End of federal “complete streets” policy. States would choose whether to build bike/ped infrastructure or not. Bad thing for urbanists.

    Would the states have the oversight to see past the border lines and think about how it affects the entire country, not just their state? That is the biggest challenge with a states rights position. Nebraska would have never had the money to build I-80 through their state by themselves. Yet you can travel cross country on the interstate system and know exactly what to expect as far as road conditions because of federal oversight.

    Then again, Kansas, Pennsylvania, and other states built interstate quality turnpikes before the Interstate program was created, so a states rights position might have worked itself out.

    States cannot just print money out of thin air like the Fed has been doing. That is the most important thing with regards to having the states carry out most of the governmental programs.

  4. Alon Levy

    I sincerely doubt any austerity will continue under Republican rule, even with respect to spending. Remember, Bachmann said that earmarks for roads and bridges aren’t really earmarks because they’re useful infrastructure. So far nothing’s been able to move the 75:25-80:20 lobbyist formula for road:transit spending, which suggests to me that continued Republican rule would torpedo high-profile symbolic projects but not general transit spending. Overall the direction would most likely be toward less useful projects – BRT rather than rail, lines in the Sunbelt rather than in the Northeast and California, Amtrak expansions rather than anything that could be called high-speed rail – but transit spending is unlikely to go down.

    Ron Paul has his own consistent, and idiosyncratic, ideas, but I don’t really see him win either the nomination or the general election. But if he gets anywhere, I believe the main effect will be to move the libertarian power dynamics away from Reason, which his supporters call the Kochtopus, and toward more radical organizations such as the von Mises Institute and LewRockwell.com.

    • EngineerScotty

      The problem with Paul for many is that he has a lot of unfortunate baggage (such as associations with racists) which make him difficult to swallow for anyone leaning left–I do think that it might be possible for a Glenn Greenwald-esque libertarian to divert significant amounts of liberal support from Obama, while still capturing economic conservatives. Social conservatives and the pro-labor left would object, of course.

      However, there’s no home for a Greenwald, really, in either major party. And neither Ron Paul, nor his son, would fit that bill.

    • Andre Lot

      I think a predictable effect would be for states to streamline the use of gas tax money for direct road investment. That is usually a winning argument among fiscal-conscious representatives, and, if one adheres to principle of user-payer, a valid one to a certain point: roughly 25% of highway trust fund and its state match funds are used for purposes other than highway maintenance.

      • Alon Levy

        I think it’s unlikely that states will divert gas tax money away from other uses. The reason is the same institutional inertia that prevents states from raising tolls and gas taxes to the point that receipts match road spending: in both cases, there’s a large, vocal constituency of both voters and agency heads who are used to the status quo and will raise hell if it’s changed. APTA thinks it’s entitled to gas tax money just as much as the road lobbies, and in fact they’ve teamed to defeat carbon taxes and preserve the status quo. Since to a first-order approximation all transportation in the US is subsidized, everyone lives in a glass house and doesn’t want to throw the first stone.

    • betamagellan

      Alon, that’s the prediction I would have made after the Republicans were elected (about them keeping funding the same but focusing on sunbelt cities and BRT), but now I’m not so sure. In Wisconsin, Walker’s initial transportation budget not only hit mass transit hard, infuriating local chambers of commerce, but it also hurt things like rural road repair, infuriating the logging industry. I’m not sure exactly how things eventually shook out (I’ve heard the transit funding situation became somewhat less dire, so I’d guess rural roads did too), but the fact that something as bad as the original bill, something which hurt solidly Republican districts, had a serious chance of passing means that the Republicans are definitely much more serious about cutting spending than I’d anticipated.

      Of course Walker now has a sub-par approval rating, and the Tea Party’s frustrated a lot of establishmentarian Republicans, but I wouldn’t rule out the continuation of austerity under Republicans. If the Tea Party remains influential through 2012-13, I’d expect them to push through a similar agenda regardless of its popularity with interests groups and the public.

      • Alon Levy

        The Republicans’ behavior this year was dominated by the desire to make Obama a one-term President, in their own words. All other concerns are secondary. As a result, spite spending cuts are more likely – they help the stimulus fail. Once they are in full power, the Republicans behave differently: the Gingrich Congress in the 1990s shut down the government in order to cut Medicare spending, while the Bush-DeLay administration did not cut domestic spending.

      • betamagellan

        Although I think there’s an element of spite in the recent crop of cuts, slashing domestic discretionary spending is one of the major goals of the conservative movement and thus the Republican Party. Bush-era conservatism (“compassionate conservatism”) arose in reaction to the follies of the Republican congress under Clinton. Although I’m not involved in conservative politics, I get the impression that most Republicans view their current policies as being politically successful at the moment, even if gubernatorial and congressional approval ratings don’t reflect this. Barring some major shift in political discourse I’d expect them to continue along with austerity–I don’t see any conservative-leaning but activist initiatives like NCLB or Medicare Part D (or sunbelt rail or lip service to privately-funded HSR) getting mainstream Republican support anytime soon.

      • Nathanael

        It’s not “cutting spending” they’re serious about; it’s looting the government and handing their proceeds to their buddies. Turns out the logging industry in Wisconsin wasn’t one of Scott Walker’s buddies. Quelle Surprise, as Yves Smith says; I suppose the Koch Brothers’s Georgia Pacific logging is located in other states.

  5. Joseph E

    Andre, 25% of gas tax money may go to “other uses”, but 50% of gas tax money comes from local roads and streets which were NOT built or maintained with gas tax money. And the tax on gas in many states substitutes for sales tax which would otherwise go to the general fund, so it isn’t really a user tax. If you look beyond road construction costs and consider the amount of money lost by free street parking, parking mandates (in zoning laws), military expenditures to defend oil supplies and many other costs, the gas tax is only a small fraction of the cost of car-related infrastructure.

    • Andre Lot

      In regard of sales taxes on fuels, I agree that there is a problem with certain states that, not only in regard of taxes, can only be solved in a sensible way with comprehensive tax reform that turns sales taxes US-wide into value-added taxes, to reduce certain discrepancies on the sales tax system (for instance: were sales taxes charged on gas, commercial fleets, taxis, trucking companies and other business could be exempt of paying sales tax on fuel because they use it as an input on their core business). This is the reason by which some states adopt an unusual high gas tax instead of charging sales tax on fuel.

      Now on free parking and parking mandates, I have an understanding that they are just part of the numerous zoning provisions that restrict land use. One could argue that all zoning laws not allowing 10ft-wide streets and unlimited height buildings is “wasting” space. Free street parking, though, is not the best way to manage capacity. I’d rather have comprehensive network of block-paring garages, that would be dynamically priced on a free market basis, to accommodate parking. In any street that is minimally busy and has parallel or angled parking, the disruption on traffic caused by drivers searching a parking space is enormous, but I think that is subject for another post comment.

      Finally, I don’t buy the “cost of protecting oil supplies” argument. Countries go on war for a variety of reason. There is no empirical way to prove that reduced oil consumption would result in less conflicts in oil-producing areas, and there is also the whole free-load discussion (that Europe and many other regions take a free ride on US military efforts to keep the Middle East in check). But that is also going beyond the scope of this post.

      =============================

      What is important, I think, is the critique that Alon presented on Engineer Scotty’s argument. As we’ve witnessed in 2008, the factors that push transit ridership (skyrocketing fuel prices, higher unemployment) also push, simultaneously, drastic revenue decreases on local tax bases (sales tax and property tax, essentially) that support transit subsidies.

      It is an interesting and seldom explored compared analysis, indeed: US has much lower, but far more volatile, gas prices than Europe, as gas taxes are far higher in Europe, but they are mostly fixed as eurocents per liter, meaning an increase in oil prices has a lower % impact on retail prices in Europe than US, which makes adjustments on family budgets smoother. At the same time, labor, material and capital costs for transit are not that different, which means transit in US cannot have higher farebox recovery rates operating networks like Europe as higher fares will divert riders for cars. At the same time, gas price shocks exert a larger impact on American public on the short-term than in Europe, which means it boosts short-term ridership (from a low base) much more strongly than in Europe.

      However, just as transit is on high demand (and operating with lower farebox recovery rates), the tax base that supports subsidies wanes, forcing cuts. This leads me to think that transit authorities should have some sort of flexible pricing that allows them to rapidly increase fares when gas prices increases, because in such scenarios (gas going from $2 to $5, for instance), much higher fares would still be competitive with driving and that could offset part of the budget crunch on state and local agencies. This would certainly hurt the poorest among the poor using transit, but it is impossible to cater to anyone in such situation.

      • betamagellan

        Although it’s only a tiny piece of your comment, I’d like to note that I think urbanists tend to understimate the worth of street parking—in the US, where for the most part we don’t have the advantage of tiny European cobbled roads to slow motorists down, they often serve as an effective buffer between pedestrians and traffic. As someone who’s mainly lived in the denser parts of northeastern American cities, I’ve walked on a lot of streets with parking and streets where all parking was on structures, and almost always the thoroughfare with on-street parking had a better walking environment.

        • Alai

          You can still have street parking with market rates (although it might be less politically easy). The streets are built, now, anyway, so it’s unlikely that we’ll do away with street parking except in a few limited cases where you’d want to put bike or bus lanes.

  6. Joseph E

    Suggesting that the gas tax should only be used to build and maintain more roads is the same as suggesting that the tax on liquor should only be used to build more bars, liquor stores and distilleries.

    • Andre Lot

      Not a proper comparison, in my opinion. Extremely high taxes on alcohol and tobacco aims to reduce its consumption. There is no public program of maintaining distilleries or smoking clubs.

      I know some people have the same view on cars: something essentially bad whose use has to be “fought against”. I, and probably the majority of voters, don’t think that way.

      There are numerous issues regarding car-mobility to be addressed, but assuming that it should be only a “residual” form of transportation on urban areas is a non-started.

      Thus, taxes on gas should be used primarily on road infrastructure as taxes and fees on airplanes and airports should be used primarily on runways and terminals, and so on. In the fiscal climate we currently live, chances of tying funding with expenses is probably the only sensible way to increase infrastructure investment. Gas tax is not meant to discourage driving, at least in US.

      • Joseph E

        I like to drink alcohol, but I realize that alcohol has many deleterious effects on society (both thru alcoholism and crime among the hard-core abusers, but also due to poor judgement and waste caused by ordinary people when under the influence), so it should be taxed heavily to discourage abuse and to help pay for the bad effects (“negative externalities”). In the same way, we can all like cars, and like driving, while realizing that when everyone drives everywhere, it wastes too much land, makes walking impossible, damages the natural environment as well as the built environment, etc.

        Gas taxes should be used to discourage excessive driving and excessive petroleum use (which has additional problems, such as climate change, resource conflicts, local environmental impacts, oil spills, etc). That’s what almost every other developed country is going, with the exception of the USA. Our low gas taxes (and low parking costs and registration costs), combined with the use of gas taxes to subsidize more road construction, are bad policy, no matter if you like driving or not.

        The Germans love their cars and build excellent autobahns, but they also realize that cars make life miserable in cities when they are used for every trip. They keep driving in the countryside pleasant, like it should be, and make access to cities possible, but try to keep walking and transit as good options in cities.

      • betamagellan

        Andre, your reasoning strikes me a bit strange because you’re dividing taxpayers by mode, not location. In practice, having gas/road/motorist taxes go exclusively to roads still typically means the taxes you pay go to someone else. In Illinois, gas taxes in collected in Chicago end up subsidizing highways for cities of 80-100,000 people downstate.

        Compare this to a taxation regime with less spatial but more intermodal distribution. You’d have more money available to, for example, fund the Red Line and Union Pacific-North rebuilding projects plus improve express bus service, all of which take pressure off of Lake Shore Drive. So, even if revenues aren’t not spent on roads, urban motorists still benefit.

      • Wad

        @Andre, you say mode-based taxes (gas for highways and ticket taxes for planes) must go back to perpetuate use to be necessary and proper.

        There is still one major problem to be solved: What to do about all that money.

        The virtuous cycle of increased users -> increased taxes -> increased capacity -> increased users creates a feedback loop that turns against you.

        Adding increased capacity requires a large capital cushion. In order to justify a capital expansion, the project will add far more capacity than linear or exponential demand. This goes for a highway, airport, light rail, even a building expansion.

        The most cost-effective capital expansions are always new projects that start from zero. Every incremental addition to capacity, on the margin, will yield a higher cost and lower benefit by definition. (Sorry, there’s no Moore’s Law for infrastructure.)

        Think about this. Say you have a highway with 4 lanes in each direction. It becomes popular and therefore congested. How do you increase capacity to decongest the highway? You add lanes. But how?

        Most often, you would have to add a lane at a time. It’s cheaper and quicker than building an entirely new highway of identical capacity as a pressure valve. But, one lane addition to a 4-lane highway results in 25% added capacity, but at a lane-mile cost that’s higher than when the original highway was constructed anew. There’s also the added costs of complexity, such as redoing ramps, over- and underpasses and rights of way.

        If the 5-lane highway gets congested again, the natural impulse would be to add yet another lane. You’d have the costs of complexity again of redoing the freeway, but for only 20% of the benefit (6-5 = 1 and 1/5 = 20%).

        If the choice is to distribute highways across a region, where 4-lane highways are everywhere, you’ll eventually bloat your highway system beyond reasonable demand and the costs of maintenance will rise beyond demand’s ability to pay for it.

        If your choice is to do nothing, then you are just sitting on a pile of money that will either be skimmed off to non-related uses — almost certain with interest-based politics of the U.S. Alternatively, the populist approach would be to give drivers tax relief. Jevons paradox, however, says that tax relief will only encourage more driving, which will only stress the system more and not leave money to pay for its relief.

        Note that I didn’t suggest recommending putting money into alternatives. These are just the consequences of path dependence.

  7. Joseph E

    “In the fiscal climate we currently live, chances of tying funding with expenses is probably the only sensible way to increase infrastructure investment.”

    Tolls, congestion reduction fees, and vehicle miles traveled fees are all excellent ways of funding road infrastructure based on user fees. Gasoline taxes are a terrible way to do it. Why should someone driving a Prius or a Leaf to work pay a fraction of the gas tax (for infrastructure) as a plumber driving a big work van, when they use the same amount of road space?

    • EngineerScotty

      The state of Oregon is actually considering (and its likely to pass) a vehicle-miles tax, levied on hybrids and electric cars, to make up for the gas tax they don’t pay. (Under this scheme, hybrids are entitled to a refund of gas taxes–whether they are exempt at the pump or have to file for a refund, I’m not sure).

      • Andre Lot

        What about privacy concerns of people not wanting cars to have GPS-tracking, even in a “black box blind to location”? Not saying I subscribe to that camp of concern citizens (carrying a mobile or Wi-Fi gadget ‘harms’ one privacy more anyway), but if I remember correctly, there is a huge concern about “Big Brother government tracking citizens in their cars”.

      • Wad

        @Andre, privacy is a concern of people who are afraid of the complexity of the system. Namely, the state can and will use the data against you in a court of law. Technology, however, has not overturned or made obsolete centuries of case law. GPS data must still abide by due process and the prosecution’s duty is still to prove guilt.

        There are other primitive ways to obtain the same data if GPS sounds overwhelming, but they won’t like the bureaucracy involved. You could gather the same usage data through your car’s odometer, but this will end up deputizing anyone from traffic enforcement officers to mechanics to insurance agents to even auto parts clerks to peek at your mileage. You could also gather the same data through a hubodometer — a mechanical tracker imbedded into the middle of a wheel.

      • Nathanael

        Wad, it’s not the courts we’re worried about when it comes to privacy, it’s *Rupert Murdoch* and his like. Have you been following the news? You should.

      • Wad

        @Natanael, as a journalist I can safely say that I follow the news.

        The case of the News of the World phone-hacking scandal involved the News Corp., which at this point might not have involved any directive to hack phones from Rupert Murdoch himself. It was the corporation involved, and only through further investigation will it be revealed how high up the flow chart the knowledge and/or actions came.

        Also, the fallout of News of the World has involved: Closure of the newspaper itself, which was not done because it was a moribund asset — the scandal did it in; Scuttling of a purchase of BSkyB network; Resignations and possible criminal charges against editors and News Corp. executives; as well as strengthening of privacy laws and/or stronger recriminations against future similar cases.

        Rupert Murdoch and his empire are getting their just deserts.

        With this recap, don’t you consider yourself looking like an ass? You should.

    • Andre Lot

      Well, a work van is much dirtier at the exhaust pipe than the Prius, but that is an issue about regulation more than anything else. American cities, all of them, that didn’t experienced explosive population growth since the 70s have much better air quality now than back in the age of carburetors. A hypothetical instant conversion of all US personal car fleet to an European profile of smaller and more efficient cars relying on clean diesel more than gas could easily slash both fuel consumption and pollutant emissions by 40% or more.

      Leaving the point-of-use pollution issue aside, I think tolls are more intelligent approaches to fund road infrastructure.The political and practical problem is that is should be coupled with a scrap of the specificity element of gas taxes.

      Tolls could have, on a system level, higher fares on peak times that would be offset by lower fares off-peak, plus some form or marginal cost for wear and tear caused (which would an exponentially priced weighed-based toll add-on). The tricky part is to define what is a “system”? In other words? How far is fair to spend dollars collected at a specific mile-long sector? After all, it is pointless to have a 6-lane freeway funneling into a local 1+1 road just because there is not enough toll income on and to pay for a 4-mile segment that lies in another county – for instance.

      Congestion charges schemes brings other issues. They tend to give residents of the “congested” area an unfair and biased advantage in relate to other drivers from elsewhere, even if the space cars occupy in a lane is the same. London and Stockholm schemes are meant to keep people from coming into downtown with cars, giving free movement there to those who live there. If a congestion charge discriminates on base of origin of traffic, then I”m opposed to it (for the same reason I’m opposed to the concept of residential parking districts).

    • Nathanael

      Yeah. But gas taxes are for disincentivizing the use of petroleum for burning. Which is a good cause. Replace the gas tax with a carbon tax and fund roads some other way.

  8. R. W. Rynerson

    Oregon was the state that launched the gasoline tax, including structuring it to suck money out of urban areas and spend it in rural areas. That was based on the argument that most driving was by well-off hobbyists who churned up country roads. It is not surprising that having started earlier, it also might go to new methods of funding, having seen the problems sooner. (It also finished its core Interstate system sooner than most, so it’s also not surprising that it is one of the smaller population states to have launched an intercity rail/bus program as a form of reparations for what that did to intercity public transportation.)

    Having worked in places where local or state/provincial funding was used, and comparing it to federally-funded projects, I’ve observed that there are pluses and minuses to both approaches. The reason that Light Rail started in Canada and then in San Diego is that local money was available in their respective systems and national governments were not able to force conformity (i.e., highways at that time for mid-sized cities). At Oregon DOT, on the other hand, when the decision was made to maximize receipt of federal highway funds, we built a $2 million IMPROVEMENT in an I-5 rest area near the California border, while cutting fund for snow-plowing and highway maintenance. The rest area was eligible for 92% federal funding, whereas maintenance was not.

    When the U.S. federal government phased out operating assistance for big transit systems, it did not phase out mandates, such as how the formula for setting senior, disabled, child, Medicaid, etc. fares works. This sets the real pattern as to what will happen with funding cuts at the national level: not a Rand Paul dream or a return to the days of private transit companies making a profit (which I’m old enough to have experienced), but continuation of all of the mandated expenses associated with federal funding, while a trickle of funding continues.

    One of the difficulties in managing the new austerity for those who realize that with bi-partisan efforts the U.S. intends to become a Second or Third World country, is that almost no one below the age of 60 even remembers how to run public transportation programs without federal assistance and mandates. No one younger than my 88-year old father can even remember how to run a U.S. highway program without federal assistance and mandates (we’ll have to hire Canadians). No one who is alive remembers how to run a waterways program without federal funding. As a consequence, some of the people who must deal with this are like General Halftrack, waiting by the phone for a call from Washington to tell them what to do.

    As the funding shrinks, this risks a lot of wasted time lobbying and hand-wringing, as well as risking voodoo-planning, the situation referred to indirectly in earlier posts, a scenario in which cuts are made by blindly swinging an axe, with the promise that some overly simplistic cutback will solve the problem.

    If we continue on the present approach, just cutting and cutting without restructuring or deleting programs or cabinet-level agencies, it will take a generation before things level off and leaders who can figure out what to do without a credible national government emerge from the rubble that we will have created.

    • Nathanael

      Good analysis. But a generation? I think it’s not going to work that way; I think there’s going to be a concentration of the new leaders. I expect that the most forward-thinking cities among those which have more freedom to levy their own taxes will get those leaders far quicker than a generation — as will the more forward-thinking of the smaller states (Vermont is what I’m thinking of here). The laggards won’t figure it out for three generations, if that.

      • Nathanael

        Note that fully-locally-funded transit construction projects have happened in Portland, Oregon and are scheduled in Denver, CO, for examples; I can probably think of others. The rich-suburb-of-a-small-town which I grew up in rejects state and federal road funding so that it can ignore state and federal guidelines on road width (it keeps its roads narrow). It’s not as hard to “cut the cord” as you might think. Operating practices will be harder, but some places will figure it out quick, others slow.

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