TANSTAAFL: A Semi-Satirical Look at a World Without Transportation Subsidies

During the 2004 campaign our Executive Director contacted the candidates running for Congress from the 5th and 8th Districts to ask about their support for passenger rail. When he reached an aide to the Republican candidate for the 5th District seat, he received the answer, "We support passenger rail only if it pays for itself." Our Executive Director works with political figures day in and day out, so he's something of a diplomat. Had I been on the phone, I would have shot back, "When did I-90 ever pay for itself?"

Hanging around conservative Republicans like I do, time and again I'm confronted by people who think the gasoline tax is a user fee. And time and again I have to explain to them that highways are built and maintained by gasoline taxes, other transportation taxes and money drawn from the general fund. This is true not only in Washington state, but in all fifty states. "Well," they grumble, "that's only because they're spending our gas tax money on those worthless public schools and those welfare queens and their Cadillacs." That's when I have to explain the 18th Amendment to the Washington State Constitution which restricts gas taxes to highways and car ferries. If a state doesn't have a constitutional restriction requiring gas tax money to be spent on roads, then it probably has a statutory restriction. All of this is the legacy of the Better Roads Movement, an effort that began right after World War I and was funded by car manufacturers and the oil lobby. Brutally put, the gasoline tax is a tax on a commodity, not a user fee.

I hear the usual grumpiness about buses that are not stuffed to the gills and complaints that riders of public transportation don't pay their fair share of costs. That's true. But then neither do drivers.

Our highways have been subsidized since the Madison Administration. One of the five explicit powers granted to the federal government by the Constitution is to establish post offices and post roads. A post road is a road that could be used to deliver mail, not necessarily one that is used to deliver mail. The burning question of the 1820's was whether internal improvements, such as canals and roads, would be financed by the private or public sector. The National Republicans, who later merged into the Whigs, took one side, and the Democrats took the other.

The Constitution also gives Congress the power to regulate interstate commerce, and that explicit power was quickly connected to internal improvements. Andrew Jackson vetoed an appropriation for a road that would have both begun and ended in Kentucky, stating that the road did not cross a state line and was thus unconstitutional for the expenditure of federal dollars. The fact that Kentucky was the political base of Henry Clay, one of Jackson's many archenemies, of course had nothing to do with it.

Canals were subsidized, and even rail started out on the dole. The state of Pennsylvania decided to build a rail line to link the state together and pierce the Alleghenies, a project known as the Main Line of Public Works. After spending a lot of money and getting very little for it, the state sold the project to a group of private financiers in Philadelphia, who created the Pennsylvania Railroad, the standard gauge railroad of the world.

During the Civil War, Lincoln gave away vast tracts of the West, both to homesteaders and to railroads. The idea was for the railroads to sell the grant lands and use the capital to build rail lines extending across America. Nobody attempted to tell Lincoln that the West's population density was so sparse that it could not support passenger rail. Rather, the purpose of rail was create population density in the first place.

For the sake of argument, let's say I'm a hard-nosed cost accountant armed with my mighty Excel spreadsheet and my manual of generally accepted accounting practices (GAAP). Let's say I'm the sworn enemy of all subsidies and want to set up a paradigm where every form of transportation pays for itself. Whenever I see a subsidy, I call out, "TANSTAAFL!" This is an acronym for, "There ain't no such thing as a free lunch." While it doesn't sound very good in English, it sounds elegant in Italian: "E finita la cucagna!"

As a hard-nosed cost accountant, I look at our highway system and my brows furrow. Highways have no direct charged costs, so people use them at all hours. Sometimes everybody and his brother wants to use the highways at the same time, a situation that occurs twice a day and is known as "rush hour". I see that and yell "TANSTAAFL!"

There is a way you can get around this, and we call it tolling. I grew up in New Jersey, and every time I wanted to cross the Delaware River, I paid a toll to the port authority that owned all the highway bridges in the region. Even after the bridges had been paid off, tolls were charged because the federal legislation that created the Delaware River Port Authority authorized it to exist in perpetuity, and those tolls were leveraged 10-to-1 for revenue bonds to support other port authority projects. Prior to the interstates, most superhighways in the East were toll roads, and even today highways such the New Jersey and Pennsylvania Turnpikes still exist and charge tolls for the advantages they confer to the motorists using them.

But to paraphrase the governor of California, "Tolls are for girlie-men. Real men use transponders."

The earliest transponders weren't much more than intelligent circuits, and the best known was the E-Z Pass from New Jersey. It started as a means of charging your trip across a bridge and paying for it with a monthly statement, rather than dropping bills or coins into the hand of a toll-taker. It was picked up by the New Jersey Turnpike, Garden State Parkway and the Atlantic City Toll Road. Then the port authority at New York picked it up, and now the toll roads of Pennsylvania, Ohio and Indiana use it.

Similar transponders are used in California for motorists who wish to use the toll roads that bypass suburban choke points in Orange County or the HOT lanes in the Riverside Freeway.

Oregon is proposing to put more sophisticated transponders in cars so that the mileage costs of using the roads are charged at the gas pump as a surcharge to the cost of gasoline in lieu of the gasoline tax. But Oregon is proposing a flat rate for each mile, ignoring the fact that different roads are owned by different levels of government. Oregon also ignores the time of day the road is traveled. My cost accountant looks askance at this kind of intellectual and financial sloppiness.

For the purpose of our exercise, I'm going to suggest a genuinely intelligent transponder. It clocks where and when you drive and passes that information back to a central computer every time you pass one of our antennas. Once a month you get a statement of your driving record, and we bill your credit card. An average commuter can expect a bill for approximately $350 per month. Let's toss out $50 for taking the kids to soccer and eating out and call our commute bill $300 per month. With two trips a day, five days a week, four weeks a month, that comes out to $7.50 per one-way trip.

When you get that monthly bill, you notice that streets controlled by localities, counties and the state all have different rates. A limited-access highway like I-5 has its own premium rate. (We'll never call these highways "freeways" again.) But we also have surcharges.

"C" is for congestion. If people insist on using the same highway at the same time, we charge a special rate, known as "congestion pricing." But we'll have a service level agreement with the motoring public to the effect that if people can't drive within ten miles per hour of the speed limit, we'll refund some money. If the highway is a mess due to an accident, we'll eat the cost and let the motoring public drive free for that trip.

"I" is for improvement. If we fix up a road by widening it or re-paving it, it wouldn't be right to spread those costs across other highways. We'll impose an improvement surcharge until the improvement is paid off.

"S" is for speeding. The transponder know only knows where and when you are, but how fast you are. No longer will we need state patrolmen with unmarked cars or radar guns. Instead, we'll fine you directly on your monthly bill. We'll have connections with the computers of the large insurance companies, so if you're going fast enough, you'll get your bill for increased insurance premiums even before you get our monthly charges. No longer will people have to worry about SOV drivers using the HOV lanes and having to call a number to report violators. The transponder takes care of all that.

There are some interesting bits of social fallout from transponder technology. With a transponder in every car, everybody now has a Lo-Jack, so crimes such as auto theft and car-jacking disappear. When investigating a crime scene such as a bank robbery, police only need to play back the tapes to find those cars present at the time at the scene of a crime. This simplifies police work.

For the War on Terror, if somebody's car lingers too long near a nuclear power plant and the name on the transponder is Middle Eastern, it's a simple matter to alert Homeland Security and call in the SWAT team. For purposes of national security, a transponder may be justifiable even if it has nothing to do with charging highway costs. It's been said that if people want security, they must be prepared to give up liberty, and technology like this can deliver on that axiom.

Of course there are also unintended consequences. If a man tells his wife that he is staying late at work but goes down to the strip club with his buddies for a couple of drinks and a lap dance, that secret is out.

Having decided that costs and other social consequences argue against commuting by car, I trudge half a mile to the Aurora Village Transit Center to take that $2 two-zone King County Metro bus ride to downtown Seattle. But when I get there I discover that King County Metro is no more. (TANSTAAFL applies to public transportation, too.) Being subsidized by tax money, it's been liquidated and sold to the King County Transportation Company, a private concern publicly traded on the NASDAQ. Having broken the union with the assistance of the Washington National Guard and the 101st Airborne Division, drivers are now making only minimum wage. But that $2 bus ride, now without subsidy, costs $4. For that amount, I can board the #358 bus for a long ride down Aurora Avenue in the company of Seattle's winos, junkies, hookers and that kid who plays rap music on his headphones so loud that everybody now knows just how many words rhyme with that infamous synonym for a female dog. Perhaps I'll be lucky today and some drug-addled passenger won't grab the steering wheel and send us off the Aurora Bridge into the Ship Canal.

Once there was a Community Transit bus that offered a $3 ride to Seattle running express via I-5, but Community Transit is gone, another governmental transportation entity shut down because it was subsidized. Instead there is a Snohomish County Transportation Company charging $5.50 for a ride on the #416 bus to Seattle. That expensive, but it's less than the $7.50 it costs to drive.

Then I get a brainstorm and decide to take a local bus to the Edmonds train station to take a Sounder commuter train to downtown Seattle. But when I get to Edmonds I find that Sound Transit is gone.

Heavily subsidized by tax money, Sound Transit was split up and liquidated. The freeway express buses were sold to a private operator, and the commuter train service was sold to the BNSF Railway who is running commuter trains from Everett to Olympia on a tight headway. (Link Light Rail was condemned as a real estate development project, not a transportation project, and was liquidated when no private concern would come forward to build it.)

I find that for a combination trip ticket of $6.50 I can board a local bus at Aurora Village, get off at Edmonds and board a BNSF train that whisks me to downtown Seattle with only one intermediate stop at the new station in Ballard. While $6.50 is rather pricey, it is still less than $7.50.

Now that people aren't driving to work much anymore, there are certain bits of economic fallout. We've all driven down the road wondering where all those other cars were coming from. Now they're gone. The highways empty out. We can now achieve every American's dream of driving down an urban superhighway at the height of the rush hour at 70 miles per hour. Of course the speed limit is 60, so there will be a speeding surcharge. But it may be a generation before we have to widen either I-5 or I-405 because there is now plenty of capacity.

People crowd into the cities and take public transportation. With highway subsidies eliminated, companies can now make money building and operating rail-based transit systems. McMansions in the farther suburbs lose 85% of their value because people can't afford to commute those distances anymore. People default on their mortgages and walk away.

Car ownership is now for the wealthy as three-cars families become one-car families. America has always been a major market for automobiles, but not any longer. The world automobile market takes a hit, and the Big Three of Detroit becomes the Big One. The passenger railcar market booms. The weekend ritual of the American family undergoes a major change. When the son asks, "Dad, can I borrow the car for a date?", Dad answers, "Only if you can pay for it."

But this is all minor compared to what happens when I put those transponders in trucks.

When you graph the equation of the damage done to a highway by truck weight, the equation is exponential to the fourth power. But when you look at the tonnage fees charged by the states, they tend to be linear, not turning exponential until you reach the higher weights. This is a subsidy to the trucking industry and prompts a cry of "TANSTAAFL!"

So as part of our thought experiment, let's put those transponders in trucks. This transponder will know whether a truck is empty, half full, full or overweight. There will no longer be a need for those weigh stations by the side of the freeway B whoops, limited access highway B staffed by the state patrol. If a truck is overweight, it will send a signal to our antenna, and within minutes a state patrol SWAT team will pull the truck over.

The transponder also knows how fast the truck is going. You'll never again have to worry about a section of superhighway posted "Speed Limit 70, Trucks 60" where the trucks are tailgating you at 75 miles per hour.

The effects of eliminating all subsidies to the trucking industry will be dramatic. People have always said, "I wish they could get all those trucks off the highway." Now they will have their wish, and it will happen because the interstate trucking companies went out of business overnight. In a world without subsidies, it makes more sense to have a short-haul crew take the truck to a railhead, strap it onto a railcar, haul it by train to another railhead, and have another short-haul crew take the truck to its final destination. This will work very well for shipments that are not time-sensitive. But it will wreak havoc on the greatest time-sensitive trade of all B America's food supply.

Sixty years ago America's railroads hauled the nation's food. But as the interstate highways were built and the trucking industry's subsidies increased, trucks took over delivery of the nation's food. Over a forty year period, America's railroads disinvested and tore out their physical plant. To return to a point where the railroads could again ship the lion's share of our food would take at least a decade. Today the railroads don't even earn the cost of their capital, but in a world governed by TANSTAAFL the railroads will have no problem raising the money to rebuild. However, during that decade we will still be required to use trucks to deliver our food.

The supermarket economy that grew up in the years after World War II was driven by the expansion of the highway network via the interstates. Supermarkets grew and expanded because deliveries by truck grew and expanded, which happened because the interstates grew and expanded. In a supermarket economy, America could grow its wheat in South Dakota and its corn in Kansas. It could spend billions to irrigate three desert valleys in California to turn them into vegetable gardens. It could raise its cattle in Texas, its chickens in South Carolina and its hogs in Arkansas. By using the interstates B America's new, subsidized distributed highway transportation network B these goods could be transported thousand of miles to the aisles of America's supermarkets.

Take the subsidies away and the price of food skyrockets overnight. Lettuce or carrots raised in the San Joaquin Valley will now reflect the full cost of moving those vegetables thousands of miles by truck. And think of the price of meat! When you hear about a politician holding a $500 a plate dinner, you know it's because he's serving meat. You'll know you're in trouble when you turn on "Oprah" and see some lady with a school-marmish voice explaining that an equal weight of lentils or Portobello mushrooms contains just as much protein as steak. Try telling that to America's carnivores! When the cost of hamburger rises to the cost of filet mignon, it's goodbye McDonald's and Burger King.

Smart shoppers will forsake the supermarket for the corner butcher shop that sells meat raised and slaughtered locally. They will turn to the farmers' market or the corner greengrocer for locally grown produce. And where will this food be grown? On the land in the far suburbs once occupied by those McMansions, now torn down to make way for local agriculture.

Truck manufacturers will go bankrupt. No longer will a trucker travel down to Florida to get his Peterbilt. Freight railcar manufacturers will make billions, and America's great agricultural areas, dependent on the distributed highway transportation network, will go to seed for a decade.

Having applied the principle of TANSTAAFL to cars and trucks, it's only fair to apply it to the airlines. There is a large, government-owned-and-operated air traffic control system, which we sell off to private industry. The airports built and run by states, localities and port authorities also go on the block. Airlines are required to own and operate airports the same way the railroads operated union stations two generations ago. Goodbye cheap air fares.

People now take long distance passenger trains again, but they are not operated by Amtrak, which has been sold off. (TANSTAAFL!) The Class I railroads now run the passenger trains, charging what the market will bear and making a profit. It's not cheap to travel by train, but it's cheaper than traveling by air and competitive with traveling by auto.

Having led you down the garden path, I now deposit you at the gates of hell. Let's take a look at what the strict application of the principle of TANSTAAFL has wrought.

When was the last time we saw an America that looked like this? If your answer is the Great Depression, you're close but no cigar. The line of demarcation for this world is 1919.

In that fateful year, US Army Major Dwight Eisenhower took a military convoy across the country via America's existing road network, which at the time consisted of dirt and gravel roads with little connectivity. Rivers were ferried or forded, not bridged. Eisenhower took the press along for the thirty day trip in an attempt to show America just how far behind Europe we were in our road building. Press reporting on the trip galvanized public discussion, and our great road building efforts began in that year.

The world I just described is pre-Eisenhower, specifically 1910 to 1917, the year we entered World War I. Armed with nothing more than a desire to eliminate all transportation subsidies, a GAAP manual and my mighty Excel spreadsheet, I've succeeded in wiping out an entire century of American progress. Let's hear it for me!

Of course the real world of transportation has subsidies. If automobile drivers don't pay their fair share, why should passengers on public transportation? If bus and airline passengers don't pay an unsubsidized rate, why should train passengers? If we subsidize one mode of transportation but not another, people will use the subsidized mode until it can't handle the traffic.

I notice people saying, "I thought he was a conservative Republican. He sounds like a socialist."

It's not socialism to insist on a level playing field for all modes of transportation; it is in fact one of the pillars of capitalism. We can eliminate all subsidies and go back to the days of hobble skirts, stiff collars and five-cent cigars. Or we can accept the existence of transportation subsidies and ask that they be applied in a balanced fashion to support a balanced transportation system. Cars, buses, trains and planes all have their places. It's important that we let each mode work where it will perform best.

Your sentiments are correct, but your specifics are wrong:

The bulk of money for road construction comes from the people who use the roads.

National roads are 90% paid by the national fuel/tire excise taxes (going into the supposed "Highway Trust Fund", and, of course, less the 10% federal cut that fuels the federal bureaucracy). And, yes, those funds are not sent exclusively back to the roads. And, yes, most state fuel/tire taxes go to roads -- but not all of them. Some 15% of state highway funding comes from general or non-automotive sources. Locally, the number is altogether the opposite, as road building is generally based on property taxes at the county and town level.

By far, the "bulk" of road mileage across the country is local and not state or national, so your statement does not stand.

What the author fails to mention is the devastating effect unionized labor had on the rail lines in the middle of the twentieth century. The Less than car load frieght was done away with because of the cost of unionized labor, passenger service was also done away with in large part because of the extra overhead of unionized labor. Rail today is not competitive for many forms of frieght, one major ltl truck casrrier pulled 20,000 pup's off of rail this year because of the unpredictable nature of rail shipping. Most LTL shipments are not extremekly time sennsitive but with inventory's trimmed and lead times cut to days rather than weeks it's not ppratical to have a two or three week transit time from shipper to cognsignee. So the picture is a little more complex than the author paints with his GAAP manuel and his excel spreadsheet.

NYC has excellent public transit (so they claim) yet there are thousands of taxis.

Just like the author said, multi-mode is best, with a proper balance. If every train commuter tried to take a taxi to employment, it wouldn't work.

You are correct that the author pulled the number $7.50 out of his ass. But he had a reason -- it was a round number he could use to make a point.

Because transponder technology is in its infancy, there are no reliable cost accounting methodologies for calculating a reasonable per mile cost, not to mention factoring in congestion pricing, improvements and law enforcement aspects.

Doing a literature search on the subject put the author in a difficult position. Oregon, for example, is proposing to change a penny per mile via transponder to be collected at the pump. London is proposing $2.30 per mile to be collected via transponder, after converting metric to English units and pounds to dollars. Singapore has a mature transponder system with a full range of pricing, and its costs are in excess of London's proposed charges. Lacking an established model, the author was forced to bend over and pull a number out.

Using numbers in the London (proposed) to Singapore (actual) range, the sum of $7.50 in billed costs for a rush hour commute from Shoreline to downtown Seattle is well within the range of possiblity. And it helps illustrate his point.

You are correct in assuming that breaking up a government transportation monopoly -- and the unions that act as parasites on it -- will drive costs down. In fact, thanks to the Internet, a bus company will not even need fixed routes but could simply pick people up based on Internet orders like modern airport van services use. Costs would eventually go down as the large network disintegrated into a group of small capitalistic fiefdoms.

But remember what happened in most major cities even before the unions ruined private transit concerns and pushed for the creation of subsidized transportation authorities. The problems of transferring between competing transit systems eventually led to consolidation as the bigger fish swallowed the smaller fish. By 1911 the Mitten interests in Philadelphia had bought out the smaller street railroads and created the great PRT -- Philadelphia Rapid Transit. Consolidation is a natural part of capitalism, and once that begins and competition decreases, costs will go up.

The point the author wished to make was that getting rid of subsidies for highways would not be fair unless one got rid of subsidies for transit systems too. TANSTAAFL applies to everyone.

...passenger service was also done away with in large part because of the extra overhead of unionized labor.

True. Passenger rail was dying thanks to organized labor, but the coup de grace was applied in 1968 when the post office pulled the mail off the passenger trains and handed it to the airlines. The post office had in effect been subsidizing long distance passenger trains, and the loss of that last subsidy pushed passenger rail over the edge.

Most LTL shipments are not extremekly time sennsitive but with inventory's trimmed and lead times cut to days rather than weeks it's not ppratical to have a two or three week transit time from shipper to cognsignee.

And that is why the Canadian National has bitten the bullet and is becoming a regularly scheduled freight railroad and why the Norfolk Southern is now following suit.

The author of this piece is making a presentation in Washington DC next week about a model for re-privatizing Amtrak's long distance trains in such a way that the Class I railroads can again make a profit from them. He will be on the dais with some folks from USDOT, Amtrak and Congress. The audience for this privatization forum will be congressional staffers on the various transportation committees, i.e. the people who do the actual work, not the ones who posture for the camera.

The last I heard, C-SPAN will tape the forum and run segments of it sometime on a weekend or the middle of a night.

By 1911 the Mitten interests in Philadelphia had bought out the smaller street railroads and created the great PRT -- Philadelphia Rapid Transit.

How much of that was aided and abetted by crony politics and palm-greasing, though, rather than fair-and-square free-market competition?

Hanging around conservative Republicans like I do, time and again I'm confronted by people who think the gasoline tax is a user fee.

Here in Washington? Riiiiiiiiiight. I'm calling "Bulls!t" on that statement.

And what's the first part of the sentence have to do with the second part?

This guy's an idiot or a liar or both. I'll say both.

Either way, it's pointless to read the rest of the article. You can't trust the facts of an article that immediately crops up with statements like that.

This article is based on a speech given by the author in Olympia last February. In speaking, the author uses index cards like Reagan and does jazz riffs on the points like Clinton. The "belly laughs" were more like people rolling on the floor when the speech was made.

I'm not sure what the (Republican) Vare and Penrose machines did in regard to the 1911 merger. The books on Philadelphia transportation history don't mention any role by the city's corrupt ruling machine, although that doesn't rule out its involvement.

"It's not socialism to insist on a level playing field"

Just that bit alone is wrong. How could the author even write "not socialism" and "insist on a level playing field" in the same sentence.

One among many silly errors in this article.

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