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.

... King County Transportation Company, a private concern publicly traded on the NASDAQ.

What makes him think that there will be only one bus company unless the government meddles and tinkers long and hard enough to insure it?

If I wanted to run a van-based jitney service, under a non-governmental system I'd be able to do so without begging the government for permission in the form of licenses and artificially-scarce medallions, and such competition for fares would drive the price down and the level of service and convenience up.

I'll have to read this in more detail to find any other logical fallacies here. It seems he's making the mistake of assuming that the bloated, inefficient transportation systems that governments set up on the basis of rent-seeking and political patronage would continue to exist in the private sector.

Does anyone here think that without transportation subsidies, most people would really live like they did in 1919?

Quite possible. That which we call modern society is still rather new in the scheme of things (the time he spoke of as the demarcation period was still dominated by the horse, although that was changing). This society is also quite interdependant on all its constituent parts, and fragile to boot. Drastic changes to one area, will inevitably lead to drastic changes in areas which may not have even been considered when the original analysis for the wanted change was accomplished.

Even if every possible cause-effect relationship conceivable were factored in, then Murphy's law would dictate that a cause-effect realtionship that had not been conceived would appear, usually at the worst possible time...

the infowarrrior

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.
* America's highways are empty.
* People have crowded back into the cities, taking public transportation rather than driving.
* Automobile ownership is only for the wealthy.
* Flying is only for the wealthy.
* Trains are everywhere, and railroad bonds have higher Moody's ratings than US government bonds.
* The far suburbs have reverted to farmland.
* People buy their meat and produce at small community-based stores.

That sounds like the kind of America in which I dream of living -- the America of Norman Rockwell, John Steinbeck, and Theodore Roosevelt, only with better sanitation, no segregation, and modern health care. (And he didn't even mention how much cleaner and more beautiful America would be without truck stops, billboards, and smog!)

Admit it, folks: without big-time federal $$$, the "free-market capitalist" automobile, construction, oil, motor transport and associated industries go bye-bye. Trains are the most cost-efficient mode of transport extant.

* Agribusiness has yielded to the family farm.

No more cardboard tomatoes, mealy apples, or tortured-cow hamburgers? Farmers a respected class again instead of being forced to live as debt-ridden welfare junkies? Hell, I'd buy into the author's scenario on the basis of that alone. Count me in!

He is full of ....

Myth #8: Other Transportation Modes Are More Highly Subsidized than Amtrak

Amtrak management argues that other forms of intercity transportation--such as buses, cars, and airlines--are just as heavily subsidized by taxpayers as Amtrak. They point out that the roads used by buses and autos were built with federal (and state) dollars. Moreover, the airlines benefit from the air traffic control system that is federally operated through the Federal Aviation Administration. However, there is virtually no net taxpayer subsidy of either highways or airlines. Maintenance of the infrastructure for both of these transport modes is financed by taxes on users rather than by general taxpayer subsidies. [35]

With respect to both highways and airlines, vehicle capital and operating expenses are fully paid by users. [36] Public facility costs also are financed through user fees. [37] Road construction and repair are funded through the gasoline tax paid by drivers. The FAA's costs are largely covered by an airline ticket tax. The federal government has a highway and an airline trust fund, each of which has accumulated a large surplus balance ($12 billion in the air trust fund and $22 billion in the highway trust fund). [38] For that reason, a case could be made that airline travelers and drivers pay more than their own way.

By contrast, nearly 40 percent of Amtrak costs are paid by general taxpayers--$850 million by federal taxpayers and additional subsidies by state taxpayers. If all intercity travelers were subsidized to the same extent as Amtrak passengers, an annual federal taxpayer subsidy of $125 billion would have been required in 1992 [39]--three times the entire Department of Transportation budget.

To "level the playing field" among transportation modes, Amtrak has proposed that Congress create a trust fund. However, the proposed Amtrak trust fund would not be financed by taxes on users of Amtrak services; it would be financed instead by gasoline taxes on highway users--that is, on travelers who do not use Amtrak. The only true Amtrak "user fee" is the cost of the ticket--which currently falls far short of covering Amtrak's costs.

Source: http://cato.org/pubs/pas/pa-266.html

I'm not sure why everyone is flipping out at this article. There are some mistakes, but the premise is generally accurate: subsidies cause behavior that would not otherwise occur without them. I do wish to correct the notion that pre-1919 and the Eisenhower road trip automobiles were the exclusive domain of the wealthy.

Firstly, Ike's trip is overplayed in history. To its day, it had little effect. Motorists had since the 1904 St. Louis Fair been protesting, and to great effect, the condition of the nation's roads. That year, hundreds of autos from across the country drove to St. Louis in order to publicize poor road conditions (as opposed to driving them in defiance of their condition to prove one's heroism, as did, for example, Horatio Jackson in his Winton in 1903 -- a story that was meaningless to 1903)

Secondly, the remarkable growth of the American automobile industry from 1909 to the beginning of the US entry to WWI was a product of the MIDDLE CLASS acceptance of the automobile. Henry Ford had by the time of Ike's trip sold several millions of cars which were bought principally by the middle class and farmers. Even in those days roads were subsidized by the national and local governments. Washington sent money for "postal roads," and states, counties, and cities regularly built or repaired roads with monies from general revenues, especially property and income taxes. While automobilists paid fees and excise taxes on cars, gasoline and tires, the roads they drove on were not paid exclusively by those taxes.

The year 1919 marked a moment when government taxation nearly killed the automobile. Just as the government had turned to the railroads for control, regulation and taxes, to help pay for WWI, Woodrow Wilson turned to the automobile for the same. Doing it, he nearly killed it. The industry hit a terrific depression in 1919/20 that knocked off a good half the producers, leaving only the financially strong to survive. All this was either exacerbated or caused by government interference in the economy and in automobiles by reguations, price controls, and taxes.

Finally, when the Wilson government nationalized the management of the railroads in the name of the war economy, it near killed the railroads and other industries (like automobiles) that depended upon them for delivery of supplies and shipment of end products. The auto industry responded by proving itself an effective alternative to the rails in shipping mass quantities of goods over the roads on trucks (including the new innovation, refer trucks). Indeed, excepting for 1919's anti-automobile tax and regulatory policies, the year marked not digression in automobiles but great advance.

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