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OpenMarket: Rail and Mass Transit

  • Reimagining Surface Transportation Reauthorization: Pro-Market Recommendations for Policy Makers

    June 30, 2015 10:15 AM

    Today, CEI published my white paper, “Reimagining Surface Transportation Reauthorization: Pro-Market Recommendations for Policy Makers.” In it, I lay out the case for making some small but important changes to federal surface transportation policy.

    Traditionally, free market fiscal conservatives have advocated for devolving all federal highway and transit programs to the states. To be sure, we at CEI support this eventual goal. Unfortunately, it is wholly unrealistic at this time. But there are still things that can be done to move closer to this direction. We suggest a strategy of “de facto devolution,” which basically involves keeping federal spending steady while increasing the flexibility of states to fund and finance their own highways. To accomplish this, we recommend the following changes to federal highway policy:

    • Repeal the current federal prohibition on states tolling their own Interstate segments for reconstruction purposes, codified at 23 U.S.C. § 129.
    • Uncap or greatly increase the national cap on private activity bonds, currently set at $15 billion, codified at 26 U.S.C. § 142(m)(2)(A).
    • Provide technical and financial assistance to states looking to launch their own mileage-based user fee pilot programs.

    With respect to mass transit, most free market fiscal conservatives have long and correctly held that transit is an inherently local issue. As such, it has no business receiving federal funding, let alone the current 1/5 share of total federal surface transportation spending—especially given the fact that mass transit accounts for less than 2 percent of person trips nationwide. You read that correctly: the federal government currently spends 1/5 of its surface transportation dollars on a mode that accounts for 1/50 of person trips.

     The federal politics of mass transit could be described as an unfortunate mix of parochial and ideological interests battling over non-federal issues. Given that serious federal mass transit spending cuts are at the moment politically difficult, fiscal conservatives and proponents of sound national transportation policy should embrace some more modest goals to rationalize federal mass transit policy. We recommend the following changes to federal mass transit policy:

    • Work to end Highway Trust Fund bailouts and raise public awareness of the huge discrepancy between transit funding and transit use—that 19 percent of federal surface transportation funding is currently directed to a mode that accounts for less than 2 percent of trips nationwide.
    • Roll existing discretionary transit grants programs such as New Starts into the Urbanized Area Formula Program.
    • Realign spending priorities to a fix-it-first-strategy by allowing federal transit funds to be used for maintenance projects.

    Read the whole white paper here.

  • Long Mass Transit Commutes Are Horrible for Your Health

    May 20, 2015 5:12 PM

    Joseph Stromberg at has an article up arguing that “commuting alone by car” is “associated with obesity, high blood pressure, sleeplessness, and general unhappiness” relative to other transportation modes. His solution to unhealthy lengthy commutes is to increase carpooling.

    Back in 2012, I argued against another now-Voxxer, Matthew Yglesias, on the supposed health harms of auto commuting. The problem, as Census data make clear, is that other than those who walk to work, people commuting by driving alone generally have the shortest commutes. Those using public transit take on average twice as long to make their commuting journeys as those who drive by themselves.

  • Yes, It Is Stupid to Blame Lack of Subsidies for Amtrak's Derailment

    May 18, 2015 2:32 PM

    This morning, Amtrak Northeast Regional service was finally reopened following last week’s tragic derailment in Philadelphia that has killed at least eight and injured approximately 200. The tragedy was predictably exploited by cynical politicians, activists, and journalists, who seem to falsely believe that flushing more subsidies down the Amtrak drain would have somehow prevented the accident. It is true the technology at issue would possibly or even likely prevented this specific crash, speeding the deployment of it would dramatically increase costs and very likely reduce overall rail safety.

    The National Transportation Safety Board (NTSB) continues to investigate and a final report will likely take a year or more to complete, but we know that the train was reportedly traveling at 106 mph right before it went into the 50-mph curve. By the time the engineer pulled the emergency brake, it was too late and the train entered the curve at 102 mph. The engineer is claiming he doesn’t remember right before the derailment and may have been struck by a foreign object. Yet, the NTSB has reviewed the dispatch tapes and found that the engineer did not report being struck by an object—although the NTSB and FBI are currently investigating a mark on the windshield.

    It is likely the Philadelphia derailment is largely due to human error. In a similar 2013 crash in Spain, the operator was found to have recklessly ignored speed warnings before entering a 50-mph curve at 121 mph, killing 79 and injuring 140 when the train derailed and crashed into a concrete wall. In 2005, a Japanese commuter train derailed after it entered a 43-mph curve at 72 mph, killing 106 and injuring 562. The operator was killed, but he had likely intentionally increased the speed to unsafe levels.

    Washington being what it is, partisans almost immediately began exploiting this tragedy for political gain, blaming Amtrak opponents for supposedly starving Amtrak of operating subsidies. Carl Cannon highlights some of the more shameless examples from Democratic groups and politicians, such as the Agenda Project Action Fund’s claim that “Republican Cuts Kill… Again.” They argue that Amtrak’s alleged lack of sufficient operating subsidies has delayed the rollout of a set of rail safety technologies called positive train control (PTC). House Speaker John Boehner has righty called linking Amtrak funding to the derailment “stupid.”

    But rather than learn from Speaker Boehner’s accurate rebuke, New York Sen. Charles Schumer doubled down, saying, “Speaker Boehner’s comments are patently false. Experts have made clear that Positive Train Control could have prevented the tragedy in Philadelphia. It is simply a fact that insufficient funding for Amtrak has delayed the installation of PTC, and to deny a connection between the accident and underfunding Amtrak is to deny reality.”

    Yes, Sen. Schumer, it is stupid to make this absurd suggestion. To understand why it is baseless, you need understand a little bit about the history of PTC and Amtrak.

    Amtrak was created in 1970 to provide emergency passenger rail service throughout much of the United States. The private railroads were dying under a stultifying regulatory regime, leading to many bankruptcies, with members of Congress fearing the U.S. would lose passenger and freight rail service. The railroads had been cross-subsidizing passenger rail for decades, but while they were circling the drain in the 1970s, the passenger service mandates became too much to bear. It was widely believed that Amtrak would be temporary, and that deregulated railroads would either retake control of the passenger routes or intercity passenger rail would simply end up in the dustbin of history.

    Unfortunately, Amtrak has a small but powerful constituency and taxpayers have now doled out more than $45 billion in subsidies to keep Amtrak afloat. Amtrak accounts for just 0.15 percent of passenger-miles and 0.8 percent of trips more than 50 miles in the U.S.

  • Let Amtrak Pay Its Own Way

    April 24, 2015 10:10 AM

    Randal O’Toole of the Cato Institute has a great blog post outlining the various ills besetting America’s government-subsidized passenger rail carrier Amtrak. The gist of O’Toole’s argument is that although both federal and state governments contribute large sums of money to keep Amtrak afloat, potential riders have not been nearly as enthusiastic. A recent National Journal article does cite Amtrak’s ridership as increasing 50 percent in the last fifteen years, but O’Toole points out that the increase was largely driven by a simultaneous increase in gas prices. Amtrak’s new riders aren’t somehow more attuned to taking passenger trains than they were before, they’re simply responding to market pricing and the laws of supply and demand.

    If the federal government revoked its latest $1.4 billion annual subsidy, Amtrak probably would not have even seen that 50 percent increase. O’Toole reports that in 2012, Amtrak fares averaged about 33.9 cents per mile, while travel by air and automobile averaged 13.8 and 25 cents, respectively. Taking into account these factors, as well as user costs and subsidies, O’Toole estimates that Amtrak costs about four times as much as flying and nearly twice as much as taking a car. These figures, along with the fact that Amtrak’s share of total passenger travel in 2012 was around 0.14 percent, demonstrate that demand for passenger rail in America can hardly be called robust.

    Even if greater demand for passenger rail did exist, the federal government would face the odd paradox of running a profitable industry that could probably be better handled by competition among private firms. Passenger trains already have at their disposal all the revenue they should ever need: fares and onboard sales. Why take money from hundreds of millions of people to finance the travel of only a few? Congress would do the nation a favor by phasing out funding for Amtrak, saving us all money in the process.

  • Administration's GROW AMERICA Act 2.0 Mixes Bad with Good

    March 30, 2015 12:11 PM

    Today, Secretary of Transportation Anthony Foxx unveiled the administration’s latest surface transportation reauthorization proposal. Like the previous White House bill, the latest iteration of the GROW AMERICA Act is unlikely to go anywhere on Capitol Hill. The president’s proposal to fund much of his increased infrastructure spending relies largely on a one-shot tax repatriation scheme, something that will do nothing to improve the long-run fiscal position of the Highway Trust Fund. In addition, the White House proposal would make the very wasteful TIGER discretionary grant program permanent. See this post for more on what good and bad surface transportation policy looks like.

    But the administration’s GROW AMERICA 2.0 proposal isn’t all bad. In fact, it contains two very smart elements that Congress should attach to their own reauthorization package.

    First, the administration proposal would repeal the current prohibition on states tolling their own Interstate segments, codified at 23 U.S.C. § 129, while also repealing the three-slot Interstate System Reconstruction and Rehabilitation Pilot Program, which was established by the Transportation Equity Act for the 21st Century of 1998 and has failed to promote Interstate reconstruction through tolling. Contrary to popular belief, the states, not the federal government, own and operate the Interstate Highway System. Currently, the only tolled segments of the Interstate system were grandfathered in by the Federal-Aid Highway Act of 1956. No federal-aid funds can be used to maintain these roads, which constitute a little over 6 percent of the Interstate Highway System. Tolling offers a number of advantages over fuel tax or non-user funding. Reason Foundation’s Bob Poole has developed a plan to reconstruct and modernize the Interstate Highway System through the use of all-electronic highway tolling, something policy makers should consider as an alternative to gas tax increases and Highway Trust Fund bailouts.

    Second, the current cap on tax-exempt private activity bonds, which bring financing parity to infrastructure development by allowing the private sector to take advantage of similar debt instruments as the public sector, would be raised from $15 billion to $19 billion (see 26 U.S.C. § 142(m)(2)(A)). Ideally, this cap would be repealed, but increasing it is at least a step in the right direction.

    To be sure, there is little in the latest GROW AMERICA Act for free marketeers to love. But Congress would be wise to take seriously the administration’s recommendations on Interstate tolling and private activity bonds.

    For more on federal surface transportation reauthorization, see CEI's agenda for Congress, Free to Prosper.

  • Benning Road: The Last Refuge of Streetcar Apologists

    March 19, 2015 1:02 PM

    Washington City Paper’s Housing Complex blogger Aaron Wiener has an unintentionally hilarious article on the slow-motion implosion of the D.C. Streetcar. But before I get to Wiener’s piece, let’s recap:

    To Wiener’s post, the streetcar boosters are now conceding what opponents (like your author) have been saying for years: H Street, N.E., does not need a streetcar. But they aren’t giving up yet; rather, it is Benning Road that needs the streetcar more than anything. Wiener closes with this: “But first, the streetcar has to start running. The ball’s in your court, Bowser and Dormsjo. And the future of Benning Road hangs in the balance.”

    Apparently, the D.C. neighborhoods of sleepy Kingman Park and former notorious drug-warzone Trinidad are in dire need of public subsidies to boost property values. I found this hilarious because when I was looking to buy a home a year ago, I looked in both neighborhoods and found myself priced out.

  • How Not to Fix, and Fix, Federal Surface Transportation Policy

    March 9, 2015 3:37 PM

    A lot of misinformation and scaremongering swells around transportation infrastructure policy in Washington. We are told our highway network is on the verge of collapse (false), that the federal role is the most critical component of government transportation infrastructure funding (false), and that things will only get worse unless we submit to massive federal gas tax increases (false). To be sure, there are many transportation projects that should be completed over the next two decades. But the “crisis” is politically manufactured. The infrastructure lobby does no one any favors by overstating the problem and supporting reckless and inefficient tax-and-spend policies.

    The “Crisis” in Context: Blame Mass Transit?

    Let’s start with the problem. As of January, the Congressional Budget Office (CBO) is projecting a 10-year $168 billion shortfall in the federal Highway Trust Fund (HTF). By 2025, CBO is projecting that the outlays from the HTF’s Highway Account will exceed revenues and interest by $16 billion (47 percent), with outlays from the HTF’s Mass Transit Account exceeding revenues and interest by $6 billion (150 percent). The HTF’s Mass Transit Account is in much worse shape over the long-run. It is also important to note that virtually every penny of the HTF’s Mass Transit Account is diverted revenue collected from drivers—2.86 cents of the 18.4-cents-per-gallon federal gasoline excise tax and 24.4-cent federal diesel excise tax is dedicated to the Mass Transit Account.

    Why is there a Mass Transit Account in the Highway Trust Fund? Because President Reagan made a foolish decision in 1982 to dedicate 1 cent of the federal fuel excise taxes to mass transit, as urban liberals would have otherwise refused his gas tax increase for Interstate projects on equity grounds (fuel taxes can be quite regressive). So, this misguided horse trade from The Gipper is why nearly 20 percent of all federal surface transportation funds are now directed to mass transit, a mode that accounts for less than 5 percent of commuting trips. But it gets worse. Less than 2 percent of total trips, both commuting and non-commuting, are completed by mass transit in the United States. When we consider expenditures from all levels of government—federal, state, and local—we observe that mass transit receives approximately 25 percent of the nearly $210 billion spent annually on surface transportation. That’s 25 percent of total funding for less than 2 percent of trips.

    In most places in the U.S., transit is a white elephant mode backed by powerful environmentalists, developers, and unions that does nothing to mitigate traffic congestion, which was its primary stated purpose in the 1970s when the federal government first began making large capital grants for local transit systems. More troubling, the U.S. Department of Transportation currently estimates that America’s mass transit systems have an $86 billion deferred maintenance backlog and that transit agencies need to increase annual system preservation spending from $10 billion to $18 billion just to tread water. No one knows where this additional money will come from, yet politicians continue pushing disastrous transit system expansion plans.

    If we were to redirect federal highway-user revenues that are currently automatically directed to mass transit from FY 2016-2025, CBO’s projected HTF revenue-outlay imbalance would be reduced from -$168 billion to -$77 billion over 10 years. Ending the major highway-dollar diversion to transit is unlikely to happen, but it is important to remember that political pandering to the transit lobby is responsible for more than half of CBO’s current projected HTF fiscal woes. But even without ending HTF diversions to mass transit, given the federal government’s small role relative to those of state and local governments, that projected $168 billon HTF shortfall would only account for about 8 percent of total surface transportation expenditures through FY 2025 assuming no increases in state and local spending. Some “crisis,” eh?

  • Transportation Roundup: Obama Budget, DOT 2045, and Sad Transcontinental Railroad Nostalgia

    February 4, 2015 1:32 PM

    The President’s FY 2016 Budget

    On Monday, the White House released its DOA FY 2016 budget. Like President Obama’s previous budgets, this one has no chance of going anywhere, with the latest iteration primarily lending itself to lame congressional Republican “Groundhog Day” jokes. The White House is expected to release its updated DOA highway bill, a “GROW AMERICA Act 2.0,” sometime in the coming weeks. Until then, we won’t know in detail the policies the White House hopes to see on surface transportation. 

    However, we know it will take the form of a six-year, $478 billion reauthorization that will rely on a $238 billion bailout of the Highway Trust Fund to be funded by a tax on foreign corporate earnings. The White House plan would also make the TIGER grant program permanent, “dramatically” (their word) increase transit spending, and attempt to turn the Highway Trust Fund into a general transportation slush fund in order to boost politically correct spending on high-cost/low-value passenger rail projects. 

    But there appears to be some good in there too. To the president’s credit, he is a strong supporter of private infrastructure investment and plans to expand the role of Private Activity Bonds (PABs). As he mentioned in his State of the Union address, President Obama wants to create a Qualified Public Infrastructure Bond (QPIB) program to support more public-private partnerships in airports, transit, solid waste disposal, sewer and water, and other types of surface transportation that aren’t currently permitted under the existing PAB framework. 

    While not mentioned, we hope President Obama’s GROW AMERICA Act 2.0 also includes a provision that would end the current federal prohibition on states tolling their Interstate segments for reconstruction purposes. Last year’s GROW AMERICA Act included such a provision. This is something Congress should seriously consider as they scramble to come up with new irresponsible strategies for bailing out the ailing Highway Trust Fund. Instead of a federal highway handout, they should give the states a hand up by empowering them to fund and finance more of their own infrastructure.

  • Premature Capitulation?

    February 3, 2015 4:13 PM

    Over the decades I’ve spent in this Heart of Darkness (a.k.a., the bowels of American politics), I’ve learned two lessons that have encouraged the steady politicization of the American economy:

    • When the right time comes, I’ll take a principled stand (sadly, too often, once you’re no longer in office); and
    • Of course, we know the “right” answer is often to liberalize current rules, but that would be politically naïve, so our goal should be to avert even worse rules (but, of course, sacrificing principle rarely assuages those favoring more government control).

    And both lessons seem to have been forgotten in the Republican rush to avert the threatened action by FCC Chairman Tom Wheeler to transform the Internet into a federally regulated utility. Senator Thune, Representative Upton, and Representative Walden have proposed a “compromise” bill that would strip the FCC of its purported authority to reinterpret the Communications Act to consider the Internet as a “public” utility.

    Unfortunately, their language concedes perhaps the most dangerous part of such a reclassification: removing the freedom of network owners to price their services. Well, actually not quite: the Republicans would remove providers’ ability to price in ways that some view as “discriminatory.” They explicitly mention pricing policies that might result in “throttling” (like congestion-managed toll lanes?), unreasonable “network management” (as decided by whom?), and “paid prioritization” (like that used for just-in-time transportation services by most transport companies?).

    But proponents argue if FCC is left alone, its rules might even be worse. And, indeed, they probably will be—but FCC action would be administrative, reversible by a future administration or via inevitable legal challenge. If Congress—led by erstwhile opponents of net neutrality—accedes to forcing the Internet into quasi-utility status, the losses could be permanent.

    Those contemplating this action should reflect on the consequences of similar regulation on an earlier network—the railroads. This was America’s first national network, knitting together then small town and rural America into the national economy. Railroads dramatically lowered transportation costs—changing the economy and resulting in growth in some regions, contraction in others.

  • United Streetcar: The Solyndra of Transportation

    December 1, 2014 2:56 PM

    Over the weekend, The Washington Post published a fascinating article about the rise and fall of United Streetcar, an Oregon-based manufacturer that owes its very existence to the worst kind of Washington politics.

    Back in 2005, Rep. Peter DeFazio (D-Ore.) managed to secure an earmark requiring that a Portland rail transit project funded in part with federal funds procure U.S.-manufactured streetcars. This was the brainchild of another Oregon transit booster, Rep. Earl Blumenauer (D), who was a champion of the imploding “Portland model” of urban redevelopment and transportation planning when he sat on the city council. When former pork-barrel Rep. Ray LaHood (R-Ill.) was tapped to be President Obama’s first secretary of transportation as the token Cabinet Republican, the Oregon delegation knew it had found the perfect accomplice in the most unqualified DOT chief in history.

    What happened was the same mix of cronyism and incompetence that has followed the Obama administration’s efforts to promote fuzzy-sounding objectives such as “alternative energy” in the case of Solyndra, and “livability” in the case of United Streetcar. From the Post:

    A day or two after the new president nominated LaHood as secretary of the Department of Transportation in late 2008, the former Republican congressman from Illinois got a call from Blumenauer inviting him to his office.

    “Portland was more than just automobiles. It was cycling, it was streetcars, it was walking paths,” LaHood said. “Earl really convinced me DOT really needed to do more than build roads and bridges. We, in a sense, followed Earl’s lead.”

    Then Washington started taking actions that looked promising for streetcar backers broadly — and United Streetcar in particular.

    LaHood’s department changed internal rules that had been thwarting streetcar projects during the George W. Bush administration. Those rules used travel time as a key criteria for certain federal dollars.


    But with $48 billion in transportation projects as part of the economic stimulus, “we didn’t have to pick and choose,” LaHood said.

    The Obama administration seized on United Streetcar’s story. In April 2011, administration officials promoted the firm on the White House Web site with a glowing Department of Transportation-produced marketing video.

    “President Obama has challenged Americans to dream big and build big. United Streetcar has risen to that challenge, and they’re doing it all with American parts, labor, and ingenuity,” LaHood wrote in the accompanying blog post.

    The administration was in the midst of ratcheting up the pressure on local officials to adhere to “Buy America” rules for federally funded projects. Those rules meant that more than 60 percent of the value of a streetcar’s components had to be from the United States, and they had to be assembled in the country.

    Despite all the special privileges it received from its backers in government, United Streetcar built only 16 vehicles for three customers and it currently has no new orders. Traditional supporters of high-cost/low-value rail transit have even become skeptical of streetcar hucksterism. The progressive Washington Post editorial board recently called on the District of Columbia to halt the expansion of its planned streetcar network while neighboring Democratic Party stronghold Arlington County, Va., just canceled its streetcar projects.


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