Welch vs. Lee: What About Freight?

Libertarian urbanist — call him a “market urbanist” — Timothy B. Lee recently had an article at Forbes.com in which he criticized Matt Welch and Nick Gillespie’s The Declaration of Independents (it’s a great read: buy it here!) for its supposed lopsided attack on passenger rail. Welch then responded, and Lee responded to his response. Both make very good points regarding the intersection of mobility and individual liberty.

But in my opinion, the Reason editors didn’t go far enough in attacking passenger rail, which has become so obsolete that it is borderline inherently wasteful. In the United States, outside of a few dense urban cores, rail is good for one thing: freight. And when freight movement is considered with respect to highway use, costs, and benefits, highways demolish arguments in favor of passenger rail.

The United States has the best freight rail system in the world. While heavily regulated by the Federal Railroad Administration, Surface Transportation Board, and other obsolete government agencies, it is privately owned and is quite profitable at the moment. This was not always the case. From the 1870s — when the National Grange and other populist farmer organizations scored pro-regulatory victories — until the 1970s, the railroad industry was on a slow decline. Major shocks during this period included the first auto-driven suburban expansion following World War I, which was followed by the second and much larger auto-driven suburban expansion post-World War II.

The latter was supported by Eisenhower’s Interstate system, along with nasty urban renewal schemes that destroyed central cities and turned obscure architecture critic Jane Jacobs into an urbanist folk hero (despite her ignorance of many urban realities, see pp. 33-43). Private passenger rail, which through much of U.S. history was cross-subsidized by freight revenues, would now be DOA thanks to the cheaper air travel we enjoy following deregulation and increased auto ownership. Freight rail is on better footing today thanks to deregulation over the past 35 years, but it is no longer the king cargo mode it once was. And since the federal government took over the money-losing passenger rail operations from private railroads four decades ago, use in terms of passenger-miles has remained flat and its ridership share out of all passenger modes has significantly decreased.

But Lee insists that the individualizing, pro-dispersal automobile and auto infrastructure would not have enjoyed such large gains were it not for pro-auto government policy that built large road networks, forced lower-density development, and imposed parking minimums. There is certainly some truth to this. Cities would likely look somewhat different than they are today, although I’d bet not by that much. But it is important to recognize what cars and the roads they drive on are, what passenger trains are, and what passenger trains are not.

Let’s start with the Interstate system. The construction phase was launched in 1956 and was completed 35 years later (right before ISTEA). The system was largely funded through federal excise taxes on gasoline and diesel and was modeled on the “user-pays/user-benefits” pay-as-you-go principle. Today in the United States, 87 percent of all daily trips are taken by personal automobile and the Interstate system provides crucial links to local road networks all over the country.

But roads don’t just move people. They also move stuff. Seventy-one (yes, 71) percent of freight by value (which in 2007 totaled more than $11.5 trillion annually) is moved by truck. Freight rail makes up 3.7 percent of moved freight by value. Waterways transport 1 percent. Air 2.2 percent. And pipelines 3.4 percent. Intermodal shipments (rail-truck, truck-air, truck-water, etc.) account for 16 percent of freight-by-value movements. Passenger rail and transit’s share, as one might expect, is a big ol’ goose egg. So, in addition to accounting for the vast, vast majority of passenger mobility, roads move the materials we all enjoy. The positive network effects from our roads are very real and very large. They would be greater still if Utopian train-loving planners would do their jobs by focusing on reducing traffic congestion, which costs the American economy $101 billion a year [PDF], rather than “livability,” “walkability,” “sustainability,” and the other -abilities that are little more than code words for “making driving as inconvenient as possible.”

While I share Lee’s concern that highway and street subsidies, along with land-use regulations, are anti-libertarian and distortionary, there is much more waste per dollar spent going on in the world of transit. Rail transit is almost always wasteful (and almost always idiotic if it is above-ground) given alternative cheaper service that can be delivered by buses. Building subways — and rail transit in general — is an extremely expensive undertaking and it only makes sense in a few CBDs (note: not necessarily whole cities and definitely not for wider metropolitan areas) — Manhattan and San Francisco, for instance. And while the Highway Trust Fund, of which more than 15 percent is diverted to transit, still sort of embodies the user-pays/user-benefits principle (although not so much anymore thanks to Congress’s refusal in increase fuel excise taxes and really terrible budget forecasting), transit and even-worse Amtrak advocates don’t even try. They just want your money: transit beneficiaries paying anywhere close to the cost of their use is unheard of.

The land-use policies that all three of us abhor are probably in large part a result of the increased democratization that Welch and Gillespie repeatedly speak to in their book, not a counterexample, unfortunately. And while Lee can look into the past to say what should have been done, there is no way he can convincingly argue that autocentric living is going out of style (suburbs and small towns are still booming across the United States). And there’s no way to hop into a time machine and stop the Robert Moseses before the damage is done — the only way to reverse this ongoing trend is to institute the massive government social engineering programs that Lee claims to hate.