"Randal O’Toole: Well, there’s a recent story that – unfortunately it
wasn’t in the Onion but it was an authentic story in the Los Angeles
Times that said despite the fact that we’re spending billions of dollars
on transit, transit ridership is declining and that’s true here in
Washington DC as well. Transit ridership seems to have peaked about just
before the financial crash and it’s not really recovering since the
financial crash.
Really transit has been on a downhill since 1960
or 1950, the end of World War Two. What we’re seeing is people plowing
more and more money into it and productivity is going down. The number
of transit riders carried per transit worker is steadily declining.
The
amount of money we spend to get one person out of their car has gone
from a dollar in 1960 to $25 or more today just to get one person out of
their car for one trip. We build transit lines that are so expensive
that it would have been cheaper to give every single daily round trip
rider on that transit line a new Toyota Prius every single year for the
rest of their lives than to keep running that …
Trevor Burrus: I’m laughing and crying at the same time.
Randal
O’Toole: And there are a lot of forces at work here. It started out in
the 1970s. Congress had given cities the incentive to take over private
transit. In 1965, almost all transit in America was private. By 1975, it
was almost all public. Congress had said to cities you take over
transit. We will pay for your new buses. We will pay for your capital
costs. You just have to pay the operating costs.
So cities took
them over and then in 1973, congress said, “Oh by the way, if you have
an interstate freeway that’s planned in your city and you decide to
cancel it, you can take the capital cost of that freeway and use it for
transit capital investments.” Well, cities thought that was great except
for buses are so cheap that they couldn’t afford to operate all the
buses that you could buy for the cost of an interstate freeway.
So
then the mayor of Portland came up with an idea. Let’s build a light
rail line. That’s really, really expensive. That will absorb all the
costs of the freeway even though it’s only going to carry about a tenth
of as many people as that freeway. It will absorb all that cost and it
won’t cost that much more to operate than a bus. So we will be able to
use that money and I won’t be accused of costing the region jobs because
we’re not building that freeway because we’re building the light rail
instead.
Well, what happened was that created – that transformed
the transportation and construction industry. Almost everybody in the
industry who was building roads could easily transform into building
light rail. So they didn’t care whether they were building roads or rail
or what. They just wanted to build something and if people wanted to
build rail, that was fine with them and they became a lobby for rail.
People have talked about the highway lobby. Today the rail construction
lobby in Washington DC is ten times richer than the highway lobby in
Washington.
Trevor Burrus: Do any of these light rails pay for themselves?
Randal
O’Toole: No. First of all, no transit – public transit pays for itself
simply because it doesn’t have to because they’re all drawing on
government money. There are a few transit systems in this country that
do pay for themselves because they’re entirely private. They don’t get
any subsidies. One is the Atlantic City Jitney. One is the New York
Waterway. It’s a ferry system in New York City between New Jersey and
Manhattan.
One is the publico, a jitney system in San Juan, Puerto
Rico. Actually carries more people than the public transit system that
was subsidized and encouraged more passenger miles. There are private
transit systems in some cities that don’t regulate private transit
operations that compete against public transit and do so very
effectively. Most cities however made it illegal to compete against the
public transit agency so they can just raise their costs with impunity
and charge at the taxpayers. Transit cost them – transit on average,
four times as much to move a person one mile as it does to drive a car
that mile. Rail transit is far, far more expensive than bus transit and …
Trevor
Burrus: I mean a bunch of politicians choosing a bunch of options that
are super expensive and bad at their job. I mean this wouldn’t be the
first time this has happened. But it’s so bad. You have to wonder like
why this is even – I mean light rail. When I’m home in Denver, I see the
light rail cruise by and let’s say there are about seven people on it
and I wonder how much it costs to just take these seven people, this
length of – why are they doing that? I mean it’s just crazy …." - Transportation, Land Use, and Freedom, libertarianism.org, 02/26/2016
Link to the entire article appears below:
http://www.libertarianism.org/media/free-thoughts/transportation-land-use-freedom
"And then what? What's next?" comes from Thomas Sowell. Sowell tells a story of a college economics professor he had, that when a student came up with a grand scheme of how to solve an economic problem, the professor would then ask: "And then what? What's next?"
The point being that few schemers look beyond the first stage economic consequences of said scheme. What is the second, third, and nth economic consequence of the scheme? Sowell calls it "Thinking beyond stage one" which is very likely based on Frederic Bastiat's (French economist) The Seen and The Unseen (1851):
http://www.econlib.org/library/Bastiat/basEss1.html
Buchanan, Tullock, Arrow and many more public choice theory academics have pin pointed something from the above discussion: politicos sell the first stage consequence. The first stage consequence is the only important consequence to the politico due to political time horizons (next election). Hence consequences years into the future of a scheme proposed today are meaningless to the politico as they will likely be out of office, retired, or have moved through the proverbial revolving door and be a lobbyist when the other consequences appear. But to achieve reelection based on political time horizons, the first stage consequence is the only stage of consequences important to the politico.
Also, the politico associates first stage economic consequences with "doing something". That is, the politico has to appear as if he/she is doing something (the exception being the political enigma Calvin Coolidge). The politico is convinced they need to be showing the electorate they are "doing something" and that something is of no matter regarding future consequences per above as the politico merely deploys such actions based on political time horizons and they know, they themselves, will pay no direct price for failure of the scheme. Sweet!
Now let us put the above into an action phase. At some point in the past building industrial parks was a "doing something" stratagem. Yet the stratagem was really a scheme and the second, third, and nth economic consequence of the scheme? As reported, the
Greensboro-High Point MSA (Metropolitan Statistical Area) is
#4 in the nation for comparable MSAs regarding empty industrial sites.
Where are those politicos today that proposed and initiated the schemes? Who is left with the consequences of #4 in empty industrial parks? Meaning, politicos pay no direct price for failure (other than non-reelection) while the remainder (everybody else) is left with the consequences and the price of failure. Insidious huh?
Consider the Mega Site. Consider political time horizons and "doing something" and first stage economic consequences. Consider the building of the 181st mega site available across the nation (which could likely be depicted as 181 lottery tickets, some purchased with taxpayer money, trying to win the one elusive auto assembly plant).
Now let us move to the future. Twenty years from now 180 mega sites will not have an auto assembly pant, maybe, maybe one site will have an auto assembly plant. The 181 sites, those built with public funds, showed politicos where "doing something". The politicos are gone, taxpayers twenty years from now are left to deal with empty mega sites. Therefore the taxpayer associated with the empty sites paid for the politico "doing something" which was directly associated with the particular politicos political time horizon, yet the politico paid no direct price for failure, only taxpayers paid the price. Very nice indeed!
The right thing to do never requires any subterfuge, it is always simple and direct. - Calvin Coolidge
A question politicos desperately want to avoid but yet a question one should always ask oneself regarding grand plans of politicos is: the seen and the unseen. What is the counterfactual to past grand schemes or the alternative to currently proposed schemes? (1)
For example, say political taxing authority G spends plenty of resources on grand schemes over a thirty year period while simultaneously raising taxes to finance the schemes. Assume for a moment that the grand schemes yield little or nothing regarding economic growth. The counterfactual would be over the thirty years no politico spending occurred, taxes were not raised and the schemes never came to fruition. Would this counterfactual have yielded zero, negative or positive economic growth?
One can’t measure a counter factual as the counterfactual never occurred. However, one can indeed measure the impact of a series of schemes. If the series of schemes generated nothing in the form of economic growth for political taxing authority G, and no growth was occurring as the series of schemes unfolded, then why would one continue the series of schemes? Would not one measure results along the way and determine the schemes are in effect schemes (notional propositions) and merely resulting in first stage economic consequences followed by negative cascading unintended consequences resulting in nothing. Yes, the proverbial sound and fury signifying nothing.
When one examines a series of schemes over an extended period that produced zero economic growth, yet schemes A - Z were unleashed as serial schemes, why did the back-to-back-to-back schemes continue when zero was being accomplished?
Serial schemes, the continuation thereof, come with a variety of reasoning of which the marquee reason is: This time is different. The reasoning has a problem in that this time ends up no different than last time as it will be no different next time as notional propositions are in fact notional. This same reasoning comes with the excuse that it wasn’t the scheme that failed it was those implementing the plan that failed. Hence it isn’t the scheme it’s the people. Yet the people change and the scheme continues to fail. Another variation is size. If the scheme had been bigger it would have succeeded. And the granddaddy of all: Judge us by our intentions not the results.
The next question to ask oneself is did someone or some group benefit from serial scheme failure? That is, win, lose or draw was a particular group or were a series of groups benefiting? Was it the same group/groups over time? The next question is what group never benefited from serial scheme failure? Another question is who paid the tab for the serial scheme failure?
Returning to the counterfactual discussion above of thirty years where no politico spending occurred, taxes were not raised and the schemes never came to fruition; although one can’t measure the counterfactual one can indeed discuss the mechanism. That is, all the James and Jane Goodfellow(s) would have had resources at their disposal in the form of tax money never extracted. That would be a large group benefiting. Would all the James(s) and Jane(s) have used their resources in such a way to create serial scheme failure or would they have been more judicious with such resources?
What about the supposed “economic impact” of politico spending vs. the counterfactual “economic impact”? One should consider that government creates nothing that the private sector would not have produced absent tax. Meaning government can only exist by extracting resources from its citizens via tax. Hence X resources are fixed in the short-run and the choice to have someone else spend X or the larger group spend X, is the choice, and additional “X” is not created in either spending scenario. Merely the basket of goods and services changes depending on who spends X.
In the counterfactual a large group is benefiting with additional resources and from a rational point of view this group by-and-large are not going to engage in serial scheme failure. This group indeed creates “economic impact” albeit in a million transactions of wide variety. Moreover, each individual makes those transactions in their very own particular time and particular circumstance which is an every changing time and circumstance. Stated alternatively, spontaneous/emergent order creates economic impact.
The grand monument to “doing nothing” is one thousand more donuts are sold per day, one hundred more oil changes, Sally paints her house, Mae buys a bicycle and so it goes. Those transactions, or more succinctly exchanges at the point of mutual satisfaction, create massive economic impact. Meanwhile, one forgoes the grand monument to “doing something” and forgoes items such as arenas, swimming pools and music halls.
Coming full circle, political schemes of spending other people’s money are framed as beneficial as it creates “economic impact” but that economic impact exists without the political scheme. No additional “impact” has been created by politicos via times some multiplier of Keynesian foolishness because if such multiplier does exist, it would exist in both the case of the political scheme and the case of the large group benefiting with additional resources.
Notes:
(1) What Is Seen and What Is Not Seen, Frédéric Bastiat, 1851.
http://www.econlib.org/library/Bastiat/basEss1.html
Upon the next occasion in which local politicos bestow corporate welfare, disguised as “economic development“, upon some firm wanting to relocate to the locale or threatening to leave the locale, one would be well served to consider the following regarding the accompanying “economic impact study” (guess) that outlines all the wonderful things that will happen when such corporate welfare is bestowed.
Yes, that rosy picture (guess) that comes in tandem with the corporate welfare handout:
“The Government spenders forget that they are taking the money from A in order to pay it to B. Or rather, they know this very well; but while they dilate upon all the benefits of the process to B, and all the wonderful things he will have which he would not have had if the money had not been transferred to him, they forget the effects of the transaction on A. B is seen, A is forgotten.” - Henry Hazlitt
