If New York really wants to improve its transportation, it should privatize the subway.
If New York really wants to improve its transportation, it should privatize the subway.
N ew York City’s new “congestion pricing” is becoming one of the most hated government policies in a city already full of well-hated policies. Is it actually a bad policy, though?
The economic arguments for road-congestion pricing are reasonable. In general, people should pay for services they use. That will make it financially sustainable to provide the service and will properly incentivize service users to consume it responsibly.
In general, people don’t pay for roads when they use them. The time component is important for the question of congestion specifically. Drivers pay federal and state gas taxes, which fund road upkeep, roughly in proportion to how much they use the roads in aggregate (drive more ==> buy more gas ==> pay more tax). But congestion results from lots of people using the roads in one place at the same time.
During times of high congestion, your usage of the road directly affects other drivers’ usage of the road. You impose a cost on them, and they on you, that is not internalized because the service is not well-priced. Congestion pricing is one way to fix that. Making drivers who use congested roads pay in proportion to the level of congestion will discourage less valuable uses of the roads and make room for more valuable ones. It does so by making drivers think twice about the costs they impose on others by using the roads and forcing them to decide whether it is worthwhile.
The owner of the roads, in this case the government, can then use the money raised from the congestion pricing to improve the roads. That should make the roads more useful to the city as a whole and to the drivers who use them.
That’s the economic theory. That’s not what New York has done.
What New York has done is impose a flat $9 charge for most vehicles to drive below 60th Street from 5 a.m. to 9 p.m. on weekdays and 9 a.m. to 9 p.m. on weekends. At other times, it is $2.25. If it was really congestion pricing, the charge should vary based on congestion, rising during the morning and evening commutes and falling at other times.
The technology to do this is not difficult to implement and already exists, for example, on I-66 in Virginia leading into Washington, D.C. New York politicians probably didn’t do it because they couldn’t bear the negative publicity that would come from variable rates at the highest-traffic times that would probably go to $30 or higher. (These same politicians have no qualms about larcenous taxation because those numbers don’t appear on light-up roadside signs on the way to work.)
New York has also added a 75-cent surcharge for taxis that cross 60th Street and a $1.50 surcharge for app-based rideshare vehicles. It makes sense to charge less for shared vehicles than for personal ones since shared vehicles will be more efficient at transporting more people throughout the day. But it doesn’t make sense to charge a higher rate for app-based ridesharing versus taxis, except that New York politicians prefer the better-established taxis over the rideshare apps that broke their monopoly.
The money raised does not go to the roads, but rather to the MTA, the state agency that runs public transit in and around New York City. This creates yet another way for non-subway riders to subsidize subway riders, of which there are already several. It also creates another funding stream for the MTA that is not dependent on providing good service. If anything, it creates a financial incentive for the MTA to provide worse service (worse subways ==> more people drive ==> more people pay congestion tax ==> more money for the MTA).
What is being called “congestion pricing” is really just a new way for the MTA to fleece New Yorkers, charged through E-ZPass rather than the tax code. It will of course also have the effect of fewer people driving below 60th Street than otherwise would, so that’s nice if you’re into that sort of thing.
Manhattan is a very densely populated place that lots of people want to go into and out of, so congestion to some extent will be inevitable. Actual congestion pricing would be one way to make it less bad, perhaps, but there are other things New York could do that would probably help more with the overall transportation situation of the city.
One would be privatizing the subway system. Most of the subway network was built by private companies, and thank goodness it was, because the government has made it nearly impossible to build subways since taking over the system. Even a privatized system would require government to deregulate and make it easier to build. And because the most successful subway systems are found abroad, foreign companies should be allowed to bid on the contract to operate it.
Profit opportunities are obvious. Expanding the system to the New Jersey side of the Hudson River, much of which is populated as densely as Manhattan and more densely than Queens or Brooklyn, would create thousands of new customers (and help relieve traffic in the Lincoln and Holland Tunnels). Developing real estate around stations also provides a steady revenue source. The Tokyo Metro was privatized last year, and its initial public offering raised $2.3 billion from investors.
Eliminating the corrupt MTA government-union labor contract would save gobs of money. The new private operator could stop treating the transit system as a jobs program or an environmental program or a social-justice program and just run it as a transit system. It’s much easier to move people on trains than it is to save the world.
The private operator should be free to charge a market rate for the services provided, which is probably higher than the price-controlled $2.90 the MTA charges right now for all rides, no matter the distance. Charging proportionally to distance traveled probably makes more sense. The operator could use the extra revenue to fund improvements to stations and trains and keep everything cleaner, encouraging more ridership.
If politicians are concerned about higher prices, they could establish a program to subsidize fares for low-income people. This would be an improvement because it would make it perfectly clear how much the government is subsidizing subway fares as one line-item in the state budget, rather than the current Rube Goldberg machine of subsidies that hide the costs from taxpayers. It would also only subsidize fares for low-income people, rather than the current system’s subsidies for all subway riders, even ones who can afford to pay more.
If the New York subway system is a valuable asset worth investing in that is helpful for getting around — and I think it’s pretty clear that it is, or at least that it should be — then riders should be willing to pay for using it and private investors should be able to expect a return for investing in it. Transit advocates have a problem with simultaneously insisting that transit is incredibly valuable but also must be run as a charity. If it’s as valuable as they say it is, it should be profitable to run privately, and people should be happy to pay for it. (The same is true of major airports, which are increasingly privatized in most of the world outside North America, and interstate highways, which can be privatized and tolled.)
Instead, politicians who think of themselves as transit supporters are constantly finding new ways to shovel more money to transit without asking the people who use it to pay for it — such as cockamamie schemes to siphon $9 from people who drive across a certain street — while cheering on the government unions that drive up costs and doing little to reduce the antisocial behavior that can make transit a miserable and sometimes dangerous experience for riders. That has a lot more to do with New York’s transportation problems than road congestion does.