Policy Analysis No. 559

A Desire Named Streetcar: How Federal Subsidies Encourage Wasteful Local Transit Systems

Executive Summary

The nation’s mass transit system is a classic example of how special interests prevail over the needs and interests of voters and taxpayers. Total inflation-adjusted subsidies to transit—buses and trains—have more than doubled since 1990, yet total ridership has increased by less than 10 percent. By comparison, urban driving has increased by 42 percent.

Prior to 1964, when Congress began subsidizing transit, the industry was mostly private. Since then, the industry has been almost entirely taken over by state and local governments. Today more than three of every four dollars spent on transit come from taxpayers, not transit riders.

The effectiveness of local transit systems is undermined by federal subsidies, which encourage the construction of highly visible and expensive services such as light-rail trains to suburban areas despite the chronically low number of riders on those routes. Federal subsidies to transit advocacy groups and misguided environmental and labor regulations also encourage a large investment of taxpayer money in wasteful transit systems.

The ideal solution would be to devolve transit and other transportation funding entirely to state and local governments. Short of that, Congress should reform the federal transportation funding system to minimize the adverse incentives it creates.

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Randal O’Toole is director of the Thoreau Institute and an adjunct scholar at the Cato Institute.