Does Peter Bell Actually Get It?

In his annual State of the Region message, Metropolitan Council chair Peter Bell provided the non-startling news that in the current economy, the council is finding it difficult to fund metro bus operation.

According to the Star Tribune, because new car sales are down year-over-year, the council is taking in less revenue from motor vehicle sales taxes. Total for the current fiscal year is $12 million less than in 2003. Bell estimates a shortfall of $45 million in the coming biennium but said a 25-cent fare increase that began Oct. 1 will raise only about $7 million a year. Bell would use any federal stimulus money to close the operating gap.

In a statement dripping with irony, Bell said vis-à-vis funding new routes with anticipated federal stimulus dollars, “It makes no economic sense to build what you can’t afford to operate?” He added, “Nor does it help the economy to hire a construction worker if it means laying off a bus driver.”

In a very important sense, Bell gets his economics right. When government attempts to “stimulate” the economy, it doesn’t create any new jobs or new wealth – it simply transfers wealth to a visible group from multiple unseen groups. If the stimulus is used to build new light rail transit, some construction workers will find employment who otherwise might not have work, but at the same time some bus drivers will be laid off because stimulus funding is not available to operate the buses. Bell gets that, but (for the irony impaired) that is only part of the equation.

When government subsidizes the bus system (the fare box pays about one-third of operating costs across the system), the subsidy funding must be taken from a taxpayer. A visible bus driver is hired, but a waitress is laid off, or a home remodeler doesn’t get a job, or a retail clerk is not hired because the taxpayer didn’t have the money to dine out, add a room addition, or buy a new coat.

If as Bell correctly notes, hiring a construction worker with stimulus money means laying off a bus driver (for lack of stimulus money) then government subsidy of a bus driver necessarily means a private sector worker will be laid off or not hired because of the subsidy to transit.

Bell and urban planners talk about the “demand” for transit, but when they do they ignore the fact that demand is always “at a specific price.” reports Metro Transit’s bus and train ridership (nearly 82 million rides in 2008) may have raised the ridership levels to a higher point than at any time since 1957. But that demand is not a marketplace demand; it is based on a price that is artificially kept below the breakeven point. Were people charged a self-sustaining price for a public transit ride, demand would fall off considerably. Transit drivers and transit riders benefit from government subsidies, but society as a whole loses because funds do not flow to their most efficient use. For every job “created” by subsidizing transit, another private job is lost or fails to come into being – just as Bell acknowledges happens when stimulus money goes to one group instead of another.

There’s more to a 21st century transportation system that simply pouring more concrete and laying more track. Necessity and willingness to pay on the part of system users is a sounder criterion for setting transportation priorities than the stimulus-inspired “shovel-ready” standard.