The debt ceiling deal between the administration and Senate Democrats on one side and House Republicans on the other includes significant discretionary spending cuts, though not as much as the Tea Party had hoped for. It is not clear yet which programs will be cut, but since all discretionary spending is fungible, money for transportation is going to become much tighter.
In a climate of austerity, and one in which transportation is not considered as untouchable as Social Security, transit agencies must find alternative sources of funding. Multiple transit blogs have proposed state and local government support instead, including The Transport Politic and Portland Transport; on the Infrastructurist, commenter Progressive Capitalist suggested the same with respect to the gas tax, which is about to lapse independently of the debt ceiling.
Let me pour some cold water on this idea: in a climate of austerity, states will lose federal support, and need to cut spending or raise taxes, of which the former is more likely. The AP wire documents some instances of state budget gaps that will get worse under the new austerity program; even in Connecticut, one of the biggest per capita tax donor states, 16% of non-transportation funding comes from the government. In other states, which are poorer and sometimes net tax recipients, the problem is much larger. Although the drying of federal aid may well skip transportation, states will still be under pressure to cut everything. Money is fungible like that.
Simultaneously, the New York Times published an article documenting Rhode Island’s transit service cuts, in its attempt to plug its own budget hole. Although the article’s tone is very politically pro-transit, noting that it’s critical for small business, and spends much time uncritically quoting job numbers from APTA as well as Brookings’ shoddy transit accessibility study, one can glean the political priorities in Rhode Island from it. I’ll come later to the technical side of Rhode Island’s service cuts, but for now note that there seems to be no political will to raise taxes to keep buses running, although the state is very liberal.
At the above-linked Portland Transport post, Engineer Scotty went further and said that austerity would actually change transportation priorities, perhaps even making transit better off in the long run by making people less able to afford cars. He says the following consequences are likely:
- A lower standard of living overall.
- Higher prices for fuel, especially petroleum products. Most of the oil we use is imported; and a devalued dollar would make oil more expensive. A reduction in US military presence could affect the stability of oil shipments, and the continued rise of emerging economies such as China, who will have their own increasing needs for oil, will further increase prices.
- Fewer funds for capital projects. In an austerity-focused economy, there would be less money available for infrastructure projects–or for anything other than debt service, for that matter.
- More migration to urban areas.
- Wage adjustments in the public sector. This section is above and beyond any reductions in wages to affect the broader economy.
- More people unable to afford cars. The combination of increased fuel costs and decreased overall disposable income will likely increase the number of households unable to afford an automobile, or cause wealthier households to cut back, perhaps to a single family car rather than one per driver.
As a result, he suggests, there will be more local and private-sector involvement in transit, regulations will be relaxed in order to reduce costs, investment in highways and rail will decline in favor of on-street BRT (of the kind that only requires paint), and an end to the transit stigma.
My analysis is a good deal more pessimistic. States do not have money for transit operating subsidies, or even for the in-house expertise required to reduce the amount of subsidy required without enormous fights with the unions. Declining gas tax revenues mean less money for transit rather than more; although the marginal rider who switches from driving to riding the bus produces a net increase in revenue to the agency, other drivers who respond to lower incomes by traveling less produce a much larger net decrease in revenue. Furthermore, the stigma that only poor people ride the bus is not going to change merely because more people are poor.
On the contrary, the situation is going to force even more federal involvement in transportation, assuming that all else is equal, i.e. that the bipartisan austerity plan to be released at the end of this year does not specifically target transportation funding. The states are genuinely cash-strapped. Their revenues come from income taxes and from sales taxes that exclude basic necessities, of which the former are quite cyclical and the latter extremely so. They can only issue bonds for so long before they get their credit rating downgraded.
In contrast, the federal government can borrow at a negative real interest rate, and is embarking on an austerity plan for purely political reasons. I fully expect states to start begging for more federal help a year or two from now. This will be especially egregious if after the 2012 election one party takes control of the White House and both houses of Congress, in which cases all promises of austerity will be a distant memory. But even if austerity persists, a few self-serving reports by the construction industry saying that infrastructure requires even more trillions than previously thought are all it takes. At the end, the federal transportation bill may well stay the same size, while state transportation funds are certain to shrink.