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U.S. Transportation Subsidies

America's long history of subsidizing transportation.


FACTS ABOUT TRANSPORTATION SUBSIDIES
A paper by the Missouri-Kansas Passenger Rail Coalition and the
Ohio Association of Rail Passengers

Much is made of the $30 billion spent on Amtrak over the last 30 years, but in that same period the federal government spent $1.89 TRILLION on air and highway modes, according to the New York Times and Washington Post.

Since 1946, the federal government has poured billions of dollars into airport development. In 1992, Prof. Stephen Paul Dempsey of the University of Denver estimated that the current replacement value of the U.S. commercial airport system-virtually all of it developed with federal grants and tax-free municipal bonds-at $1 trillion.

Not until 1971 did the federal government begin collecting user fees from airline passengers and freight shippers to recoup this investment. In 1988 the Congressional Budget Office found that in spite of user fees paid into the Airport and Airways Trust Fund, the taxpayers still had to transfer $3 billion in subsidies per year to the FAA to maintain its network of more than 400 control towers, 22 air traffic control centers, 1,000 radar-navigation aids, 250 long-range and terminal radar systems and its staff of 55,000 traffic controllers, technicians and bureaucrats.
- James Coston, member, Amtrak Reform Council, 2001.

The purpose of this paper is to document subsidies highway and air modes of transportation have received over the years.
Much is made of the support Amtrak has gotten since its inception in 1971 by critics who overlook the huge amount of funding provided by all levels of government on behalf of the auto and airplane.

As has been noted by well known conservative Paul Weyrich, of the
Free Congress Foundation, the current transportation system, dominated by highway and air transportation is by no means a free market outcome. Rather it is the result of massive and sustained government intervention on behalf of these two modes. Indeed, before government became involved on this massive scale, most transit and intercity rail passenger systems were privately owned for-profit enterprises.


U.S. Department of Transportation Funding, 2002:

$32,300,000,000 54% Highways
$14,000,000,000 23% Aviation/ airports
$  5,000,000,000   Mass transit
$  4,000,000,000   Maritime
$     521,000,000  -1% Amtrak
$60,000,000,000   TOTAL USDOT BUDGET

 

Federal transportation funding 1971-2001

$1,890,000,000,000 Air & highway funding 63:1 ratio  
$     30,100,000,000 Amtrak funding    

-Sources: New York Times, Washington Post


Amtrak's entire budget accounts for less than one per cent of US Department of Transportation spending---$521 million vs. $33 billion for highways and $14 billion for air, not counting the post-Sep.11 bailout of $15 billion.
-Source: US Department of Transportation

Federal transportation funding 1921 to 1971, the year of Amtrak's creation:

1921-1971 * 1947-1971 ** 1958-1971 ***  
$72,400,000,000   $50,000,000,000 Highways
$16,200,000,000 $11,300,000,000   Aviation/ airports
$  9,100,000,000     Water
$       65,000,000     Rail
           $50,000,000 Bus subsidy- annual

    *Source: Passenger Train Journal 1973
   **Sources: Report to accompany S. 3706, Rail Passenger Service Act of 1970, 91st Congress, 2nd Session, April 9,1970 and R.L. Banks, Is Subsidy...

***Source: USDOT, "Study of Federal aid to Transportation" and R.L. Banks and Associates, "Is Subsidy Unique to Amtrak?"


About User Fees... they don't pay the bills
User fees only account for about 60% of highway spending by all levels of government. The rest comes from non-users and in 1990, non-highway users subsidized roads at the rate of $18 billion per year.
-Source: Highway Statistics 1990,
Tables HF-10 and SMT, Federal Highway Administration


Air passengers did not pay user fees between 1963 and 1971, ironically the year Amtrak began operation. "Airport and airway development costs incurred prior to the assessment of user charges in 1971 have been treated as sunk costs, none of which will have been or will be paid for by air carriers...these sunk costs total $15.8 billion."
-Source: Study of Federal Aid to Rail Transportation, USDOT 1977

Railroad passengers paid for airport construction through special tax!
Between 1942 and 1962 a 10% rail ticket tax was levied on railroads as a war measure to discourage unnecessary travel. This tax generated revenues of over $5 Billion, which went into the general revenue fund and ironically, was used in some
cases to build more airports and highways. In today's dollars, that probably would amount to about $100 billion and one wonders what would have happened if that money had been invested in rail service after the war. By the time, the tax was lifted, the passenger train was already on the ropes.
-Source: report by USDOT Secretary William Coleman, 1977

Air passengers also paid a federal passenger tax, also as a war emergency measure, but the government was busily investing in air facilities at five times the rate at which taxes were being collected.
-Source: Study of Federal Aid to Rail
Transportation, USDOT, Jan 1977


Airlines don't even pay HALF of FAA cost
Between 1980-1989, total spending by the Federal Aviation Administration (FAA) was $54.9 billion. Of that amount, less that half, 45.1% came from user charges. The rest, 54.9% came from non-users through the general revenue fund.
-Source: Office of Management and Budget

Federal support for transit AWOL
Federal support for transit and intercity rail is relatively recent: 1964 for transit and 1971 for intercity rail. By contrast, the federal government has supported road and waterway construction almost from Revolutionary times and air since the 1920's. It was not until 1973 that a portion of the federal gas tax could be used for transit. It still is off-limits for intercity rail.
Various sources

U.S. has a Third-World rail transportation system
According to a study by the International Railway Journal, the United States ranks between Bolivia and Turkey in mainline railroad spending per capita at $1.64. The average is $21.85, with a high of $228.29 for Switzerland and a low of $.29 for the Philippines.

Between 1971 and 1994, capital spending for Amtrak has never exceeded $220 million in any year...about the cost of a mile or two of urban freeway. On that, Amtrak is supposed to make the investments to become profitable.
-Source: The Amtrak Story, by Frank Wilner

Years ago, transit and intercity railroads were privately operated for-profit enterprises. This changed when all levels of government began subsidizing highway and airport construction, which ultimately led to the demise of all privately run service. The irony is that the government has had to step in to preserve what was left of these services.

The paving of America...
The federal involvement with highways goes back to 1905, when the Bureau of Public Roads was created. In 1916, President Wilson signed the Federal Aid Road Act, which dedicated $5 million to help states build new roads. This marked the beginning of federal revenue sharing with states for road construction. In 1921, the US Congress set a goal of linking every county seat in the nation with smooth surface roads.
-Source: The Amtrak Story, Frank Wilner

Between 1958 and 1971, the year of Amtrak's creation, the federal government spent more than $50 billion on highways and at the same time, the government subsidy to intercity bus operators grew to $50 million annually.
-Source: USDOT, "Study of
Federal aid to Transportation" and R.L. Banks and Associates, "Is Subsidy Unique to Amtrak?"



There he goes again...
When the Reagan Administration claimed that each rail passenger required a $35 subsidy, Amtrak President Graham Claytor countered that air passengers were subsidized at $42 each, including $9 for the air traffic control system.
-Source: US
News and World Report, April 29, 1985


If the airlines had to pay for the cost of the at traffic control system, as Amtrak now pays for the upkeep of the Northeast Corridor, they would soon be out of business. In 1989, it cost the federal government $3 billion to operate the system vs. the combined net profit of $1 billion for the airline industry.
-Source: "Supertains: Solutions to America's Transportation Gridlock, Joe Vranich

Feds build airports but tax train stations to death...
Washington's National Airport was built with $36 million in federal funds and between 1941 and 1957 had cost $4 million to operate; the airport paid no taxes.

At the same time, Washington Union Station was valued at $32 million and paid more than $6.9 million in taxes
-Source: Trains Magazine

The Pennsylvania Railroad modernized its Pittsburgh station in the 1950's only to see the taxes increased and the money spent to improve the Greater Pittsburgh International Airport.
In 1955 alone, railroads paid $92 million in taxes on passenger related facilities.
-Source: "Supertains: Solutions to America's Transportation Gridlock."

The Essential Air Service Program subsidizes air service to small cities, which would not otherwise be served by air carriers. This amounted to $25 million in 1989 for a small trickle of customers. For example, at Manitowoc, Wisconsin when an average passenger boards a flight, the fare is $89, but the subsidy is $515! This city is only 39 miles from Green Bay, where more service is readily available.
-Source: Supertrains

Some other interesting federally-funded transportation projects:

$12,000,000,000 Los Angeles Proposed LAX expansion (1/20/01)  
$  5,400,000,000 Atlanta Hartsfield International Airport expansion Georgia's largest public works program ever
$  3,400,000,000 St. Louis Airport expansion  
$  3,000,000,000 Washington Dulles Airport expansion  
$     521,000,000 U.S. Amtrak yearly funding Serving 530 U.S. cities in 46 of 50 states
$     112,000,000 Los Angeles LAX aesthetic upgrade  

Note how Atlanta's expansion - one airport project - is NINE TIMES Amtrak's current appropriation.

Other road and waterway federally-funded projects:

$654,000,000,000 Maryland State ports expansion
$    1,000,000,000 Louisiana Expansion of Red River Waterway
$  13,000,000,000 Boston "Big Dig" freeway 20-year expansion project
$    6,000,000,000 I-95 Wilson bridge project
$           3,200,000 Alabama Two-mile highway widening cost.
$           3,000,000 Alabama Cost to provide passenger train service to Montgomery, Mobile, Birmingham

For the same amount of money, the state of Alabama could fund a 200-mile passenger train route that would serve many more citizens than widening an EXISTING two-mile roadway. Such passenger train would serve Birmingham, Montgomery, Greenville and Mobile - half of the state!



The facts above point up two things: That government does not have a real, coherent transportation policy that takes into
account the needs of all modes. Instead one or two modes gorge at the federal trough while everyone else starves. The other point is that ALL modes are subsidized. Why? Because it is in the public interest and transit or rail should not be subject to an unrealistic set of expectations no other mode has to live up to.

Note: Original paper was modified and expanded with additional details by MOKS Rail.

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