I’m sure that Robert Reich has forgotten more about economics than I have ever known or ever will know but in a recent post on public transport he makes the following claim about costs of public transport:
Even more absurdly, right now when it’s needed the most, public transportation across the land is being cut back. This is because transit costs are soaring by the same skyrocketing fuel prices that are forcing people out of their cars, at the same time transit revenues are shrinking because most transit systems depend largely on sales taxes, now dwindling as consumer purchases decline in this recession.
Public transit systems are cutting back but they aren’t cutting back because fuel prices are rising, at least here in Chicago. Here’s the most recent Chicago Transit Authority budget and, yes, it complains about rising fuel costs. But that’s not what makes public transit expensive.
The CTA’s operating budget for 2007 was $1.079 billion. Labor expenses were $772.8 million (71% of the total) and fuel expenses were $68.6 million (6.3% of the total). The cost of employee benefits constitutes 27% of labor expenses. That includes things like health care and pensions. That 27% ($193 milllion) dwarfs the cost of fuel and is rising fast. Merely holding the line on the cost of employee benefits let alone cutting them would cover a good bit of the cost of more expensive fuel.
But this ties directly back to the point I made in the comments to James Joyner’s post that drew my attention to former Labor Secretary Reich’s post: public transit needs to decide whether it’s a means of employing people at high wages, a method of subsidizing the poor, or a means of moving masses of people around. It won’t be able to achieve all of those equally well.