Randal O'Toole asks:
"The New York Times recognizes that, even in New York City, transit is perpetually hungry for subsidies. The state’s proposed solutions are to toll the remaining free bridges into Manhattan and new payroll taxes, all to subsidize so-called “sustainable” transportation. But why should drivers pay to subsidize transit and why should the state pay to subsidize Manhattan’s unsustainable densities?"
I don't think that anyone who really understands congestion pricing can ask that first question. Properly pricing roads requires that transit be subsidized, at least until there is so much demand for it that it can pay for itself.
Let's look at the free bridges into Manhattan. They are perpetually congested. Pricing them properly would eliminate the congestion (most of the time). As O'Toole very well knows, this is the economically efficient solution.
But congestion pricing does more than relieve congestion. Congestion pricing tells us when a road needs more capacity. Additional capacity costs money, and drivers are willing to pay only so much for it. That "so much" is exactly equal to the price they are willing to pay to avoid congestion. When the revenue collected by congestion pricing is low -- too low to finance new capacity -- we know we have enough capacity. Drivers aren't willing to pay for more, so building it would be wasteful.
On the other hand, If a properly priced road starts generating "too much" revenue -- enough to cover the cost of expanding capacity -- then it's time to figure out how to add the capacity users are willing to pay for.
There are three ways to add new capacity: (1) add lanes; (2) build new, alternate routes; or (3) add rail. Sometimes (1) will make most sense. Sometimes (2) will be the right choice. And sometimes (3) will be the only sensible choice. A rail line will be the right choice when -- surprise! -- it is the most cost-effective way to add the capacity that travelers are willing to pay for.
Viewed properly, then, transit is simply a means for adding capacity. (Yes, I'm well aware of other arguments for transit, but I'm concentrating on the one that ought to appeal to the economics-inclined.)
The logic of congestion pricing, then, is that the old capacity is supposed to finance the construction and operation of the new capacity. Or to put it in the charged language that dominates transit debates, the old capacity is supposed to subsidize the new capacity. Indeed, if users had to pay "cost" for the new capacity, then too few would switch from the old road. That makes no sense because it creates the wrong incentives.
This does not mean the new capacity -- whether road or transit -- should be free. It should be congestion-priced, too. And as time goes by, the revenue raised thereby might cover the cost of operation and, in turn, finance even more capacity. But until that transpires, we shouldn't insist that new capacity pay for itself. (I'm distinguishing between "new" and "old" capacity for simplicity, but it doesn't matter which is built first. As long as everything is priced right, the subsidies will run the right way.)
Now one can argue about whether New York City's mass transit provides more capacity than the city needs (I don't think that's true) or does so at too high a price (I don't know enough to say). But either argument is irrelevant to the central point: the bridges into Manhattan should be priced, and any revenue generated above the cost of maintaining them should help finance transit.
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