Tuesday, September 13, 2011

Why Government Spending is So Impotent

We have a proposed Southwest Light Rail Transit line, a high frequency train that would connect downtown Minneapolis to my town of Eden Prairie. funding for capital costs will come from four sources: the transit sales tax in the metro area (30 percent), the County (10 percent), the State (10 percent), and the Federal Transit Administration (up 50 percent). Every month there's a new cost added to the currently estimated $1.25 billion project.

Ridership is projected to be 24,000 to 30,000 rides per day by year 2030, which would be a large increase from the 2000 rides a day generated via the buses that run from Eden Prairie to downtown. Currently, very cushy buses with large comfortable seats carry a handful of people downtown all day on each trip. Revenue, meanwhile, is falling, reflect low demand. Riders pay an average of $2.5 per trip, even though it costs $8 to cover marginal costs. The proposed project has many stops as planners hate express routes that travel nonstop node-to-node because this just encourages riders to live outside the city! The wishful thinking is basically designed to fail, not that anyone cares because they are all spending not just someone else's money, but each agency feels like the other agencies are subsidizing them, as if it doesn't all come from taxpayers in the end.

Spending money on such boondoggles to create jobs relies on a faith in the fiscal multiplier, and the magic of spending to reduce debt. Bush II spent like a drunken sailor (wars, medicare) and this ended with a disaster even though it should have been no worse than the alien invasion expenditures suggested by Keynesian economists. It should be remembered that after independence India focused on jobs and the poor, as opposed to free trade and property rights, and they stagnated for decades. If governments could boost the economy spending on big top-down projects, countries like India would have done much better than countries that were less hands-on in their management.


Bob said...

In Connecticut we have the proposed "magic bus way", 9 miles of dedicated walled off road to cost over $600,000,000.

The ridership claimed is 10,000's a day. A number that no one really believes, but what is truly scary is all the permanent jobs it will create, union state jobs the tax payer is on the hook for. Which is probably the real reason for the magic busway.

No one, not even the government is claiming this will be a breakeven venture. In times like these, this is the last thing we need.

Anonymous said...

Bob, Thanks for the heads-up. I'm a Nutmegger myself but hadn't heard of the magic busway. Taking a quick look at the first search-result article -- http://bit.ly/mWqMnW -- lots of Onionesque material: “Show me one mass transit program out there that pays for itself. It’s about getting people from point A to point B and that’s what government does to help people”... “it may not be a perfect project, it is the first step in creating a comprehensive multimodal transportation system in central Connecticut”...

Bob said...

"comprehensive multimodal", God I love it when public officials talk dirty.

The last ditch effort to stop this nonsense is to insist on an uptodate comprehensive environmental study.

Oddly enough, the one from 20 years ago is seen as adequate by the government. Never has been before, but hey who are we to stand in the way of progress!

Dipper said...

not convinced.

Prejudice + random factoid <> truth !