The Failure of a “Government Enterprise.” A Periodic Series on Governments Trying to Run Businesses. Part 6: The Triumph of the Goo-Goos: Subways in the State Era

Are Goo-Goos Part of the Problem?

The Goo-Goos, the “good” government who allied themselves with the mainstream pols of the 1920s and 1930s, had won. After World War II the subways would be a state enterprise and there was no going back to the private management companies.

Today, the Straphangers Campaign is a descendant of the Goo-Goo public interest groups of the 1920s and 1930s. Unfortunately, these groups, though sometimes critics of the MTA—the state agency that runs the subways– are part of the problem.

To repeat, the Goo-Goos were the public interest groups of the1920s and 1930s that pushed for the government to buy out private management companies. They were and are against any form of subway privatization. Today they are joined in their opposition to the private sector by just about every politician and union official in New York.

That means that they want to continue in some form the same system that banished private companies and has ruined the system for over 75 years.

Since 1940, the state system has had a history of cutting service, neglecting maintenance, delaying new lines, and losing money.

More of the Same Failure

Yet, transit historians support the general principles of this public system. In fact, I believe they are part of the problem. They perpetuate the system, giving it legitimacy.

One major historian of the system, Peter Derrick, who wrote Tunneling to the Future: The Story of the Great Subway Expansion That Saved New York, has worked for the MTA. Another subway historian, Brian Cudahy, became a federal transit agency official. Still, these pro-government historians will sometimes grudgingly concede the accomplishments of the private management companies.

The most important of the accomplishments was this: “Without private money,” writes Brian Cudahy, the subways “would not have been possible.” Cudahy became an official of the Federal Transit Authority (FTA), which is supposed to oversee the system and ensure that safety standards are being met.

But the FTA apparently passes the subway buck as well as the New York politicians. I learned this recently when I corresponded with an FTA official, pointing out the subway’s many deficiencies.

A Federal Official Explains It

The FTA is supposed to police unsafe conditions on the subways and municipal transit systems around the nation, which creates conflicts-of-interest as one level of government rarely corrects another.

I asked why the agency wasn’t cracking down on some of the problems that my wife and I frequently see on the subways. The delays and other countless problems, I wrote, were making me “meshuggah” (crazy). Here is what FTA spokeswoman Amy Feinstein wrote back.

“I know from meshuggah, believe me. The FTA has spearheaded the charge for several years now to convince Congress that more funds are needed to modernize our public transit systems and plug the “infrastructure deficit” we are facing,” she wrote.

“Our agency has,” she added, “in fact, allocated a greater percentage of its resources in recent years to help bring these rail systems into a state of good repair than ever before. But you must understand that Congress holds the purse strings. You should let your elected representatives in Congress know your views.”

I am grateful for Feinstein’s response, since the MTA never replied to any of my questions about subway safety and various projects. But I will translate what Feinstein and all the bureaucrats of our ever-growing federal government are saying: I, the obedient citizen, “must” understand. Demand Congress allocate more money for my bureaucracy.

By implication, although no politician or bureaucrat wants to say this, the logic is stark: We should raise taxes and fares and pass more bond issues. This “you must always give us more” philosophy is the answer of almost every government bureaucracy ever created.

Always Give Us More

These bureaucracies usually follow the same line of reasoning whenever anyone wants less government and points out the weaknesses of the current system. It is also the way they reply whenever a taxpayer makes the logical assumption that numerous government agencies should be ended and that, in the meantime, surviving agencies should live with a zero-based budgeting system.

And pace Ms. Feinstein, why should I let “my elected representative” know my views? This is precisely what taxpayers have been doing for generations, and what has been the result? Most politicians tell you they are “for” mass transit and refer you to an authority. Then the authority members and other transit officials such as Feinstein send you back to Congress.

Most of its members’ only experience with riding mass transit is the Capitol Hill subway. Most never have been on the New York City E-train as it suddenly turned into an F-train, confusing passengers and making them late for work or an appointment.

The economic effect of poor mass transit should be studied in detail. I believe it will inevitably show that the reforms of the 1940s and 1950s have hurt the system and the city in myriad ways; that the bond issues of the last 50 years—supposedly designed to provide better services and new lines–have been a joke.

History Repeats Underground

In the period since 1940, when almost every New York City politician has felt obligated to be “pro-mass transit,” the results have been uniform: subway service has become worse and worse. This has happened as myriad fare increases have gone into effect as operating deficits grow. This results in highways becoming clogged with ex-subway riders or those who try to avoid the subways as much as possible.

When a system is owned by the people, as the New York City subway system is, fare increases represent a tax increase. New York City Mayor John Lindsay conceded this point in the 1960s. He ran for mayor the first time in 1965 on a platform of not raising the 15-cent subway fare and other taxes.

However, Mayor Lindsay raised both his first year in office. He gave New Yorkers their first city income tax, which has gone on and on. Forty years later, Money magazine called New York City “tax hell.”

New York City and state, as affirmed by Money and other publications, has some of the highest taxes in the country. And, over the last half century, the subway fares of the state-owned system have gone from 15 cents to $2.75. A half century and numerous fare increases later, still more fare increases are expected.

A Silly Email

My email to the FTA was silly. It is a stretch to expect one level of government to correct another. It is crazy to expect officials of large units of government to understand, no less feel bound by, the concept of the Rechtsstaat. This is the idea of government under law, obeying the same laws that it enforces on the citizen.

This lawlessness of government is similar to that of city police officers. Many are pressured by an always money-needy city government to ticket as much as possible. But that pressure doesn’t extend to ticketing fellow city workers. Several anonymous police officers have conceded in New York tabloids that they don’t ticket their “fellow municipal workers,” even when city bus drivers go through red lights.

No one is ticketing a transit system that is breaking down. At the same time, since there are no private management companies and no profits, it is illogical to think that the transit system has any incentive to improve. Losses result in no penalties for any of the system’s leaders, the MTA, and its enablers, the city and state ruling classes.

The Golden Era and Today

What regular riders of the subway today are “proud” of New York City’s system? Yet, as we have seen in an earlier segment, they once were?

What supporter of the current state system could ever condone a policy of delayed maintenance? Decades of neglect will never be corrected over a few years or through still another bond issue, since it seems no one can compel the government to spend money on the things it promises it will (see the Social Security Trust Fund. If a private entity “borrowed” from a trust fund, it would be severely penalized. However, no penalties are exacted from the administrations, both republican and democratic, that have “borrowed” from Social Security and now tell us the trust fund is headed for problems).

More government meddling with trains has only worsened a bad situation. Even many defenders of the system concede its problems. Cudahy, the FTA official, toward the end of one of his histories of the New York subways, wrote that the problems of the subways have been perpetual despite all the state and federal aid.

“If anything has emerged as a timeless and universal characterization of the New York Subway,” he writes, “it is the endless search for some future salvation, some not-yet-realized resolution of its difficulties and cure for its ills. Plans are made, programs developed, goals established. But they never quite live up to their initial expectations, and a new cycle must begin”

And this statement comes from a supporter of state subways!

Still, our politicians, mainstream media, and bureaucrats are always ready for another cycle of subway bond issues and promises of new lines. The problem is this: They want to do more, much more, of what has been done over the past 75 years, even though the policies have failed.

For instance, a few years ago, there were suggestions of various new taxes to fund the system. Then-mayor Michael Bloomberg, running for re-election in his last campaign in 2009, said he had a plan “to fix” the subways.

What was it?

Raising more taxes on drivers and creating still another government subway authority!

Some things in life can be fixed. Other things are too far gone and must be ended. The Soviet Union, despite its many fans in the West, couldn’t be reformed. It had to be ended. In the private sector, efficient markets liquidate poorly performing firms that take customers for granted. The latter is an apt description of the history of the New York City subways since 1940, except for one factor.

Given the poor service state run subways have provided for many decades, they don’t even take customers for granted—-they ignore them and run the system based on how a small group of political elites decides.

And with no profit and loss system to govern it, with the system run as a public enterprise, these elites can get away with it seemingly forever, no matter how bad service is. That is just as long as the majority of citizens accepts what mainstream media and career politicians tell them: The subways must always be owned by the government, no matter how incompetently they are run and how much taxpayer money is lost.

Government Enterprise?

We live in a nation in which governments have proven, time and again, their incompetence in running businesses. In New York City, city officials had to shutter their off-track betting operation because it lost too much money.

How can the house lose money in horse racing when it has every advantage? This showed that the government has a perverse skill for failure when it tries to manage a business; when it engages in government “enterprise.”

Therefore, I believe that the words “enterprise” and “government” should never be used in the same sentence. This is a nation in which Fannie Mae and Freddie Mac went belly up. It is one in which Amtrak, despite the grandiose Nixonian promises of the 1970s, has lost untold billions of dollars over decades.

Yet, most New York political players imitate the Bourbon kings in their subway policies: they “have learned nothing and forgot nothing.” Indeed, the Coalition for a New Penn Station is urging taxpayers to tear down the current Penn Station and Madison Square Garden—both only about forty-five years old—so taxpayers can give the disastrous, crash-prone, money-losing Amtrak a new home in New York.

The lesson of 1940 in the subways is simple: nothing can be saved in the current governing structure of New York’s government transit systems. They can only be ended because they have failed on every level.

And they will continue to fail as long as politicians and Goo-Goos insist that only the government and its agents can run the trains that have become a disgrace, and as long as no pol—no mayor, no governor, no city council–is ever held responsible for these problems. Taxpayers and riders will continue to pay more and more for a bad service and have no effective say in how the system is run.

There is only one logical answer to the problems of the subways after generations of government mismanagement. New York should do what Michigan did in the nineteenth century after its disastrous experience running state railroads. It should get out of the transportation business forever and do so by writing an airtight prohibition into the state constitution.

And, in New York City the course is clear: Sell the subways.

About The Author

Gregory Bresiger

Gregory Bresiger is an independent business journalist from Queens, New York. His Personal Finance articles have appeared in publications such as The New York Post & Financial Advisor Magazine. He is the author of the eBooks “Personal Finance For People Who Hate Personal Finance” and “MoneySense”.