Home MTA Economics Teaching John Liu, comptroller-elect, a lesson in MTA economics

Teaching John Liu, comptroller-elect, a lesson in MTA economics

by Benjamin Kabak

When it comes to educating New Yorkers about the MTA’s problems, I’m all in favor of advocacy journalism. I’ve long believed the most New Yorkers who don’t actively seek out transit news are ill-informed on MTA matters because our major news outlets both in print and on TV do not adequately and thoroughly report on the MTA’s problems. So when PIX 11’s Project S.O.S. (Support Our Students) came along, I thought I would be able to applaud a major news organization’s transit advocacy efforts.

Boy, was I wrong. Instead of a true educational/journalistic endeavor, PIX’s coverage is sycophantic and just plain wrong. Instead of examining how systemic long-term funding droughts from New York City and New York state have left the MTA, the region’s economic driver, struggling to stay afloat, PIX is using its TV time to blame the MTA for its financial straits and to urge it to restore student MetroCards without coming up for ways to pay for the program or to cover the $400 million gap.

Since Project S.O.S. launched last week, PIX has featured numerous local politicians and transit advocates, and none have advocated for just and proper MTA funding. The news reporters on Channel 11 are making a sham out of advocacy journalism. The most infuriating appearance came from long-time MTA ignoramus John Liu. The current City Council member and New York City Comptroller-elect appeared last week, and if you have the patience for it, watch the video above. I’m going to parry with Liu. The italicized quotes are his; my responses follow.

“It’s a real sad situation. You never what to expect from the MTA nowadays except that they are always asking for more money and threatening to reduce service in all different ways, and this latest round is really…they have reached a new low here.”

Liu makes it sound as though the MTA is choosing to cut services for its own joy. The truth is that the MTA has no choice. They’ve been hung out to dry by Albany and cannot continue to offer the current level of services and pay the current levels of compensation owed to its employees without service cuts or a fare hike. Since Albany mandated no fare hikes in 2010 as part of the sub-par rescue package last spring, the agency is left with one option to balance its books: service cuts.

“It’s absolutely abominable. A number of people have commented this morning that the students are being used as pawns, and that’s exactly right because you know what? Not allowing the students to take free mass transit to and from school, that’s not actually going to save the MTA a single red cent. The fact of the matter is they need to continue the service, allow the students to get to and from school without interruption.”

Here, Liu begins to show a firm misunderstanding of basic economics. According to a 2007 comptroller study, students took 133.4 million free trips during the 2005-2006 school year at a total cost to the MTA of $161.5 million. Simply put, it costs more to the MTA as more people use the system. They have to ramp up the number of buses and subways available, increase the number of employees and clean up afterward.

“Part of it is that it’s a very real situation that the state cut its budget to the MTA, but it is also true that the MTA is jumping the gun here. We don’t really know exactly what the deficit they’re facing is. we don’t know how bad it is. the number keeps changing. The current crisis just came to light a few days ago, last week, and the numbers are shifting. And they’re now saying these reductions will take place months from now and a lot of this is a threat and they’re just trying to angle for more money.”

This one is simply a mess. Liu insinuates that the MTA is jumping the gun because the cuts won’t take place for another month. This is a logical fallacy. The MTA issued its budget last week because it has a legal mandate to approve a balanced budget before the end of the calendar year. It’s true the numbers might shift a bit, but careful accounting and transparency — another of Liu’s tried and tired points — requires the agency to detail why it has a $400 million gap and how it plans to close that gap. If Liu can’t understand that, I fear for the future of the comptroller’s office.

“The students are already up in arms and rightfully so. The parents, the families, they are going to be screaming bloody murder if this every goes through…and like I said before, the MTA is not going to save any money simply by getting rid of these transit passes….There’s no marginal cost to providing the students with the bus and subway service so taking them away from them isn’t going to save any money. They’re not going to be able to eliminate trains because they don’t allow students to get on.”

That, ladies and gentlemen, is a statement on economics from the next comptroller of the City of New York. That is a statement on economics from the person in charge of overseeing the city’s economy. That is a statement on economics from one who doesn’t really understand economics and should never have been elected to the comptroller’s office.

Liu seems to believe that there is no marginal cost to the MTA. He seems to believe that 133.4 million free rides don’t impact the transit agency’s bottom line. He doesn’t understand that free isn’t actually free and that subsidies are subsidizing something that carries a price tag. He doesn’t understand that, by charging, the MTA can capture added revenue, and he doesn’t understand that, by not charging, the MTA is offering up services it must pay for to those who ride at no cost to themselves.

In the end, I can’t say I’m too surprised by John Liu’s ignorance. He has served as the head of the City Council’s Transportation Committee for the past few years and has exhibited no willingness to learn about the city’s transit issues. In the end, we’re simply stuck with another person in a position of power and no idea how to exercise it. The MTA continues to founder.

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Jamisen E December 23, 2009 - 2:15 am

Why does public transportation seem to have financial problems, no matter where it is? Rail is the most energy efficient form of transportation, so why can’t they balance the budget? As to Liu, he may not know what he’s talking about as far as MTA economics go, but I know he’s done a lot of other pretty good things for his (former) constituents in Queens, so I am reserving judgment. He will be a serious mayoral candidate in 4 years, I guarantee it (Men’s Wearhouse guy).

Benjamin Kabak December 23, 2009 - 2:18 am

Great at pork, bad at policy and economics. I expect and fear for the day when Liu is a serious mayoral candidate.

I think the answer to your first question, in a way, is one of politics though. Transit systems have never been allowed by the politicians who control them to price fares at levels that would cover operating costs. Because they are so dependent on government subsidies, they can respond in one of two ways when governments withhold those subsidies: fare hikes or service cuts. Neither are palpable, and although some agencies in the country are allowed to take on operating debt, the MTA is legally required to balance its budget. Hence, this mess every year.

A-W December 24, 2009 - 11:16 am

To be fair, it’s not the Comptroller’s job to advocate for a dedicated finance stream for the MTA. At least in his prior job as Transportation chair at the Council, Liu was indirectly involved int he process.

But I agree with you otherwise; Liu has no interest in talking about the real issues concerning the MTA. This makes him no different from the rest of the “denial oriented” political establishment.

Lawrence Velazquez December 23, 2009 - 2:28 am

Christ, he makes me want to bash my head against a wall. Repeatedly.

Benjamin Kabak December 23, 2009 - 1:11 pm

What’s worse though: listening to Liu or listening to the PIX news anchors nod like sheep and not challenge his baseless economic statements?

Glenn December 23, 2009 - 6:10 am

Transportation is perceived by the consumer as a simple commodity – just get me from point A to B quickly and cheaply. There’s little perception of the true value either in what it takes to make that trip happen (the miracle of 24/7/365 service) or the cost/externalities it imposes on others (pollution, traffic congestion).

It’s not like the airlines, automakers and bus lines make huge profits.

And I’m sure Liu would never ask the unions to make any sacrifices or changes to work rules.

Avi December 23, 2009 - 8:42 am

Technically, the MTA runs no extra trains or buses for students, so it technically does cost them nothing, other than the lost fares, which they might not recoup anyway (students will walk, skip school, jump turnstiles…).

The question anyway is whether students should get free school transportation, if they should then whether the MTA or city and state should be providing it is a separate question, but since the MTA is a part of the state government, it is far from obvious that the rides should not come out of that budget. I have long advocated the abolition of the MTA (and the other authorities) and wrapping them back into the state budget, and this is a clear example of why that should happen. You cannot take money from Peter to rob Paul if Peter and Paul are names for your two pockets.

Calling the MTA the “region’s economic driver” changes nothing. Isn’t education as important as the MTA? Have a region without public schools and see whether you would like to live there?

Clearly, the student passes are a pawn in a battle, Ben you should know that by now, nothing in the MTA is separate from politics. So essentially, Liu is right to call them on their fake deficits (they have fluctuated by more than $100 million in various descriptions), and not to use children and the disabled as part of the game.

The real question is how to fix the system once and for all, but the current funding system just cannot work. The fact of the matter is that last year they played this game and got new funding, this year they want more funding sources and the next year after that they will want more. Honestly, at some point the system needs significant change. As long as the MTA board will borrow to the limit, there is no way around this problem.

Andrew December 23, 2009 - 9:15 am

As I pointed out a few days ago, the MTA runs plenty of “school trippers” – buses that run only on school days, specifically to handle the school crowds. Many of them even run off the regular route to better serve the school.

While the subway side has no explicit “school trippers,” service levels are set according to ridership levels, including students. On lines serving a number of schools, I wouldn’t be surprised if the uptick in ridership at dismissal time is enough to require more service. (Then again, maybe not – most students probably don’t travel through the most crowded section of the line.)

The MTA is a transportation provider. Where else is the transportation provider on the hook for even a portion of the costs of providing service to students? Normally the school district pays for school buses in full. Shouldn’t the NYC Department of Education be fully covering the costs of this program? Why did the MTA ever agree to swallow even a fraction of the costs?

This is simply the MTA’s way of declaring that it can no longer afford to pay for the lion’s share of this program out of its own budget. The MTA can’t declare who is going to pay for it from now one – it can only say that, if nobody else steps up to the plate, the program is going away.

No different from a school bus company declaring that it’s going to stop running school buses unless the school district pays.

John December 23, 2009 - 9:47 am

Yes, maybe they are using the students as pawns in this battle, but that doesn’t change the fact that the MTA never should have been subsidizing student fares in the first place.

Marc Shepherd December 23, 2009 - 1:36 pm

Avi, you make fundamental errors in every paragraph.

It is sheer nonsense to suggest that if free student fares were abolished, every single student in the city would walk, skip school, or jump the turnstiles. I mean, when the fares go up for adults, that does not happen, does it?

If the MTA were abolished, as you have “long advocated,” then some entity would be charged with operating the same functions. Whether you call that entity the MTA or the SPQR, somebody would be running it.

It really does matter how free student fares are paid for, once we have decided that, as a society, we wish to have them. The MTA is a transportation department, not an education department. Having the MTA foot the bill merely masks the true cost of providing our children with an education. Even if there were no MTA, children would need to get to school somehow. Where I grew up, there were dedicated school buses, which the education department paid for. That’s how it works everywhere else. Getting kids to school is part of the cost of operating the school.

While Liu is correct that the size of the deficit has fluctuated, nobody disputes that the state has cut its funding, and that the MTA is required by law to present a balanced budget. Why blame the MTA when the funding cuts and the balanced-budget requirement both came from Albany?

The MTA board has “borrowed to the limit” because that is what the legislature wanted them to do. It was former Gov. Pataki who came up with the idea of putting the capital plan on a credit card. The “game” you referred to is the legislature’s game, not the MTA’s. Remember, we are in this mess because the two preferred funding mechanisms (congestion pricing and East River bridge tolls) were denied by the legislature. The tax increase that they approved produced less revenue than expected, and this year they are cutting subsidies yet again.

Nathanael December 25, 2009 - 12:08 am

You do pin blame where it is deserved.

There seems to be a problem: the state legislature simply doesn’t want to behave responsibly at *all* (not just on transportation issues!), and the City government seems to want to ignore all the problems and make someone else pay for it (which, given that the MTA could probably just dump the Subway back on the city if it wanted to, is rich).

Anon December 23, 2009 - 6:26 pm

Re: “echnically, the MTA runs no extra trains or buses for students, so it technically does cost them nothing”

The “students” are the class of passengers that cause the most Vandalism and litter in the system.

Well second most if you count vagrants… but vagrants aren’t realley passengers.

Sure there are some good kids out there (honor students andd such) and no doubt some good vagrants as well…

but the fact remains that these students cause the most vandalism and litter in the system.

Therefore there is a cost.

Older and Wiser December 25, 2009 - 3:47 pm

It’s not just vandalism against property. It’s the unnerving effect a large group of unsupervised teens can have on other straphangers, (to say nothing of tourists) whenever the kids notice they have sufficient numbers to essentially “take over” the subway car or bus with consciously over-assertive shouting episodes. Whenever that happens, the grownups start wondering if it might not be a safer option to start commuting by automobile.

Nathanael December 25, 2009 - 12:05 am

It’s absolutely 100% obvious that the city government should be paying for transportation for students.

Every other school district in NY state pays for student transportation. Why is New York City avoiding doing so?

Scott E December 23, 2009 - 8:47 am

“and if you have the patience for it, watch the video above”

I didn’t. I stopped the video 45 seconds in. But I ask the question again: Why doesn’t the MTA have a spokesperson in front of the cameras to set the record straight? When a person hears one side of the story, they tend to believe it. When they hear two sides, they need to think and make a choice.

AK December 23, 2009 - 9:40 am

I was at Liu’s final Transportation Committee meeting last week and had to listen to every Council member kiss up to him and tell him how wonderful he was. Yeah, because he was really a great advocate for transit while on the Council…sigh…

JL December 23, 2009 - 9:56 am

What’s really disgraceful about John Liu and his comments is how much he panders to anyone. This is the same man who used the MTA has “two sets of books’ argument during his campaign even though the myth had been debunked years ago. Yes, John Liu ran for comptroller and won on a campaign slogan that he was going to shake up City Hall. Which he will (and not in a good way), but he essentially will disregard his supposed skills as an accountant and just base arguments on whatever wins him votes. This is the sort of politics that has slowed Albany to a halt and this is the sort of politics that will put New York City on a downward spiral. Hopefully the MTA will get a spokesperson because it seems the media and plenty of politicians are willing to say anything while the MTA sits quite.

Nathanael December 25, 2009 - 12:09 am

Well, it sounds to me like the new head of the MTA is going to do his best to clean things up — and if he does what he did in London he will probably start by reorganization the communications/PR department.

SEAN December 23, 2009 - 10:45 am

Most news outlets only give one side of a story because either it would upset the apple cart in some way or knowing they don’t have to. Former president Regan repealed a rule that required news stations to give ballenced reporting. That is why WPIX got away with shotty work in explaning the story with the MTA.
Meanwhile the Whestchester County Business Journal reports that a bus company owner on LI is going to court to get the Payrol tax repealed.

SEAN December 23, 2009 - 10:56 am

I ment payroll Tax.
Of course the business leaders in the berbs love it. It has gotten so ugly that several polititions at both the state & local levels trying to get there counties out of the MTA. This includes Putnam, Dutchass, Rockland & Orange. Where is the news media on this story, silent as usual.

Josh December 23, 2009 - 11:50 am

You are referring to the so-called fairness doctrine, which sounds like a great idea, if you think the Soviet Union was a wonderful place.

AK December 23, 2009 - 12:14 pm

I don’t know if I’d quite go that far in describing what the Fairness Doctrine sought to do. For a VERY cursory overview, see: http://en.wikipedia.org/wiki/Fairness_Doctrine.

Many civil libertarians, while naturally skeptical about any forced government ideology/law regulating speech, are starting to understand that group polarization is the natural consequence of media outlets that promote only one side of an issue (see, e.g. MSNBC and FOX).

I highly recommend “Nudge,” a book by one of my profs, the always-controversial Cass Sunstein. In it, Sunstein describes this polarization as having potentially-grave consequences for teh “system of ordered liberty” constructed by the Founders. Of course, no one knows for sure what increased extremism will do. History teaches us that polarization can lead to mass catharsis by which socities rectify ills of the past (the Civil War being a prime example), or that polarization can lead to heinous violence (see killings of Dr. Tiller and James Pouillon, an anti-abortion protestor, earlier this year).

Alas, I have gone astray. Back to transit… 🙂

QW December 23, 2009 - 10:51 am

What an idiot. I’m appalled by his comment – There’s no marginal cost to providing the students with the bus and subway service so taking them away from them isn’t going to save any money. From my Professor Greg Mankiw – There is no such thing as a free lunch. Also, have you ever seen how rowdy and crazy these kids get while riding buses and subways? They certainly bring a high upkeep cost to the MTA.

Boris December 23, 2009 - 12:29 pm

This is like the Israel-Palestine conflict- 99% of the war is winning the public relations battle. It may be a bit of a stretch to call our politicians terrorists, but their PR tactics are the same.

Think twice December 23, 2009 - 1:50 pm

Agreed. The MTA has only the most rudimentary concept of Public Relations.

Think twice December 23, 2009 - 2:02 pm

Ben you’ve touched on a topic that has been on my mind. The MTA’s public relations.

First they should have spoken directly to the riding public with PSAs during the morning and evening news timeslots displaying this very same chart that made it rounds in the transit advocate blogosphere. Or at the very least have commentaries during 1010 WINS or CBS 880. If the Yes Network and Fox (in their battles with Cablevision and Time Warner respectively) can get out there and win over the public and stir up the masses to call or write, then why can’t the MTA.

One of the best investments they can make would be to go to Washington, D.C. and hire some rainmaking K Street lobbyists.

Cap'n Transit December 23, 2009 - 8:42 pm

You can’t teach anyone who isn’t listening.

Look on the bright side: he’s not Council Transportation Chair anymore. Of course, you’ll be doing a story on who’s likely to be the next Transportation Chair and what we can do to help get a pro-transit Councilmember in there, right? 😉

rhywun December 24, 2009 - 4:11 pm

One gets the sense that the real reason these agencies were created was to give grandstanding politicians–and boy if John Liu isn’t ever one of those–an opportunity to absolve themselves of any responsibility for the services said agencies provide and to direct the blame for any problems away from themselves.

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