The Falling Cost of Transportation

The Surface Transportation Policy Project has issued another report blaming transportation problems on the suburbs. Driven to Spend claims that low-density suburbs (“sprawl”) make people poor because it forces them to spend more of their incomes on transportation.

“Transportation is a big expense for America’s families, and it is getting bigger,” says the report. “This study finds that a major factor in driving up transportation costs is sprawling development.”

The study relies on very limited data to prove its point. It compares the percentage of personal income that people in 28 metropolitan areas spend on transportation with the “sprawl factor” of those areas — essentially a measure of whether an urban area fits the nineteenth-century pattern of development (high-density, concentrated downtown) or the twentieth-century pattern (lower-density, widely distributed employment).

Because it has high densities, Los Angeles has one of the lowest sprawl factors of the 28 areas — a result not commented on by the report’s writers. Typically, the report includes graphs rather than actual data so none of its conclusions can easily be checked. Nor can a statistical analysis be performed to see whether there is any significance to the report’s conclusions.

However, we can look at other data to check the report’s claims. First, is transportation getting more expensive? And second, is low-density development making it more expensive?

The best way to answer these questions is not to compare a small number of urban areas for a single point or short period in time. Instead, it is to compare data over a long period of time. The 1999 edition of National Transportation Statistics, an annual report published by the Bureau of Transportation Statistics, contains transportation costs data extending from 1960 to 1997. While it would be nice to go further back, this is sufficient since sprawl-opponents claim we have suffered lots of sprawl since then.

These data show that:

1. The cost of transportation as a share of gross domestic product is falling;
2. The cost of driving as a share of personal income is also falling;
3. The cost of driving each mile is also falling;
4. The cost of transit is rising.

As a result, people drive more yet spend less on transportation. But the Surface Transportation Policy Project’s study ignores the rising cost of transit because most transit costs are paid by taxes, and their study counts only costs paid by consumers.
1. The Cost of Transportation as a Share of GDP

According to National Transportation Statistics table 2-6, in 1960, all freight and passenger transportation costs in the U.S. amounted to 20.6 percent of the nation’s gross domestic product (GDP). Due to high fuel prices, this briefly shot up to 28.6 percent in 1975. But it has been declining ever since, and in 1997 amounted to just 16.1 percent of GDP. This hardly makes it appear that sprawl since 1960 has led to rising transportation costs.
2. The Cost of Driving as a Share of Personal Disposable Income

The Surface Transportation Policy Project’s report looked at personal costs, not costs to the total economy. So let’s consider the cost of driving since 1960. This can be found in National Transportation Statistics table 2-7 and compared with personal disposible income data from the annual Statistical Abstract of the United States. Data in the 1999 issue does not go back to 1960, so you have to look at earlier editions.

In 1960, the average American spent 15.0 percent of his or her disposable income on buying, operating, and maintaining automobiles. Again, in 1975 this briefly spiked to nearly 20 percent. But by 1980 it had fallen to 14 percent; by 1990 to 12 percent; and today it is around 11 percent. This is a decrease of 24 percent since 1960.

This decline is in spite of the fact that we drive much more today than in 1960. In 1960, autos carried the average American about 6,300 passenger miles per year. Today they carry Americans more than 14,000 passenger miles per year, an increase of about 124 percent. Despite this huge increase, the share of personal income spent on driving fell by 24 percent.
3. The Cost Per Mile of Driving

One reason people drive more is the cost of driving has decreased, which can be calculated using National Transportation Statistics table 1-30 (showing passenger miles) and the previously mentioned table 2-7 (showing auto expenses). In 1960, Americans spent an average of 23.5 cents per mile (in 1997 dollars) to drive their cars and light trucks. Today this has fallen 26 percent to just 17.4 cents per mile. This is partly because of more fuel-efficient cars and partly because today’s better-quality cars and trucks last longer.

Another reason people drive more is that they make more money. In 1960, disposable personal income averaged $9,900 (again in 1997 dollars). In 1997 it came close to $22,000. This represents a 118-percent increase.

A 118-percent increase in income combined with a 26-percent decrease in the cost of driving each mile makes it possible for Americans to drive 124 percent more yet spend a significantly smaller portion of their income on autos than they did in 1960.

The Surface Transportation Policy Project argues that people drive more because they are forced to by sprawl and that this extra driving imposes a costly burden on Americans. The reality is that people drive more because they can afford to do so, and this has given them the opportunity to move to the lower-density areas in which they prefer to live.
4. The Cost of Transit

The Surface Transportation Policy Project looked at the cost of transportation as a share of people’s personal incomes. But in transit-dependent cities, such as New York, much of the cost of transportation is not paid out of personal incomes. Instead, it is paid out of taxes.

The same tables of National Transportation Statistics that allow calculation of automobile cost per passenger mile also have data to calculate transit cost per passenger mile — tables 1-30 and 2-7.

In 1960, when most transit companies were private and not subsidized, the cost of transit averaged 18 cents per passenger mile (in 1997 dollars), a little less than the cost of driving. By 1975, when virtually all transit agencies were publicly owned and heavily subsidized, the cost per passenger mile reached 44 cents — most of which was paid by taxpayers, not transit riders. Today transit costs exceed 50 cents per passenger mile. This is three times as great as the cost of driving per passenger mile.

Auto drivers get subsidies too. But as explained in The Vanishing Automobile (pp. 380-383), subsidies to highways average around 0.2 cents per passenger mile. Even if all social costs, such as air pollution, are counted, subsidies are less than 7 cents per passenger mile.
Conclusions

For most of the past fifty years, the cost of driving has steadily fallen while personal incomes have steadily risen. This makes it cost less and less to drive more and more each year. Americans have responded: they drive more.

Of course, people don’t drive more simply because they can afford to do so. They drive more because driving gives them opportunities for better jobs, better schools, better housing, and better quality and more affordable consumer goods.

Even Americans in dense cities with low “sprawl factors” drive more than they used to drive. But most Americans have elected to live in areas compatible with their transportation. One thing these numbers don’t include is the cost of time wasted in congestion. Low-density areas with sufficient highways have less congestion than smart-growth’s ideal of high-density urban areas with few highways. Partly as a response to congestion, development over the past century became less and less dense.

But for whatever reasons people drive, the Surface Transportation Policy Project’s claim that transportation costs are rising is simply wrong: Instead, costs are falling. Their claim that rising costs are caused by urban sprawl is doubly wrong: Instead, what they call sprawl is the result of falling costs giving people the opportunity to live the way they want.

Opponents of the suburbs would like to deny that opportunity to future Americans. We have to make sure they fail.

http://www.ti.org/vaupdate04.html

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