It costs $287 to fly on Trans World Airlines from Nashville to Los Angeles with a stop in St. Louis, and $273 to fly on the same plane from St. Louis to Los Angeles. So it should cost $14 to fly from Nashville to St. Louis, right?
It cost $86 to fly from Nashville to St. Louis.
Some passengers are obviously subsidizing others in this true life story, but that is typical of the way the transportation bill is paid in the United States. It is almost impossible to find an example where the cost of providing transportation and the fee charged are directly related because of the complicated, inconsistent and sometime apparently unfair methods used.
It cost 55 cents to ride the Metrobus (during rush hour) from Anacostia to Friendship Heights, but $1.30 to ride it from Old Town Alexandria to the Federal Triangle, a shorter distance.
The Burlington Northern and other railroads, using shipper-furnished cars in long trains that carry nothing else, charge 80 cents per mile to move 100 tons of coal from Belle Ayr, Wyo., to Pueblo, Colo., but $1.01 per mile to move 100 tons of coal from Belle Ayr., Wyo., to Columbia Wis.
When the Federal Highway Administration participates in the construction of Interstate 66, it pays $9 of every $10. When the Urban Mass Transportation Administration helps the Metropolitan Atlanta Rapid Transit Authority buy buses, it contributes $8 of every $10. What that means is that a local or state dollar is worth nine federal dollars for an interstate highway, but only worth four federal dollars for a new bus.
The Federal Aviation Administration, in a highly controversial study, said that taxes collected from airline passengers, freight and commercial airlines paid 95 percent of the cost of providing government service to them, while taxes on the rest of aviation -- the business jet and the weekend Piper pilot -- paid less than 20 percent of its cost. The general taxpayer picked up the rest.
Over the years, policy statements from various secretaries of Transportation of both political persuasions have inevitably contained the statement that the U.S. transportation system should be "user-financed."
What could be fairer, the reasoning goes, than to have the person or corporation that actually needs the transportation paying its cost? The problem comes in the execution, because transportation, in addition to being a commodity that is bought and sold, is also a key element of social policy and politics.
The answer to the question of who pays for transportation "because a political decision . . . Ultimately the legislative body will compromise out to something that will work," said George Smerk, a professor of transportation in the school of business at Indiana University.
"Something that works" means that TWA and Burlington Northern, within certain constraints, can adjust fares or freight rates not only on the basis of their costs, but also on what the market will bear.
"Something that works" means that the local governments of Northern Virginia can subsidize their bus riders less than the District of Columbia subsidizes its bus riders.
"Something that works" means that Congress, in setting up federal grant programs for highways, buses and airports, can establish whatever formula it wishes when it wants state and local governments to put up matching funds for federal dollars.
"Something that works" even means that through governmental action, one form of transportation is favored over another.
It will be interesting to see if the Carter administration, the Congress and the railroads can find "something that works" to solve a problem that has tied down Capitol Hill for months: railroad deregulation.
On the surface it seems a simple issue: If regulatory barriers to rates are removed, the railroads and the administration argue, then the railroads can fend for themselves.
The problem is that the railroads are accused of taking unfair advantage of the energy situation by charging high prices for their unique ability to haul western coal to distant electric power plants.
Congress has been willing to deregulate in theory -- a bill has passed the Senate -- but has balked on the specifics of letting the electric company and its customers subsidize other railroad users who pay less.
The railroads argue, through Dick Briggs of the Association of American Railroads, that the interpertation is unfair, although there is no question that some commodities move over the same track at different rates than others.
The railroads figure, Briggs said, that to survive they have to cover variable costs (rolling stock, labor, fuel) and fixed costs (plant investment), plus show "a reasonable profit," defined by the Interstate Commerce Commission as 11 percent.
To meet those criteria, freight rates have to average out so that the shipper pays 160 percent of variable costs.The highest coal rate, Briggs said, is 170 percent of variable costs -- but some other commodities move for less. Piggyback trucks, for example, are carried for 115 percent, Briggs said.
"If we raise the piggyback rates, the truckers would leave" the railroads because they could beat the price themselves. "If we can't raise the piggyback rate, then coal has to pick up the difference.
But is it fair?
"It seems to me inherently fair," Briggs said. "If we didn't haul piggyback, the coal rate would be higher or we'd be out of business."
"The stark irony of it," Briggs said, "is that it's been the coal rates [that have set off the debate about this type of pricing]. For years the railroads carried coal [at low rates] to keeps the coal industry alive. . . ."
Two federal experts agreed to discuss railroad ratemaking if they were not identified. Basically, they agree with Briggs' scenario.
"Rates," one of the experts said, "are not really cost-based. The railroads hope they bear enough relationship to cost that the railroad can compete in the capital market.
" . . . The railroads are conscious of the shippers' needs. And they know if they mess up, they're going to be even more tightly regulated than ever before."
But is it fair?
"The answer," the other expert said, "is that sooner or later a railroad has to close his eyes to all the shippers and say, 'This is fair enough.'"
Everybody in transportation, not just the railroads, has to worry about meeting fixed costs.
An enormous amount of transportation equipment -- about 114 million personally owned automobiles -- is simply self-financed by the owner. There are really two general sources of money for the rest of transportation: taxes, which go to build systems, such as highways, and fares or rates, collected from passengers or shippers to move people or goods.
Underlying the entire structure is the assumption that some transportation costs benefit specific individuals, and should be laid wholly at their feet, and that other costs benefit society at large, and should be paid by everyone. No one, however, has devised a foolproof formula for determining when a cost should be financed entirely by the user and when it is in the public interest for everyone to pay a share.
The costs of policing and regulating, while not purely transportation costs, are created because of transportation, yet are paid by the general taxpayer, not the user.
The National Transportation Safety Board, to take one small example, consumes about $18 million in federal tax dollars annually -- all of it from the general fund. When somebody figures out the cost of aviation or railroading every year, the total never includes what it cost the safety board to investigate the DC10 crash in Chicago or the derailment in Waverly, Tenn.
There are other inconsistencies. Congress has created trust funds for highways, waterways and airports, but not for railroads and transit, yet both receive federal aid.
There is enormous argument as to whether the trust funds fairly tax the people who are using the service, or whether the funds are used for the right need.
The highway trust fund has never been available for maintenance programs, now the most pressing highway need. The maintenance bill is paid from state taxes, either from general revenues or from petroleum taxes.
The aviation trust fund can be used to buy equipment for the air traffic control system, but not for its operation and maitenance. If the air traffic control system is not a right-of-way in every sense that a highway or a railroad track is, what is it?
The highway lobby has been successful over the years in persuading everybody that taxes on gasoline, rubber and big trucks pay for the highways. The highways, then, are truly a user-paid-for system, unsubsidized by people who receive no direct benefit.
In fact, the study commission said only about 65 percent of highway costs are met through user fees and the rest come from general federal, state and local tax revenues.
"Each person driving is paying his share," said Carlton C. Robinson, executive vice president of the HighwayUsers Federation. "The only studies that say he is not are the ones that throw the local streets in. Overall, the system is solvent."
There is a question, of course, as to how much value the primary highway system would be without the local streets that connect to it.
Robinson and others in the highway lobby agree, however, that the highway trust fund is no longer adequate for the needs. It is financed primarily by a per-gallon tax on gasoline and benefits not one whit from the increase in gasoline prices. Gasoline consumption is decreasing, so the revenues are literally going down while inflation strikes highway construction costs just as it does the cost of everything else.
The trust fund, for the first time this year, will pay out more than it takes in. Surgery in Congress is certain next year.
That brings us back to the TWA flight from Nashville to Los Angeles with the stop in St. Louis. The $287 coach fare from Nashville to Los Angeles averages out to 15.4 cents for each of the 1,863 miles of the flight.
The guy who gets on in St. Louis for Los Angeles and pays $273 is charged 17.1 cents for each of his 1,592 miles. The salesman who flies from Nashville to St. Louis on the first leg of the flight alone pays $86, or 31.7 cents per mile. Is this fair?
Well, the airplane from Nashville to St. Louis may fly only half full, and carry only 20 people who are going all the way to Los Angeles. Jets are cheaper to operate on a per-mile basis the farther they go.
"I couldn't operate that long-haul route (St. Louis to Los Angeles) if I didn't have those 20 people out of Nashville," said Neil Effman, TWA'S vice president for planning. "And I couldn't operate to Nashville if I weren't getting some people in there from that long-haul route. It's a symbolic relationship."
If TWA decides that one of its routes is a loser that can't be fixed or that is not contributing to some greater good elsewhere, then that route will be dropped. Because of deregulation, TWA can drop it now, without a lot of regulatory discussion.
What happens if no other airline decides to serve that medium-sized community that TWA just abandoned?Some federal agency may have to order service restored, and pay a tax-supported subsidy to get it.
"I don't think you can ever have pure market forces driving a transportation system," Effman said.