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Privatizing Local Transit: Part of the Free Market Energy Agenda

By Randal O'Toole -- January 6, 2011

Those who are not yet convinced that government is vastly less efficient than private enterprise should closely examine the nation’s transit industry. In 1964, the industry was mostly private and earned an overall profit. In that year, Congress gave local governments incentives to take over transit, and by 1970, the industry was nearly all publicly owned.

Today it loses nearly $40 billion a year.

In that time, the industry has seen a spectacular decline in productivity. According to data published by the American Public Transportation Association, the industry’s chief lobby group, between 1970 and 2008, inflation-adjusted operating costs more than quadrupled, while transit ridership grew by about 40 percent. In the same time period, the number of annual transit riders carried per operating employee fell by nearly 50 percent. As economist Charles Lave observed, “It’s uncommon to find such a rapid productivity decline in any industry.”…