Cars Gets Billions in Hidden Subsidies
For that expense, we’re saddled with massive social costs
Debates on the expansion of public transit, the construction of cycling infrastructure, and restrictions on cars to create walkable communities inevitably come back to the question of public spending. The general discourse on these topics assumes that to make any of these choices would be costly because government would have to subsidize these alternatives, but the truth is the reverse: the quicker governments can get us out of cars and constrain auto-centric development, the more money they will save.
Public transit not only involves public investment, but its operation tends to require an operating subsidy — the percentage of the trip cost not covered by fares. Those opposed to greater transit investment seize on this as an argument against transit — as evidence that it is inherently uneconomical and unworkable — but that ignores the massive public investment that was necessary to construct the infrastructure for automobility, and the ongoing subsidies that make it possible.
Suburbs, roads, highways, cars, oil and gas — these are just are few of the highly subsidized pieces that make auto-centric cities possible, yet we rarely recognize them as being subsidized.
Consider suburbs: the sprawling neighborhoods that house most Americans were not a free-market invention, but the result of government policy. The New Deal created the Federal Housing Administration (FHA) in 1934, which was given the dual tasks of reviving the housing market and making home ownership more attainable.
It’s hard to imagine today, but before that period mortgages were hard to obtain; they had to be paid back within a few years, and deposits were upwards of 50 percent of the purchase price. The FHA made several-decade mortgages and low deposits possible by having the government guarantee them, but it went further than that. The FHA established standards through which it would assess houses eligible for mortgages, which made auto-centric development highly favored and transit-oriented development much more difficult. Suburbs were, and continue to be, possible only because of rules and subsidies created by the government, but they’re not the only way it encourages automobile dominance.
Suburban development also required an expansion of the road network, which was followed by the construction of the Interstate Highway System beginning in 1956 that ultimately cost about $500 billion to build more than 47,000 miles (76,000 km). Meanwhile, China’s 13,670 miles (22,000 km) of high-speed rail cost about $360 billion. But there’s more than construction costs that need to be factored in. In 2015, maintenance on a mile of national highways cost $28,020, while maintenance on a mile of local road was estimated to have a range of $1,528 to $23,651 in Washington state. Those high ongoing costs are why a number of counties are starting to unpave roads — they simply can’t afford to maintain them, especially with an estimated national road maintenance backlog of $420 billion.
And what about the cars themselves? Automakers have historically received government subsidies or bailouts; Tesla, for example, has received $1.3 billion in support from Nevada, over $100 million more from California, and every one of its cars come with a federal credit. Donald Shoup has also estimated that the subsidy for free car parking amounted to $127 billion in 2002 — a policy which is increasingly under threat in cities across the country. But the biggest subsidy for automakers has been for the fuel that powers their vehicles and makes automobility possible.
The United States spends an estimated $26 billion per year to subsidize fossil fuels, of which $15 billion is dedicated to oil and gas production, and nearly half of the discovered oil that isn’t yet developed is dependent on those subsidies. While that might already seem like a lot of money, it doesn’t count the many billions more spent on military actions to preserve U.S. access to foreign oil, particularly in the Middle East. Should the $2 trillion cost of the Iraq War also be factored into these figures? I’ll leave that to you to decide, but it’s impossible to deny that automobility is not free of subsidies; it’s by far the most subsidized form of transportation, which required a complete remaking of urban space and has come with many social consequences.
Automobility may have made the open road a symbol of American freedom, but that didn’t come without a human cost: more than 36,000 people dead in vehicle crashes, another 53,000 from tailpipe emissions, ever-longer commutes, higher risks for many different health conditions, and terrible mental health consequences that are becoming apparent with the crises of loneliness and social isolation.
But why don’t we consider these costs when we discuss the transportation system and decisions about where we want to prioritize investment? They often aren’t included in the analyses.
A recent study by researchers in Europe and South Korea looked at the cost-benefit analyses undertaken for transportation projects in the European Union, and found that they often failed to include the negative externalities of automobility that would have highlighted its “hidden” costs. They advocated ensuring factors such as climate change, noise, soil and water quality, land use, travel time, health, safety, and quality of life are added to the assessments to more accurately reflect the full picture, and to compare auto-oriented development to other transportation modes.
The researchers estimated that every passenger kilometer (pkm) of car use cost society €0.11, or $0.20/passenger mile (pmi), while cycling and walking had a net social benefit of $0.32/pmi (€0.18/pkm) and $0.67/pmi (€0.37/pkm). Once extrapolated to the total number of kilometers driven, cycled, and walked, their research showed that automobility costs the European Union about $566 billion (€500 billion) per year, while cycling and walking produce respective benefits of $27 billion (€24 billion) and $75 billion (€66 billion).
Automobility costs the E.U. €500 billion per year, while cycling and walking produce benefits of €24 billion and €66 billion
These results show the true social benefits and cost savings that would accompany a large-scale shift from auto-centric development to transit-oriented developments where people can more easily get around their communities without the need for a car. Consider that the Netherlands, a country of just 17 million people, saves an estimated $23 billion and avoids 6,500 premature deaths as a result of its high bicycle use, which is possible because its cities have been redesigned to promote that mode.
North American cities may be oriented toward the automobile now, but that doesn’t mean they must always be. There was a time when walking and bicycling were much more common, but we redesigned cities to around other priorities. Maintaining auto dominance comes with huge costs, and given that we only have until 2030 to slash global emissions by 45 percent, we need to start considering the full picture. Prioritizing transit, cycling, and walking will require public investment, but it will ultimately save us a lot of money over the long-term and make cities more liveable.
What are we waiting for?
