The New York City Subway is the circulatory system for the global capital of finance and media, and today this 114-year-old engineering marvel is coming apart. Stalled trains, signal breakdowns, and constant line closures are complicating the lives of New Yorkers, who ride the trains more than five and a half million times a day.

The MTA, the public agency that runs the subways, is woefully mismanaged, fiscally irresponsible, and politically captured. Thanks to the clout of the Transit Workers Union, subway workers on average make $155,000 in total annual compensation, or more than twice as much as the passengers they serve.

The political response to this crisis has been mainly to devise new ways to collect more money for this troubled operation, such as a new "millionaires tax" or by imposing additional tolls and surcharges on cars.

But a major lesson from the first 114 years of subway history is that giving the MTA more money from outside sources is like bringing an alcoholic to an open bar. The path to real reform and accountability is to make the subway live off its customers once and for all.

"The rider should be paying the full cost with the exception of low income folks, where there's going to be some subsidy," says Baruch Feigenbaum, who's the assistant director of transportation policy at the Reason Foundation, the 501c(3) nonprofit that publishes Reason.com and Reason TV. "That is the most efficient system. It's also the best system for the rider, because if the rider is the one paying the cost, then the transit agency is serving the rider. If Albany is bailing out the transit system, then it's going to be whatever Albany wants."

Lately, "whatever Albany wants" has included budget items big and small that don't have any impact on service and reliability, such as the $5 million that the MTA spent bailing out three ski resorts in upstate New York and the $1.4 billion Fulton Street Transit Center.

And this is a theme that extends all the way back to the system's early days. The subway's troubles are deeply rooted in the decline of the fare as its primary revenue source.

When the subway opened in 1904, it was five cents a ride, which was more than enough to finance operations. But when inflation eroded the value of a nickel, the city refused to permit fare increases. By 1920, 500 other U.S. cities had raised fares on their transit systems. Meanwhile, New York City's populist mayor, John Hylan, campaigned on the preservation of the nickel fare, calling it "as sacred and binding as any contract ever drawn in the history of financial transactions the world over."

The fare did eventually go up, but not enough to keep pace with inflation, and the subway's revenue shortages became an endemic problem.

Decades later, the city and state discovered a new way to plug up the shortfall: forcing drivers to pay for transit.

In 1968, Governor Nelson Rockefeller orchestrated a backroom deal to reallocate revenues from nine major bridges and tunnels to transit. Last year alone, drivers paid $1.1 billion in tolls that were diverted to subways and buses.

The state created more hidden funding streams in the years that followed, and taxes and subsidies now comprise a larger share of the MTA's revenue than fares. These include a special sales, corporate, and payroll tax, plus fees on real estate transfers, car rentals, drivers license renewals, and vehicle registrations. And the state just imposed a brand new surcharge on taxis and ride shares coming into Manhattan, with the money going to the MTA.

These subsidies violate a central tenet of good transportation policy, which is to make each mode of travel self-sustaining.

If fare subsidies were to come to an end, could the subway survive on its customers alone? It could in 1904, when the system opened. And it could in 1982, when the MTA studied the issue, and journalist Peter Samuel wrote about it in Reason.

The key is getting riders directly invested in slashing wasteful spending and reining in wildly inflated salaries by making them feel the horror—not just of signal malfunctions, train rerouting, and line closures—but that they've paid top dollar for the privilege of such dreadful service.

Written, shot, and edited by Jim Epstein. Interview and narration by Nick Gillespie. Interview cameras by Mark McDaniel and Todd Krainin.

"New Baby" and "Subway Song" by Nicola Paone, Public Domain, archive.org.

"Fun in a Bottle", "Fast Talkin," and "C-Funk—Funkorama" by Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0 License http://creativecommons.org/licenses/by/3.0/

Photo Credits:

Andrew Cuomo: Michael Brochstein/Sipa USA/Newscom

Save Our Subways Protester: Erik McGregor/Sipa USA/Newscom

Bill de Blasio: Paul Martinka / Splash News/Newscom

Make the Rich Pay: Michael Nigro/Sipa USA/Newscom

Congestion pricing now: Erik McGregor / Pacific Press/Newscom

Sheldon Silver and Cuomo: HANS PENNINK/REUTERS/Newscom

Nelson Rockefeller: Danita Delimont Photography/Newscom

NYC Toolbooth: Susan Pease / DanitaDelimont.com "Danita Delimont Photography"/Newscom

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