Stop distorting the cost of living with anti-urban subsidies

From rural air service to military base sitings to post office closings, many federal policies pick winners and losers among places for people to live. Exurban communities require much more expensive infrastructure, yet policymakers cling to a system that rewards building or living on cheap land but has the government subsidizing all the other associated costs.

The Federal Aviation Administration has been shut down since Saturday. Planes are still flying but employees in DC are furloughed and capital improvement projects at airports are frozen.

The shutdown stems from an impasse between the House and Senate over reauthorizing the FAA. Sticking points include union organizing rights at airlines, long-distance flights at National Airport, and a rural air subsidy called the Essential Air Service (EAS), which Republicans want to substantially scale back.

The Wall Street Journal recounts one example of a crazy EAS subsidy: service from Hagerstown, Maryland to Baltimore. The $59 flight, which costs $191 in subsidy per passenger, lets people fly for 40 minutes instead of driving for 80 minutes.

The Journal quotes one visitor who liked the service because it let him avoid taking a bus, “and I’m not into buses,” he said. That’s not a great reason to subsidize a flight. And the airport director says he doubts losing the flight would really affect Hagerstown all that much.

Nevertheless, Senator Barbara Mikulski is fighting to keep the flight, saying it would hurt the economy and cost jobs. That may be true, but keeping it also creates a drain on the economy and costs jobs elsewhere. Republican Senators have fought for similar exemptions in the past, too.

But there’s a larger problem. Democrats and Republicans alike generally operate on a belief that people should be able to live where they want yet face no consequences for their choices, with the exception of housing prices.

We subsidize rural air service, build expensive roads and power lines to accommodate more housing in far-flung areas, tax telecommunications to pay for rural broadband, and maintain a flat rate to mail a letter anywhere in the nation. When people live in areas with high risk of natural disaster, states step in to provide insurance if private companies are unwilling.

Land is cheaper in areas more distant from jobs because the land is more distant from jobs. That makes housing cheaper (and some government subsidies make it cheaper still). But infrastructure costs much more to provide, creating huge long-term burdens for states which find they can barely afford to keep up all the roads and other kinds of infrastructure they have, let alone build more.

That means government is mostly letting the market dictate the cost of housing, but not letting it dictate the cost of providing various services to that housing. This distorts the incentives.

When government officials look for cuts, like many families, they often focus most on the immediate real estate costs instead of the infrastructure impacts. The Department of Defense did that with BRAC, moving jobs to cheaper locations in Fort Meade and Fort Belvoir while imposing enormous infrastructure burdens on Maryland and Virginia. Congress and the administration might push for something similar for civilian workers, choosing locations where there’s cheaper land instead of maximizing public infrastructure.

The Post Office is looking to close 3,700 post offices around the nation. Some are small rural ones that see very little usage, and could be replaced by a single clerk working out of the town’s library or a store. That makes a lot of sense. But some are charging that the list targets more urban offices than suburban ones. They’re closing one in downtown Silver Spring and leaving one a bit farther away, for instance. Yet urban residents are more likely to be walking or taking transit to post offices, and at least in my experience, lines are already longer in urban locations than their suburban counterparts.

The Post Office hasn’t released details of their calculations, other than saying that they’re evaluating each location based on its revenue, the number of hours workers spend there, and its distance from other post offices. If it’s picking urban post offices to close just because they’re geographically close to others, that’s just downright foolish since urban areas have more people. If they’re picking urban ones because land costs are higher, that ignores the infrastructure impacts of their choice by forcing more driving, saving money for the Post Office but dumping added costs onto localities.

With pressure from Congressional Republicans to find budget cuts, Democrats could point to the many programs that bias settlement patterns in ways that cost more in the long run and hurt our metropolitan areas. Instead, many instead are just digging in to preserve those programs. That’s because voters in those areas don’t want the government money to stop flowing to exurbs and rural areas.

That will only stop when voters in the more populous cities and inner suburbs insist on an end to the silly public policy that the price of land should be set by the market, but the price of most other services somehow has to be equal for everyone, no matter where they live and what the cost.