NYC transit fare hike: Another tiny blow to the US economy

It's just a regional data point, but one with that exemplifies the small but significant contraction forces acting on the U.S. economy.

The Metropolitan Transit Authority, the agency that runs the City of New York's subways, as well as commuter railroads, and selected bridges and tunnels, approved a fare and toll increases averaging about 10 percent. Subway fares will increase on June 28, commuter rail fares on June 17.

A subway system for the city that never sleeps

The increase is needed to keep the world's only 24-hour, 365-day subway system running amid a time of revenue shortfalls stemming from reduced ridership, due to the recession, which has reduced the number of workers who ride subways and trains, and drive across bridges and tunnels. Higher debt service also contributed to the MTA's budget shortfall.

The most GDP-contracting fare hike? The increase in the subway fare to $2.25 from the current $2. A monthly subway pass, the widely-used MetroCard, will jump to $89 from $81.

A 10 percent hike in anyone's transit cost is difficult enough, but the subway fare hike hits the working poor and poor particularly hard; historically, these income groups have the least disposable income.

Further, it may not seem like much, but take $8 per month out of the typical subway rider's pocket and you can guess what will happen to the sectors that serve commuters; you can bet that coffee, bagel, lunch counter, and related businesses and merchants will see a drop in their sales.

The extra, roughly $20-50 per month that suburban citizens will pay to take commuter trains into Manhattan may have a similar effect, although with generally higher incomes, these commuters may not cut out a discretionary expense to offset the higher fare.

Gail Wright of Larchmont, N.Y., is one of those New Yorkers who will be hit with a "double-whammy" -- she uses both the commuter rail system and the subway to commute to work, which means she'll pay about $40 more per month. "It's one of the prices that you pay to live and work in New York," Wright told DailyFinance, adding that she'll continue to commute via mass transit, as it isn't practical to drive weekdays to her job in Manhattan.

Economic Analysis: Instead of increasing mass transit fares, what the nation should be doing is finding ways to increase subsidies for mass transit systems across the nation to increase mass transit use. The subsidies would: 1) reduce auto traffic congestion, 2) reduce pollution from auto emissions, 3) reduce the carbon footprint of these citizens, and most importantly 4) increase the disposable income of these citizens -- a net GDP-positive policy that would help pull the U.S. economy out of its recession.

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