Nobody likes paying more for anything, but New Yorkers have been paying less in real terms for the subway for eight years.
In spring 2015, the MTA increased the subway fare from $2.50 to $2.75. New Yorkers complained then and they’re going to complain now, but a fare increase is, well, fair and necessary. There has been no price increase since 2015 despite an average annual compounded inflation rate of 2.63 percent, according to the personal consumption expenditures index from the St. Louis Federal Reserve. In total, the price level increased 23.12% from May 2015 (PCE of 103.156) to May 2023 (PCE of 127.007). This means that, although New Yorkers have been paying the same nominal price for the past eight years, we have been paying less than we should have.
The New York Times quotes Janno Lieber, the MTA chairman, defending the rate increase on the basis of inflation: “New Yorkers understand that the cost of everything has gone up 6 percent, 7 percent.” Lieber is more right than he realizes: the incoming increase from $2.75 to $2.90 constitutes an increase of 5.45 percent, 17.67 percentage points lower than inflation. The rate hike isn’t a real; it’s nominal.
In any event, a rate hike is needed. The Times reports weekday ridership at “about 70 percent of prepandemic levels.” This decline in ridership translates to less revenue and a ballooning budget deficit, which the MTA estimates to be “$3 billion by 2025.” While Governor Hochul’s bailout kept the MTA afloat and delayed the need for a rate hike, it did so temporarily and unfairly. The taxpayer in Cooperstown should not be on the hook to subsidize New York City’s transit system; residents of the five boroughs should. (Assuming that demand for the subway is inelastic, moderately increasing the price will increase revenue.)
Concerns about the regressive nature of the price increase are legitimate. Currently, the Fair Fares program provides New Yorkers living below the federal poverty line “a 50% discount on subway and eligible bus fares or Access-A-Ride fares.” Since the cost of living in New York City is greater than the U.S. average — on which the geographically invariate poverty line is calculated — an argument could be made to increase the cap on eligible incomes.
Increased access to the Fair Fares program may not be directly subsidized by the MTA’s Central Business District Tolling Program, which I defended here, because revenues raised thereby must go to capital improvements. However, money is fungible and some of the funds the MTA would have otherwise directed to investment absent the tolling program could be redirected to Fair Fares. An alternative way to raise revenue to finance the subway’s operating costs and subsidize Fair Fares is straightforward: ensure that commuters pay for the service they use; prosecute fare evaders.
However you slice it, fare hikes are inevitable: the MTA must balance its budget, cannot (and should not) be subsidized by those who don’t use it indefinitely, and inflation, though often ignored, is real.