Are we driving to the poorhouse in an automobile?
In the early 1920s when every US city of more than 5,000 residents had at least one streetcar line, households spent an average of just 3 percent of household income on transportation. Today families spend an average of 19 percent.
In the 1920s, streetcars helped build wealth for both cities and individuals, and made living much more affordable. Streetcar companies bought franchises from cities in order to run their lines in the streets, contributing significantly to municipal budgets, especially in places with extensive streetcar systems – like Los Angeles, where franchise fees added up to 16.7 percent of the city’s budget. Moreover, there was so much development and business activity around streetcar lines that early property value maps showed the highest values along streets with the most streetcar lines.
Concentrating transportation, residential density and business activity in this way also helped build personal wealth. Federal Reserve Board data shows the rise and fall of the personal savings rate in the US exactly mirrors the rise and fall of automobile sales. Bernstein notes that Ellen Swallow Richards, who introduced home economics into the high school curriculum in the early 1900s, preached that transportation costs should never rise above 5 percent of income and that one should never go into debt to buy a car. Ironically, drivers training eventually crowded home economics out of the high school curriculum, and today young people routinely go into debt to buy a car.
It was Will Rogers who said that Americans would be the first to drive to the poorhouse in an automobile, and the combined costs of transportation and housing in Los Angeles today suggest this is coming true: Median-income households in Southern California spend about $12,000 a year on transportation, almost as much as they spend on housing – $12,240 – for a total of 52 percent of income, significantly more than the 30 percent for transportation and housing in 1920.
Collectively, the 4 million households in the Southern California region spend about $50 billion on transportation each year – which adds up to about $1 trillion over the 30-year span of the region’s transportation plan. Bernstein notes that individuals pay for 90 percent of that $50 billion – federal, state and local revenues together pay for just 10 percent. The private automobile has shifted much of the cost of transportation onto individuals.
Re-building streetcar systems and concentrating residential density and business activity around them would once again create efficiencies that would help build wealth and make living more affordable.