Wong: The Abuse of Intercity Bus Subsidies

September 9, 2025

by J.D. Wong

Since 1978, a federal subsidy program (49 U.S.C. 5311) has funneled taxpayer money into intercity bus routes. Fast forward to today and this initiative has failed. Instead of attracting riders, politicians have often crafted routes to win votes. As a result, subsidized buses have been squandering taxpayer money for 46 years. Meanwhile, unsubsidized bus companies have faced unfair competition from subsidized routes.

Since the invention of air conditioning, travelers have favored north-south routes. For instance, Flixbus now offers ten daily New York to Atlanta trips, up from six in 2019. Business is also booming between Chicago and Atlanta, with eight trips, up from five in 2019.

In contrast, demand for east-west routes has diminished. For example, Atlanta to Dallas has dropped from six to three trips. Direct service from New York to Chicago via Cleveland has also ended.

In FY2024 alone, Amtrak’s east-west routes lost over $560 million. Meanwhile, the Auto Train (Virginia to Florida) made a $6.6 million profit. Since FY2011, east-west Amtrak passenger-miles have decreased by 22 percent. Yet, north-south routes have seen an 8 percent bump. In fact, train travelers favor north-south routes over east-west routes by a ratio of three to one.

Airlines are seeing the same trend. In the fourth quarter of 2024, the New York to Miami route saw 27,368 daily passengers, a 22 percent bump from 2019. Meanwhile, the New York to Los Angeles route saw only 13,903 passengers, a five percent drop.  

In FY2021 alone, taxpayers subsidized Section 5311 bus routes with $821 million. For example:

1. Indiana spent $20 million subsidizing routes, such as Elkhart to Indianapolis.
2. Virginia lost $19 million subsidizing routes, such as Washington to Bristol.
3. Ohio splashed out $30 million subsidizing routes, such as Parkersburg to Columbus.
4. Colorado squandered $16 million subsidizing routes, such as Denver to Grand Junction.
5. Oregon incinerated $17 million subsidizing routes, such as Portland to Astoria.
6. Washington doled out $17 million subsidizing routes, such as Seattle to Port Angeles.

Subsidized routes, like Muncie to Indianapolis, often have less than 10 passengers daily. Some trips operate with no passengers at all.

Intercity bus subsidies create a problematic cycle:

1. Least-used routes need the most subsidies.
2. Meanwhile, popular routes draw business from unsubsidized routes, causing their demise.
3. As a result, there is an ever-increasing number of subsidized routes.

Proponents argue these subsidies connect large cities with smaller towns. Yet, there’s no guarantee that subsidized routes wouldn’t be profitable without support. Nor is it clear why some routes need subsidies while others do not.

Some routes, such as Denver to Colorado Springs, compete with unsubsidized routes. Others, such as Washington to Danville, replicate subsidized Amtrak routes. The subsidized Portland to Eugene route duplicates both.

Without subsidies, buses between cities might stop in smaller towns. Instead, subsidies have distorted the transportation landscape. Again, political support for weaker routes has led to an endless waste of taxpayer funds.

For travelers, the results have been stark:

1. Bus travel has become more expensive. A Denver to Dallas trip booked in advance can cost $138, while a flight might be $44.
2. Subsidized bus companies use interline revenue as matching funds, against the law’s intent.
3. Buy-America laws force subsidized companies to buy vehicles from Motor Coach Industries. These coaches have small fuel tanks and need to stop more often for fuel. Many have fuel fillers on the right and cannot enter gas stations or truck stops to refuel.
4. Bus insurance costs have soared from $8,000-$12,000 to $47,000-$73,000 per year. Taxpayers are now subsidizing insurance companies rather than bus routes.
5. Subsidies worsened a dire shortage of mechanics. This in part raised annual bus maintenance costs from $25,000 two decades ago to $100,000 by 2021.Appointment scheduling takes weeks or months, with repairs needing another two weeks. Battery equalizers are more likely to fail  causing unexpected engine shutdowns. Air suspensions deflate, causing coaches to bottom out and run aground.
6. In 2020, Congress passed the Coronavirus Economic Relief for Transportation Services (CERTS) Act. It gave $2 billion to bus companies, yet BoltBus and Megabus still failed. Meanwhile, insurers raised rates citing the Act as a reason.
7. Maintaining underperforming routes with legislative coercion has always failed. Take the Saskatchewan Transportation Company for example. It shut down in 2018 because only two of its 27 routes were profitable. Greyhound Canada’s unprofitability also caused it to go out of business in 2021.

So why does Congress continue to subsidize intercity buses when it defies market logic?

One reason is that Congress has given the money to the states. For this reason, state politicians can make federal taxpayers foot the bill.

Another reason is the claim that subsidies connect isolated areas. Yet, subsidized intercity buses represent less than 0.001 percent of travel. In fact, Americans travel more miles by bicycle than using these buses.

Even if subsidized routes vanished, alternatives would be cheaper than subsidizing them. Despite the subsidies, air travel often costs less than bus travel.

There are also many ways to enhance the profitability of struggling routes:

1. Using smaller coaches.
2. Adjusting frequency.
3. Attracting tourists with scenic and enjoyable destinations.
4. Offering demand-responsive service instead of a fixed route.
5. Rerouting or extending existing routes.

Since 1978, Congress has exhausted ways to limit the growth of bus subsidies. Its efforts at reform have not produced the desired results:

1. Intercity bus subsidies have become a sunk-cost fallacy. If Congress continues to subsidize intercity buses, their losses will only grow.
2. Insurers will continue to profit while unsubsidized bus companies fail.
3. A shortage of mechanics has persisted. Passengers will get stranded when coaches shut down on the road.
4. Buses cost more to operate than trucks because of exorbitant insurance costs. As a result, efforts to use them for freight transportation have also failed.

The only way to stop politicians from playing favorites with routes is to cut subsidies to $0. Political control over subsidies means that ending them would also end that control. Other “reforms” are unlikely to succeed, as they would still allow political interference.

Ending subsidies doesn’t mean the end of underperforming routes. History shows that bus routes can come and go in popularity.

Innovative companies have reduced costs while expanding routes. Flixbus faced criticism for replacing terminals with curbside stops. Yet, this cost-cutting measure helped the company to grow its north-south routes.

Politicians can stop guessing which routes will succeed and cut subsidies to $0. The President can also veto any bill that subsidizes intercity buses. While these subsidies have enjoyed bipartisan support, it comes at the taxpayers’ cost. Focusing on successful routes is better than bemoaning the end of unprofitable ones. Market-driven operations will succeed where subsidized companies failed.

J.D. Wong, formerly co-owner and vice president of an intercity bus company, is an expert on the transportation industry. He wrote this at the request of the Indiana Policy Review Foundation.

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