That is very true. I rarely commute during peak hours, and the trains are just as packed at these off-hours because the headway drops off like crazy after the peak time. That's just cost-cutting. The system can run with rush hour frequencies at 2 in the morning if someone is willing to pay for it. (Yes, at some point you have to do maintenance; for that a reduction of frequency is perfectly reasonable.)

There are also plenty of places on the system where longer trains could be run. A trains are 600ft long. C trains are run on the exact same tracks with 480ft trains. Nothing feels worse than boarding a C train that's packed because you know there's nothing stopping the MTA from running longer trains there. They claim they don't have the equipment for this, which may be true during rush hours, but it's a complete lie during the rest of the day. There are plenty of 600ft trains ready to go just sitting in the yard.