President Trump campaigned on a promise to invest $1 trillion in U.S. infrastructure. This left big spenders in Washington eagerly awaiting the announcement of a new pork-laden spending binge. But to their disappointment, the administration kicked off its “infrastructure week” not with a blank check, but with a reform proposal that would reduce federal spending and taxes by moving a vital service out of subpar government management.
The proposal recently unfurled by the president would fundamentally reform the nation’s air traffic control (ATC) system by moving it out of the Federal Aviation Administration (FAA) and establishing a private, non-profit entity to provide the service.
Transferring air traffic control to the private sector—as Canada and dozens of other nations have done—is a much-needed reform that would benefit everyone who flies and the broader economy as well.
Long advocated in free-market circles, the idea vaulted into the political mainstream last year when House Transportation and Infrastructure Committee Chairman Bill Shuster (R-Penn.) introduced the AIRR Act. Both Chairman Shuster and the Trump administration deserve much credit trying to fix a broken system with an innovative approach.
However, last year’s AIRR Act exhibited several flaws and has room for improvement, as the Trump Administration’s principles of reform acknowledge. The reform principles set forth by the administration would make modest improvements to the bill. Specifically, the administration calls for integrating emerging technologies into the national air space and expanding the board of the new corporation with four flexible at-large seats. But the administration and Congress should go much further in their attempt to build a better ATC reform bill.
First, the AIRR Act is missing important fiscal titles necessary for a comprehensive proposal. The House Transportation and Infrastructure Committee assured members that the final proposal would include a tax title that would eliminate federal aviation taxes and authorize the new corporation to levee user fees in their place.. But the Ways and Means Committee never produced that section. Enacting the bill without lowering taxes would result in double charging the flying public.
Similarly, because the “corporatization” proposal would move user-financed ATC expenditures off the federal discretionary budget, the transfer would open up roughly $12 billion per year under the discretionary budget caps. This new room for spending is sure to leave appropriators giddy to divert cash to their pet programs. Lowering the budget caps to accommodate this change and including the tax title are necessary to produce a fiscally responsible bill.
Second, the ATC reform bill effort should ensure that no special interest handouts are included in the transfer of ATC to a non-governmental organization. For example, the AIRR Act included lax labor provisions concerning the National Air Traffic Controllers Association (NATCA), the union representing the bulk of workers providing ATC services. Because of the 24/7 importance of air traffic control to the economy, air traffic controllers must be prohibited from striking—just as they are today. Although the AIRR Act did include a no-strike provision buried in the text, the new bill should explicitly build on that provision and authorize strict penalties should the union break the law.
The proposal also should be tightened to ensure that the union does not exploit the binding arbitration process or gain power to block the new organization from pursuing efficiencies or closures of underperforming facilities in the collective bargaining process. Making sure that the transition does not amount to a turnover to union control is especially important because the ATC process will set a precedent for any future transfer of government services into the private sector.
Likewise, the AIRR Act continued the massive subsidies that flow to general aviation aircraft, exempting most general aviation users from the new charges imposed by the non-profit. The new entity should be able to evaluate a fair charge for the service they provide to general aviation and reduce the implicit subsidies that flow from the vast majority of fliers to private jet owners and recreational pilots.
Lastly, for privatization to be successful, innovative service providers must be allowed to enter the marketplace. That is why a true reform bill must fundamentally separate air traffic control from the government and expose it to a free and competitive market. Although the AIRR Act attempted to explicitly excise the new entity from the government and ensure taxpayers would not be on the hook for any losses, the Congressional Budget Office still deemed the new entity sufficiently connected to the government to remain part of the federal budget: “an agent of the government” in CBO’s view. In other words, the proposal did not amount to true privatization.
The likely reason behind this decision was that the AIRR Act included a provision that gave the new entity exclusive rights to provide ATC services in the U.S., establishing it as a government-sanctioned monopoly. Because the ATC corporation would initially remain the sole provider of ATC services, this provision is extraneous at best and pernicious at worst.
By erecting an incredibly high barrier to entry, setting up the new entity as a permanent monopoly has the potential to quash innovation and prevent other firms that could provide cheaper or better service from entering the market in the future—a distinct possibility given the current transition from capital-intensive ground-based infrastructure to digital and satellite alternatives. True reform would abolish the monopoly provision and allow the ATC corporation to stand on its own merits.
By taking these steps to improve the already ambitious plans laid out in the AIRR Act, the administration and Congress have a once in a generation opportunity to massively improve the nation’s aviation system and, by extension, the whole economy. Let’s make the United States an aviation pioneer once again.
This piece originally appeared in The Hill on 6/20/17