No: Privatization not all it seems
In June, President Donald Trump announced a plan to reform the nation’s air traffic control system.
As usual, the president’s claims were grandiose and his details were lacking.
What we actually got was an endorsement of legislation that was passed this week by the House Transportation and Infrastructure Committee, which is led by Rep. Bill Shuster, R-Pa. The legislation’s ultimate fate is uncertain, but much is at stake.
The pitch is that the nation’s air traffic control system, currently under the aegis of the Federal Aviation Administration, or FAA, should be privatized. In this case, however, the promise of privatization isn’t all that it seems.
Generally, it’s argued that public services moved to the private sector improve under the pressure of marketplace competition, leading to efficiencies and reduced costs.
The problem here is that the private air traffic control nonprofit being proposed looks a lot like a new, monopolistic government agency. The principal advantages of privatization simply would not apply.
This new bureaucracy would be disciplined by neither competition nor the pursuit of profit, and there would be no public shareholders driving managers to better performance. Giving it a board of directors and a CEO doesn’t change those basic facts.
What would the proposal actually do?
Air traffic control would be separated from the FAA and put under a new organization governed by industry stakeholders, including the big airlines, regional carriers, airports, air traffic controllers and others. The organization would borrow directly from the private sector, and interest and principal on the loans would be financed by charges to — guess who? The flying public.
Other countries have implemented a variety of reforms to the organization of air traffic control, but comparisons in this vein are dubious. The workload of the U.S. system is an elephant compared to the fleas of other nations.
Of prime interest, as in all things, is where the money comes from to finance both operations and investment.
Presently, there is an array of taxes and fees paid by passengers and other users of the system.
Under the Shuster plan, the new entity would determine all these fees, subject to the approval of the secretary of transportation. In effect, the reform shifts control of revenues from Congress to the Department of Transportation and ultimately, the White House.
So the vaunted independence of the new organization is not all that, especially in light of the reality that he who controls the money has inordinate influence on everything else.
These are just a few of the concerns about a wholesale reorganization of the agency that prevents planes from crashing into each other. If you like excitement and turbulence, this could be the reform for you.
Max B. Sawicky is an internationally known economist specializing in public finance and privatization. Readers may write him at the Center for Economic Policy Research at CEPR, 1611 Connecticut Ave. NW, suite 400, Washington, D.C., 20009.