Beware the False Promises of ‘Faux’ Privatization
July 17, 2017
  • Share
  • As a general practice, privatization of certain government operations can be a good thing. Government should be in the business of doing things that are inherently governmental, and anything that the government is doing that isn’t “inherently governmental” should be done by the private sector.

    But problems arise when policymakers, in the name of privatization, use the promises of privatization’s benefits (namely, lower cost and better service) to lead the public down a false path… to create entities that aren’t really privatized, but are, instead, these bizarre hybrids of government and “private” sector, government-sponsored enterprises (GSEs). Anyone who has ever gotten stuck on an Amtrak train knows just how inefficient GSEs can be — the maddening aspect of an entity that has no incentive to provide a maximized customer service experience at a cost that is competitive enough to keep a consumer coming back time and again.

    Given the nation’s track record with GSEs, one would have thought that policymakers would have learned their lesson. Yet here we are, talking about creating another GSE in the form of a “privatized” Air Traffic Control system — the central issue in the 21st Century AIRR Act, currently wending its way through Congress. While technically being proposed as a not-for-profit, publicly chartered independent corporation, supporters point to it as an American analog to Canada’s non-profit ATC system.

    But this is a distinction without a difference — since being a federally-chartered non-profit (as opposed to a true GSE) doesn’t inoculate an entity from the same cronyist tendencies and complicated-oversight problems that have plagued GSEs in the past. Supporters have pointed to both the American Red Cross and the US Olympic Committee as analogous examples (presumably because of the warm and fuzzy feelings they generate for the American public).

    Unfortunately, both the American Red Cross and the USOC have had their share of scandals. It was only a few years ago that the Red Cross, which gets reimbursements from the federal government for its activities despite its constant fundraising from the public in the midst of disaster, was under scrutiny for how it spent money in the aftermath of a tragic earthquake in Haiti.

    And the USOC is currently mired in a scandal surrounding how it governed internal investigations into allegations of abuse.

    This is not to say that agencies are free from scandal — far from it — but the point is that when it comes to making fundamental changes in agency operations, let’s be clear about what the risks are.

    Like other government bureaucracies, our nation’s Air Traffic Control system has vast room for improvement. It needs to be more fleet-of-foot (or swift of wing) in terms of its ability to innovate.

    But this would seem to necessitate an effort on the part of policymakers in both Congress and the executive branch to engage in operational reform, not an effort to “spin out” the ATC into an entity which has none of the incentives to provide better, less expensive service, while at the same time operating just out of the palpable reach of those doing oversight work in Congress.

    The 21st Century AIRR Act should have taken a much different approach to ATC reform. As it stands, it moves the nation’s air traffic control system in the wrong direction.