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Equity Gone Wild Grounds the FAA

With the debt ceiling debate rising to must-see-TV status, the national public is left to wonder about day-to-day impacts. What really happens if we shutdown government programs to pay off prior debts? Well, stalled FAA negotiations in Congress give us a current example--and the results aren’t pretty.

A quick recap. While the surface transportation legislation’s seven extensions get more media attention, the aviation legislation is already on its mind-boggling 21st extension. Operating on short-term fixes mean airports and airlines have trouble generating long-range plans, and the federal authorities have difficulties implementing long-term capital upgrades like NextGen satellite technology.

It seemed like July would see the end to this endless suturing. That was until Congress’ two chambers--and, essentially, political parties--ran into an impasse over a minor rural program. Essential Air Service (EAS) tempers the free market principles of 1978’s Airline Deregulation Act by subsidizing commercial air service to rural communities. The most recent FAA report from May 2010 tags the program with a $163 million subsidy to support 109 communities in the lower 48 states.* That subsidy helps pay for 2,344 passenger seats, of which all routes should have two to four round trips a day.  With an average of three round trips, this means maximum EAS daily traffic is less than three percent of the daily passengers at Atlanta’s Hartfield-Jackson International Airport.

Returning to the original premise, what does a program shutdown look like?  Using a $163 million program to hold up a multi-billion dollar proposal, media outlets are reporting delaying capital projects across the country and a furlough for 4,000 employees. I assume this is not Congress’ intent, but such political posturing sends a message that Washington would rather leave families without a paycheck than force rural travelers onto trains or buses.

And it gets worse. Because of the FAA’s partial shutdown, federal aviation taxes can’t be levied and the FAA could incur losses of $200 million per week --more than the cost of the EAS program. In the meantime, ticket costs should drop by the tax savings, but airlines are just holding prices and pocketing the difference. Who’s winning here?

Good policy is about maintaining a balance between efficiency and equity, market failures and social shortcomings. This is a classic example of unbalanced scales, a case where a vocal minority spoils the outcomes for a larger group. Posturing, whether over the entire federal budget or just one agency, helps no one.

*There’s an additional $12.6 million subsidy for 44 Alaska airports, but that service is less in question due to the geographic isolation of those communities and the lack of transportation alternatives.