Privatization Would Grow The Budget Deficit By $100 Billion

A newly-revised estimate issued by the Congressional Budget Office (CBO) on the budgetary impact of privatization of air traffic control (ATC) is not pretty, and adds to the already numerous and significant reasons to oppose H.R. 2997, the 21st Century Aviation Innovation, Reform, and Reauthorization (AIRR) Act.

The August 15 CBO report shows that the cost to transfer ATC to the proposed American Air Navigation Services Corporation (AANS) would bloat the U.S. budget deficit by $100 billion over the next ten years. This would be caused by the combination of operating expenses and decreased revenue from aviation excise taxes. The actual ten-year shortfall is closer to $190 billion, but revenues expected from air navigation service and user fees are projected at about $95 billion. (To view the full report follow the link below)

The updated analysis of the legislation was requested by several ranking House Democrats who noted that the House Rules Committee made significant changes to the bill for the chamber’s consideration, including the addition of a tax title. The request was signed by Peter DeFazio (D-OR), House Transportation and Infrastructure Committee; John Yarmuth (D-KY), House Budget Committee; Eddie Bernice Johnson (D-TX), House Science, Space, and Technology Committee; and Richard Neal (D-MA), House Ways and Means Committee.

The two largest business and general aviation organizations spoke out in response to the new study.

NBAA President and CEO Ed Bolen said, “This study is further evidence that ATC privatization is a bad idea for all Americans. Adding to the budget deficit, just to help the big airlines, is the definition of bad public policy.”

AOPA President Mark Baker said, “$100 billion. Really? So here’s how it shapes up: The legislation would hand over the air traffic control system to the airlines, who are behind in equipping with the latest technology and responsible for 50 percent of delays; it would create a too-big-to-fail monopoly; and now it will cost taxpayers almost $100 billion to create a new system when the one we have is the envy of the world.”

In addition to expanding the deficit by a tenth of a trillion dollars, there is no accounting for the fact that all of the current assets of the air traffic control system would be transferred to the AANS Corporation lock, stock, and barrel, and with no reimbursement to taxpayers. These assets — control towers, personnel, hardware, software, and all navaids and ancillary equipment, worth tens of billions of dollars — have been paid for with taxpayer dollars.

In addition, over the past 20 years alone taxpayers have invested more than $53 billion into air traffic control facilities and equipment which would also be handed over to AANS. To simply transfer them, for free, to a private entity dominated by the airlines and having no Congressional oversight or accountability is blatant cronyism of the worst kind.

Cronyism, if you’ll recall, is the act of government selecting winners and losers in a marketplace. It usually happens when large entities desire to use public policy to drive out smaller entities. In the case of privatization, commercial airlines, despite whatever they may say publicly, are in business to make a profit. And if that eventually means excessive user fees and/or curtailment of services in smaller municipalities and airports well, too bad for them.

The Institute for Liberty sent a letter to Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Committee, and Rep. Rodney Frelinghuysen (R-NJ), chairman of the House Appropriations Committee. The letter (link below, with a fact sheet explaining why H.R. 2997 is bad public policy) expressed support for true privatization, but explained that that is not what H.R. 2997 does. It creates a government-chartered public-private hybrid, which generally contain the worst elements of both: no incentive to compete or innovate, and no oversight of its governance or accountability to the public.  Think of the U.S. Postal Service, Amtrak, or FannieMae/FreddieMac as disastrous examples of what could very well happen with AANS.

To top it all off, taxpayers have NO protection or legal relief should AANS encounter financial difficulty and become unable to provide services or manage air traffic control operations.

And you know what that means: You and I and every other taxpayer in the country will have to foot the bill.

 

Mike Straka, PhD
HN Contributing Author & Technical Support
Past Chairman, Colorado Aviation Business Association

Sources:
1.  CBO ESTIMATE OF DIRECT SPENDING AND REVENUE EFFECTS OF ENACTING H.R. 2997, 21ST CENTURY AVIATION INNOVATION, REFORM, AND REAUTHORIZATION ACT, AS POSTED BY THE HOUSE COMMITTEE ON RULES ON JULY 11, 2017.  Congressional Budget Office Website, August 15, 2017  https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/hr2997table.pdf

2.  NBAA: New CBO Report Says ATC Privatization Bill Swells Deficit By $100 Billion. Dan Hubbard, National Aviation Business Association. NBAA Website, August 17, 2017. https://www.nbaa.org/news/pr/2017/20170817-056.php

3. ATC Privatization Would Add Almost $100 Billion To Deficit. Editorial by Aircraft Owners and Pilots Association. AOPA Website, August 16, 2017. https://www.aopa.org/news-and-media/all-news/2017/august/16/cbo-says-privatization-would-add-almost-100-billion-to-deficit?

4. Conservative Group Calls ATC Privatization’Cronyism.’ Editorial by Aircraft Owners and Pilots Association. AOPA Website, July 13, 2017. https://www.aopa.org/news-and-media/all-news/2017/july/13/conservative-group-calls-atc-privatization-cronyism

5. IFL Sends Letter to Congress Opposing Air Traffic Control “Privatization”
Andrew Langer. Institute For Liberty Website, July 12, 2017. http://www.instituteforliberty.org/index.php?src=news&srctype=detail&category=Home%20Feature&refno=209