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Another Anti-Union Conservative Swings at Air Traffic Control Reform and Misses

Most free market and libertarian researchers—at least those familiar with what the House’s AIRR Act (H.R. 4441) actually does and doesn’t doare strongly in favor of the bill’s air traffic control corporatization plan. Unfortunately, a small number of D.C.-based, center-right labor policy professionals has gotten it in their heads that the AIRR Act’s air traffic control title constitutes a “union giveaway.”

A weak critique of air traffic control corporatization was just published by the Washington Examiner, ominously titled, “AIRR Disaster: Air traffic control reform a boom for unions, a bust for taxpayers.” I have previously debunked most of these same incorrect and misleading claims made by anti-union conservatives about the House’s air traffic control reforms (see hereherehere, here, and here).

In the latest, Russ Brown of the Center for Independent Employees repeats some of the same inaccurate claims made by previous opponents, but he also raises some new fallacious arguments. As with previous rebuttals, I will quote Brown directly and then respond point by point. Brown’s claims are in bold and my responses follow.

We owe our safe skies to America's talented air traffic controllers. Their record is even more amazing when you consider some of their antiquated equipment is from the mid-20th century, still in use today.

In spite of this sterling record of air safety in the United States, Rep. Bill Shuster, R-Pa., and Airlines for America (A4A), a powerful air industry trade association, think it is time for a change.

In February Shuster, who chairs the Committee on Transportation and Infrastructure, introduced the Aviation Innovation Reform and Reauthorization Act. Proponents argue the legislation is needed to reform America's air traffic control system. But what "reform" was really proposed? First, the bill was designed to spin our nation's air traffic controllers off into a quasi-private agency — very much like Fannie Mae or the U.S. Postal Service. Proponents of the reform tout it as privatization in order to gain the support of Republicans in Congress and conservatives who are supportive of the idea of privatization in general.

Comparisons to Fannie Mae or the U.S. Postal Service are inapt. As the libertarian Reason Foundation’s Bob Poole noted months ago when similar comparisons were made:

What I find especially disturbing is the piece’s misunderstanding (or misrepresentation) of what the proposed corporation actually is. It is not a government-sponsored enterprise (GSE) like Fannie Mae, as the piece claims. It would be a federally chartered private nonprofit corporation, analogous to the American Red Cross or federal credit unions. It would receive zero government funding, and its bonds would not be backed by taxpayers, only by the revenues that it generates from providing ATC services (just like private or public toll roads—or like utility companies).

And as I noted in a recent critique, despite the Postal Service’s patina of independence, it is still a federal agency and relies heavily on the appropriations process to keep its doors open. In contrast, the current reforms are in large part designed to allow air traffic control to escape from the appropriations process.

Even worse for Brown’s argument is the existence of Section 90304 in the AIRR Act, which specifically provides:

(a) Non-Federal Entity.—The Corporation is not a department, agency, or instrumentality of the United States Government, and is not subject to title 31.

(b) Liability.—The United States Government shall not be liable for the actions or inactions of the Corporation.

(c) Not-For-Profit Corporation.—The Corporation shall maintain its status as a not-for-profit corporation exempt from taxation under the Internal Revenue Code of 1986.

(d) No Federal Guarantee.—Any debt assumed by the Corporation shall not have an implied or explicit Federal guarantee.

Finally, Brown’s claim that “proponents of the reform tout it as privatization in order to gain the support of Republicans in Congress and conservatives who are supportive of the idea of privatization in general” is completely false.

Proponents have been correctly referring to this as “corporatization” or “commercialization,” not privatization, from the beginning. This is because the corporate structure proposed would be a congressionally chartered, stakeholder-controlled nonprofit. No equity shares would be issued and traded. The corporate structure is much more akin to a utility co-op than anything the word “privatization” brings to mind.

In reality, the only people throwing around the P-word are far-left government employee unions and their allies in Congress, rent-seeking Delta Air Lines and corporate jet lobby National Business Aviation Association, and, ironically, conservative anti-union critics such as Brown who are disappointed the bill doesn’t attempt to crush the air traffic controllers union.

But what's actually contained in this bill are huge giveaways to the air traffic controllers' union, including binding arbitration. Conservative organizations, including the Center for Independent Employees, the Heritage Foundation and National Right to Work Committee have urged Congress to oppose the bill's egregious labor provisions.

There should also be concern of a heavy cost to taxpayers: Shuster's bill would hand billions of dollars worth of taxpayer-owned air traffic control equipment to the new union-controlled operation.

As David Grizzle, former FAA chief operating officer and chief counsel, noted in a guest post for CEI:

Binding arbitration is currently required for collective bargaining negotiations (not a “new tool”) and is a necessary and valuable adjunct to a strike prohibition. Binding arbitration further reduces unions’ leverage in negotiations by ensuring that protracted labor negotiations cannot create labor unrest. Arbitrators are selected with equal input from both sides from a qualified, knowledgeable pool of private sector arbitrators.

As I further explained to another mistaken right-wing critic of reform:

In reality, controller binding arbitration changes little during the transition. The primary difference is … that the new private ATC Corporation would not be able to impose its final offer if it reached an impasse with the union. But … this rarely used provision is not even effective, as the Obama administration reversed the Bush administration’s decision [to unilaterally impose a final offer] three years later. Apparently, clinging to an ineffective legal tool possessed by the government is reason enough to prevent the private sector from taking over the collapsing state-owned enterprise called the FAA’s Air Traffic Organization.

But to those who fear this inconsequential change, let me explain how the “new” binding arbitration process will work if the ATC Corporation’s management and controllers’ union reach an impasse. First, management and the union each select eight mediators from an accredited pool and set the list aside. Second, management and the union each choose one mediator. Third, those two mediators then select the third meditator from that eight-eight list. So, you’re going to end up with a middle-of-the-road mediation panel because management and the union would be on equal footing. Again, this non-issue is worth fighting to prevent badly needed reforms?

As for Brown’s stated concern about “taxpayer-owned” assets being transferred without compensation, his approach would result in taxpayers being taken to the cleaners. This past February, Bob Poole explained in congressional testimony that requiring the ATC Corporation to purchase the FAA Air Traffic Organization’s assets was wholly inappropriate for three reasons: 1) this is a reorganization of the ATO, not a purchase of the ATO by an outside party; 2) most of these assets are completely obsolete and need to be replaced as quickly as possible; and 3) requiring the unnecessary payment of billions of dollars for rundown assets will only add to the user fees paid by aircraft operators, resulting in higher airfares.

In a nutshell, because these assets are junk and will need to be replaced by the ATC Corporation, there is no cost to the taxpayer. Even if these assets were economically valuable, the assets were procured through the Airport and Airway Trust Fund, which is backed by aviation user taxes that would be reduced and replaced by the ATC Corporation’s new cost-based user fees. General taxpayers didn’t pay the aviation taxes into the trust fund to purchase these ancient assets, so why should they be compensated to the tune of billions? The primary effect of following Brown’s logic here would be increased air traffic control user fees and higher airfares, and for travelers to pay twice for the same obsolete assets.

In his newsletter, Poole also published a comment from George Donohue, FAA operations expert and Professor Emeritus of Systems Engineering at George Mason University, providing additional details as to why Brown’s objection is baseless:

I was a strong proponent of moving the ATC system out of the U.S. government when I was David Hinson's Associate Administrator. (It was one of the reasons he hired me, to make the move to the private sector, since none of the [other] FAA executives was in favor of the move.) It was one of the reasons that Vice President Gore got me the nomination to become the Deputy Administrator. . . . My book [Terminal Chaos: Why U.S. Air Travel Is Broken and How to Fix It, co-authored with Russell D. Shaver III, AIAA, 2008] made a point of this necessity to achieve modernization. I was making this point to the NAS committee that reviewed NextGen [in 2015] and got some of this language into the final report. In my recent interview with GAO [on transition issues], I told them that my estimate was that the current ATC assets were worth zero! The computers are mostly beyond a six-year maximum economic lifespan, the Centers should be reduced from 20 to fewer than six (sell the land), the ADS-B system is not owned by the FAA (but paid for as a service), the primary radars are now mostly used for a national and homeland defense security requirement that the government should pay for in any case, and NextGen digital data links will be privately owned and operated (as a service like ADS-B). Most of the new infrastructure is not owned by the U.S. government because there has been no funding to purchase it, and the FAA has had to out-source the new systems to the private sector anyway.

This is not a new concept. In the 1990s Canada did the very same thing with their much smaller, less congested ATC. The Canadian system, called Nav Canada, not only transferred taxpayer assets, but awarded severance packages to all of the Canadian Air Traffic Controllers as lump sum payments for nearly 50 percent of their annual pay, just for keeping the same job but separating from the Canadian Government payroll. They did not miss one day of work and they retained other government benefits. On one day, Canadian taxpayers gave $116 million in cash as severance to 6,400 controllers, who again did not miss a single paycheck. By comparison, the U.S. has around 25,000 controllers.

This retelling of the Nav Canada experience is strange for two reasons. First, a conservative is demanding that taxpayers spend billions of dollars they don’t need to spend for no tangible benefit. Second, Brown makes it sound as if Nav Canada’s use of the RBC Dominion Securities investment bank to develop the financing package that ultimately resulted in the sale of Transport Canada’s air traffic control assets to Nav Canada applies to the current U.S. context. It doesn’t.

Under the House’s proposed legislation, the ATC Corporation would be a nonprofit chartered by Congress. In Canada, aviation stakeholder groups, with the government’s support, drew up incorporation documents themselves. As I noted above, what is being proposed in the U.S. is merely a government reorganization of the Air Traffic Organization (albeit into a nongovernmental nonprofit). There is no purchase by an outside group as was the case in Canada—Congress would create the ATC Corporation and then transfer federal assets to it—so pretending there is and then requesting unnecessary payment is beyond foolish.

Brown’s argument for completely unnecessary big-government spending is similar to the false claims of Rep. Peter DeFazio (D-Ore.), the ranking member of the House Transportation and Infrastructure Committee and the public face of left-wing opposition to these badly needed reforms—and just as wrong.

The good news is that Congress is expected this week to take up a short-term extension of the current FAA law, allowing proponents to continue educating members of Congress and the public on the need for these important reforms—and to continue debunking false and misleading claims made by opponents.