User Fees are Not Wacky Spendthrift Ideas

There has been a lot of attention paid recently around Washington to how to pay for transportation improvements.

The U.S. Chamber of Commerce has been an important player in this and they should be; the business community is heavily invested (if you will) in how well our transportation system works.  Their president, Thomas Donahue, made an important speech earlier this week on a range of economic issues and when he touched on transportation he said that the users should pay.  Makes sense, I think.

capital domeAlso earlier this week Virginia Gov. Bob McDonnell, who has been under heavy pressure to do something to increase investment in the Commonwealth’s transportation infrastructure, announced a plan that would eliminate the gas tax and substitute an increased sales tax.  Reaction is mixed, but I was interested to hear Republicans interviewed say they are reluctant to embrace this because they feel users should pay.

What is interesting about all this is that two of the more noted conservative institutions in the country, the U.S. Chamber and Virginia Republicans (many of them anyway, the governor is a Republican after all) are publicly embracing a user fee approach to finance infrastructure.  And (without passing judgment on the governor’s specific plan as I am not intimately familiar with it) I agree with them.  Indeed, all those places all over the world we like to point to as being ahead of us in investing in infrastructure use some sort of user fee approach.  Whether in the form of a straight fee or a fuel tax or whatever, the principle of user pays makes sense and, if the levels are set correctly, it works.

This has been the crux of our argument on the PFC for years now.  The PFC is not a federal tax, it is not a federal ANYTHING, except a federal limit on the ability of a community to set a user fee to pay for its own aviation infrastructure.  The PFC, as important thinkers like Bob Poole of the Reason Foundation have argued for years, is the best conservative approach to financing airport infrastructure.  It is paid by users, it is not filtered through Washington or a state capital, it is tied to specific projects, stakeholders and the community must be consulted, and it has an expiration date.  If you gave a conservative a blank sheet of paper and asked him or her to draw up a perfect infrastructure financing scheme my bet is it would look just like this.  And such an approach would benefit the airlines too, that is why airlines all over the world have pushed for such a model.

These are not wacky spendthrift ideas.  They are solidly conservative and prudent and right for these economic and political times.

Will there be sequestration? I don’t think so

I was at an aviation event the other day and ran into a friend who runs another aviation association.  Say something about sequestration, she asked.  Ok. Here are a few thoughts.

First, I strongly believe it will not happen.  That Congress and the president will figure something out.  For a whole variety of reasons, I think the climate is right for some sort of deal.capital dome

I do agree that if sequestration happens, NextGen would take a big blow.  This cannot be permitted to happen.  But pardon me for being a little jaded.  I’ve been working on air traffic control reform and modernization since 1993 when I authored a presidential commission report calling for satellite based navigation by 1997.  It didn’t happen then because certain interests didn’t want it and, frankly, the airlines did not care.

In the end, the best way to move this along is to change the way it is financed, allow access to capital markets, as proposed by our 1993 commission and so many others.  The real lesson from sequestration is that getting air traffic control modernization out of the usual Washington way of doing things is the best answer.

The same is true with airport infrastructure. Although the federal grant program is not impacted by sequestration, it just shows how unreliable Washington is as a partner.  We must allow airports more freedom to generate their own resources.

Bottom line.  Doubt it will happen, but I think sequestration really shows how we need less Washington in the matter of aviation infrastructure.

Just before I started writing this I learned of the death of Sen. Daniel Inouye.  Senator Inouye is the second longest serving senator ever, and one of the greatest Americans of the 20th century.  He was a true war hero, who left his arm on a battlefield in Europe during World War II.  He was a great patriot and senator, one of those people who knew how to get something done.  He was an important part of the Watergate Committee in 1973. Such was his integrity that, even though he was a Democrat, no one ever questioned his aggressive pursuit of the truth.  When I arrived in the Senate as a young staffer six years later, I could easily see the quality of this man.  Later, I had the honor of testifying before his committee.  And I still recall going to some ceremony in the Senate a few years ago, taking my seat and then looking up a moment later as Senator Inouye asked if he could sit next to me.  No pretense, no “great man” vibe.  Just one of the greatest people this country ever produced politely asking if a seat was taken and if he might be able to sit there.  I can’t stop smiling thinking about it.  What a great man.  They say his last word was “Aloha.” So I will say Aloha, Senator Inouye.

As I have said and the Post now reports — airline baggage fees costing U.S. Treasury millions

I was thumbing through the Sunday Washington Post last night and came across an article in the Business Section called “Moneybags.”  I figured it was about hedge fund managers or Alex Rodriguez.  But it was about the bag fees and other fees charged by the airlines.  And not so much that the airlines charge those fees, but the fact that by doing so the Aviation Trust Fund is being shortchanged, with big implications for the future of the American air transportation system.

Now I have been one of those saying all along that airlines can charge whatever they want.  It is a deregulated system and if the customer will pay then, as long as everything is fairly disclosed, they can charge how they want.  That doesn’t always make me popular in some quarters.

But what I have also pointed out is that by moving to this model the system we have for funding aviation investments in this country is now broken and in need of reform.  And that if we don’t reform it then we will be short of the revenue we need to really implement NextGen and to fund capital improvements (if someone can show me how to do those things without money I am all ears.).  And NextGen is something the airlines all tell me they really want and need (count me skeptical on that score, but that’s another post).

At the same time, the fiscal cliff Congress has built as an incentive for a new debt deal looms and millions of people now know a new Washington term “sequestration.”  I wrote about this earlier this week in an AOL.com article.  All of these things conspire to push the implementation of NextGen; and efforts to build a 21st century aviation infrastructure, further into the future.

I have said it before.  Most of the aviation community understands these things and knows we need to address them.  The ACI-NA Board passed a resolution calling for a new National Aviation Policy to deal with them.  Included in this policy is rationalizing the tax and regulatory regime under which airlines operate.  It was not an “airport-only” resolution.  I think most of the aviation community agrees with this.  The only thing keeping us from dealing with it is the refusal of the airlines (as a group) to work with airports and discuss ways to modernize the system for financing airport infrastructure.  I truly hope that cooler heads will prevail and that we will be able to all work together to build the kind of air transportation system we all say we want; a system that will ensure a competitive future for a competitive nation.

A final note:  One of my real “Welcome to Washington” moments came right after I got here in 1979.  I was a 23 year old, freshly-minted, Senate staffer and was briefing my boss on the merits and demerits of a bill to bail out the Chrysler Corporation (yes, boys and girls, the issues don’t really change).  We got on a Senate elevator and I continued to talk.  I all of a sudden realized that the others on the elevator were all listening to me.  Their names were George McGovern, Frank Church and Birch Bayh.  All people I had grown up admiring.  The fact that they listened actually made me more confident; it was a real key moment.

So, I was saddened to learn yesterday that Senator McGovern had passed away.  Most of you know him as a failed presidential candidate, but he was so much more:  a hero of World War II, a dedicated public servant and a genuinely nice fellow.  He and Bob Dole worked closely together on programs to ensure that children and others in this country would have access to the food they would need.  He worked later in life with Jack Kemp on tort reform issues.  He was someone willing to work across the aisle with anyone who could help solve a problem.  One of the real ah ha moments I had (a series of moments, I guess) was seeing Senator McGovern in action, and also seeing Senator Barry Goldwater work (Sen. Goldwater’s office was right next to ours, talked to him a few times, another nice fellow and not the devil I was told he was when I was a kid).  The two of them represent, to many people, polar opposites in American political ideology.  But each was willing to work across the aisle.  Each wanted to legislate.  Hopefully they are getting together in the Senate in the sky and can help inspire today’s political leaders to look to a time when such things were possible.  Sen. George McGovern.  RIP.

Something Congress Can Do Right Now

The last year or so has been a tough one for aviation, at least from a policy point of view.  We had numerous, frustrating short-term extensions of the FAA authorization, adding up to twenty-three in all.  One time the Congress couldn’t even agree on an extension and closed the FAA down for a couple of weeks, delaying projects all over the country and resulting in thousands of layoffs.

When a bill was finally passed about the best you could say was that at least we would have some stability.  But it will result in less investment in aviation infrastructure and will delay the day when the traveling public will realize the full benefit of NextGen.

What  a year!  We need to do better.

Here is something Congress can do, right now.  Michael Huerta was nominated several months ago for a full five year term as FAA Administrator.  When he was nominated I issued a statement strongly supporting his confirmation and I feel that way even more strongly today.  The law calls for a five-year term to take this appointment out of the purely political realm, and it should be treated that way. Michael has done a great job leading FAA since being named on an acting basis.  He knows the agency and the issues and has the full confidence of the entire aviation community.  His work on NextGen is critically important for the future of both airports and airlines.

So, US Senate, please confirm Michael Huerta right away so the FAA and the aviation community can get on with the business of building a twenty-first century air transportation system.

Babbitt, Katzenbach: My Thoughts

I wanted to write today about two people I admire greatly.

First is Randy Babbitt.  I first met Randy when he was President of the Air Line Pilots Association, in 1993.  President Clinton had appointed him to a commission chaired by my former boss, former Virginia Governor Gerald L. Baliles (as an aside, he now runs the University of Virginia’s Miller Center, they’ve just produced a very important report, Are We There Yet:  Selling Americans on Transportation, which I recommend highly).

I was the Clinton/Baliles Commission’s executive director. I worked closely with Randy and found that he was always in search of new and better ways to help lead the aviation industry into the future.  He took positions on some issues, like foreign investment, that were surprising and constructive.  He was a major part of the commission’s success.  And in the years following we worked together on a wide variety of issues.

When President Obama appointed him to head the FAA I felt it was a job for which Randy had prepared his whole career.  We’ve had some fine people head the FAA during my time, but I don’t think anyone was better prepared.  When the events of late last year unfolded, his being pulled over and brought in and then leaving FAA, it was a tough day for all of us.  When I had a chance to sit with Randy and find out what really happened, I was angry.  As we all now know, and as that judge saw for himself on the video, this is something that never should have happened.  Whether it was a mistake by the officer or a flaw in the system or whatever, he should not have been pulled over, he should not have been brought in, and he should still be running the FAA.

As my folks always told me, life is not fair.  But I am so glad that Randy has been, rightly, exonerated, and that the aviation industry will once again be able to rely on his experience and wisdom.

Second, is Nicholas deB. Katzenbach, who passed away this week at the age of 90.  Katzenbach was a key member of JFK’s Justice Department and is the guy who faced down Gov. George Wallace, literally, at the schoolhouse door.  He played an indispensable role in the civil rights advances of the 1960’s, and in the Johnson Administration was made Attorney General.  Later, he moved over to the State Department as an Undersecretary; the kind of move that would be impossible in today’s Washington, but back then people made such moves for the good of the country. While there, he played a role in the effort to change the course of our Vietnam policy; an effort that was overwhelmed by bigger forces.

In the end, Katzenbach made a huge difference in the life of our country for years to come.  His book, “Some Of It Was Fun” is an excellent read; I recommend it highly. He was one of those people whose name is perhaps not widely known but who made a huge difference that history will long remember.  Nicholas deB Katzenbach.  RIP.

Facilitate International Travel – And Watch the Economy Grow

There is a lot of talk on the campaign trail these days about jobs.  Even as the overall economy improves, many have yet to feel any positive impact.  So, talk about jobs resonates.  But the fact remains there is little government can do to directly create jobs.  In the end, the best way to do this is to invest in critical infrastructure.  Not only do you create jobs building the road or runway or railway or waterway, but those things help foster growth for years and decades.  And some candidates do seem willing to talk about this.

But there is one other way, maybe the only other way, the federal government can directly create jobs.  And that is through ensuring that our customs and border protection resources are adequate and well deployed, and by ensuring that people who want to  travel here for legitimate purposes can get a visa.

This might not be where you thought I was going with this.  It might not seem obvious.  But it is true, and it has never been more true than it is now.  I say that because the parts of the world that are growing fastest:  Asia, the Pacific, Latin America and certain parts of the Middle East, feature literally billions of people with disposable income who want to travel for business or please and who, compared with travelers from North America or Europe, spend a lot more money.  And, we are making it harder and harder for these people to come to our country.  And, those people are going elsewhere!

You might ask how this could be.  After all, we have more than 100 open skies agreements, can’t anyone who really wants to come travel freely?

The answer is no, for a couple of reasons.  First, we do have all those open skies agreements; and agreements with other countries, by and large, are more liberal than a quarter century ago.

But in reality, the skies are only as open as Customs and Border Protection says they are.  If they can staff a flight or an airport, then sure, come on in.  But if they can’t, if they do not have the resources, then those travelers will end up going somewhere else.

Even with a community able to generate the market.  Even with an airline or airlines willing to serve it.  Now I don’t want to blame Customs and Border Protection, entirely.  They are resource constrained and have to make do with what they have.  But the administration (like most before it) has not bothered to make the argument for more resources to welcome these high spending travelers (by the way, a dollar spent here by a tourist counts on the positive side of the trade balance ledger).  Indeed, even though they are now collecting fees from Canadian and other Western Hemisphere travelers that were not previously levied (and that we were told would be used to facilitate travel) the administration has not asked for an increase in its budget.  And, don’t tell me we don’t have the money, a dollar spent on facilitating travel is earned back many times over.

And, I am not letting Congress off the hook on this; they need to provide those resources.

The other problem we have is that it takes too long and is too costly for legitimate travelers from countries such as China, India and Brazil to get visas to come to the United States.  Here, I will pat the administration on the back – once.  They have announced efforts to deploy additional people to those countries and have set goals for quick visa issuance.  But even with that, it is still too difficult.  I will tell you straight up that even people in the airport business tell me they do not like coming to the United States because of the time, expense and hassle that is involved.

I was speaking earlier today to Mario Diaz, who runs the Houston Airports.  One of our smartest airport leaders.  He put it well.  The problem, he said, is that too many people look at these things as simply cost centers.  They do not look at the result.  If someone came along and said that if the government turned a switch on some shiny new machine it would result in hundreds of billions of dollars of guaranteed annual impact to the economy, and  said that the machine cost a half a billion or so each year, Congress would appropriate the money in a heartbeat.  But spending that kind of money to facilitate travel for the same result seems a bridge too far (to mix modal metaphors) because these things are seen simply as cost centers.

People, we are getting our brains beat in by our international competitors.  There are lots of reasons for that, and I will return to some of them in later posts, especially the investments they are making in critical infrastructure.  But a key reason is this self-inflicted wound.  We are not putting the effort we need to into facilitating legitimate, lucrative, travel to the United States.

We cannot blame any kind of improper subsidy or unfair trade practice.  We are doing this to ourselves.  Self-defeating is an apt description of the result.  Stupid is the better term to use to describe our whole approach.

So, let’s put the resources where they need to be.  Let’s buy this shiny new guaranteed job creating machine.

Airports Have Greater Economic Clout than the Economies of South Korea, Mexico or Switzerland

Sometimes you might wonder exactly why people care so much about debates over investment in infrastructure.  Isn’t it just all politics?  Does it matter?

A study released today by ACI-NA, Economic Impact of Commercial Airports in 2010, offers an emphatic YES.  (Go to www.airportsforthefuture.org to see the study).

See, in 2000, two very important airport infrastructure policy decisions were made.  The first, allowed local communities to raise more local resources to finance infrastructure by increasing the cap on the passenger facility charge from $3 to $4.50.  The second decided that funds sitting in the aviation trust fund and paid by air travelers should not just sit there, but should be invested.  So the Airport Improvement Program was increased and money paid by air passengers for capital improvements was spent on its intended purposes.

As a nation, we (through our Congress and President) decided to increase our investments in airport infrastructure.  Our study, the first undertaken since those policy changes went fully into effect, shows the very positive results.

America’s airports support 10.5 million jobs.  America’s airports support $1.2 trillion in economic activity, larger than the GDP of South Korea.  “Airports, Inc.” directly employs 1.3 million people, making it the second largest employer in the nation, behind Wal-Mart.  Total airport payroll equals the total payroll of the State of Michigan.  The total economic clout of airports:  8 percent of U.S. GDP and 7 percent of U.S. employment.

Those are big numbers.  But if you are still not convinced, consider this:  during that time, the jobs number increased by 56 percent.  Total payroll has gone up over 90 percent.  And the total contribution to the output of the American economy has more than doubled.  All this has happened despite the industry being devastated by the largest terrorist attack in history.  All this has happened despite the most severe economic downturn since the Great Depression, including spikes in the price of fuel.

This economic growth occurred because we decided to invest in our economic future.  In economic times as difficult as most of us will ever experience, those investments paid off.

That is why it is so discouraging that the recent FAA bill leaves in place federal limits on what airports and local communities can do to generate resources.  That is why it is so discouraging that the president’s budget reduces investment in airports.  That is why it is so discouraging that local communities cannot raise their own resources because of decisions made in Washington.  We are putting the future in peril, just as we are set to take off.

Some have called for a new national airline policy, designed to promote the financial strength of airline companies.  I am a strong proponent of strong airline companies.  But the purpose of the air transportation system is the movement of people and products to destinations and markets.  It is not to ensure shareholder value for airlines; that’s what airline executives and boards are supposed to do.

We do need a new national AVIATION policy, looking at all aspects from NextGen to financing airport infrastructure to the regulatory environment in which aviation must operate to the tax structure, all of it.  It must be designed to strengthen the air transportation system, not merely any one component of it.

We are now stepping back from investments in aviation at the same time as our competitors around the world are stepping up.  We are in peril of becoming what the steel industry became in the 1970’s and 1980’s, out of date and non-competitive.

We have a chance to avoid that.  Our study shows the benefits in terms of job creation and economic impact when good decisions and good investments are made.  I worry that the next study will show when the opposite happens.