Here in Washington, even liberal pundits agree that the Obama administration has lost the battle over sequestering funds for the Federal Aviation Administration. The Democrats tried to keep a united front—treating the whole sequester as a monolithic bundle of political pain—only to be rolled by the reality that some parts of the federal government are more popular than others.
Yet even though Congressional Republicans won an obvious victory on the sequester, we might note that on the overall issue of optimizing air travel, the sequester reversal doesn’t make things better; it only keeps them from getting worse. So the long-term decay of America’s competitive position in the world–air travel being a key component of competitiveness—will lamentably continue.
As we all remember, in the wake of last months’s FAA furloughs of air traffic controllers, constant news reports of travelers suffering long lines at airports proved alarming—and galvanizing—to Congress. So gridlock was transcended, and quick action taken, to “carve out” the FAA’s air traffic controllers from the effects of sequestration. And yes, the fact that reporters and lawmakers fly so frequently had a lot to do with this sudden supernova of media attention and legislative action.
The political spin was clear enough immediately; even progressive partisans had to agree that their side had lost: “The Democrats have lost on sequestration” was the headline atop Ezra Klein’s April 26 blog item in The Washington Post. “Sequestration: GOP Wins” ran the header for Michael Tomasky’s same-day piece for The Daily Beast. Democratic leaders were naturally upset: “We’re going to have to reclaim some lost ground here,” declared Rep. Chris Van Hollen, a rising star in the House. Moreover, added Van Hollen, “We cannot have a situation where people just cherry-pick the sequester.”
Yet that cherry-picking, of course, is exactly what happened. The air traveling class picked itself out of the one-size-cuts-all impact of the sequester. Is such cherry-picking a victory for aerial overclass elitism? Or is it a victory for the common-sensical need to make judgments as to what are the most important federal functions?
Everyone can help answer that question, and yet in the meantime, Beltway politicos know that the Republicans won big, even as the next generation of would-be sequester-exempters are lining up for their own special treatment. Most likely, the sequester will continue to be honeycombed with carve-outs, as powerful groups reclaim “their” federal money.
However, returning to the FAA matter, we can see a lost opportunity in the way that this chapter in the sequester saga was resolved.
First off, we might note that the pre-sequester system was hardly ideal, and so a mere return to the status quo ante is hardly the best possible outcome. Why? Because the airways are overcrowded beyond their current capacity; we need better air traffic control, and we need better, bigger, and more airports. Otherwise, we will continue to snarl our travelers, and our commerce, in costly delays.
In 2011, according to the Airlines for America trade association, the direct cost to the airlines of system delays was $7.7 billion—and that was a 15 percent increase from the year before. That $7.7 billion cost, we might note, does not include the personal cost to passengers from all those delays. For busy business travelers, time is money, and if it takes too much time to get from place to place in the US, well, they can make other long-term business arrangements, elsewhere in the world.
Second, the $253 million that Congress reallocated to air traffic control was, in fact, taken from elsewhere in the FAA budget—specifically, from the fund that finances airport improvements. To be sure, airport infrastructure might not be as immediately critical as air traffic control, but it is, of course, vitally important.
Last year, the American Society of Civil Engineers calculated that a $2 billion shortfall exists in projected airport construction spending through 2020. The ASCE further argued that inadequate airport infrastructure could cost the economy as much as $47 billion during that same time span.
On April 30, President Obama himself took note of the air infrastructure issue, expressing the problem in terms that the flying class could readily understand:
“There was a recent survey of the top airports in the world. And there was not a single U.S. airport that came in the top 25. Not one. Not one U.S. airport was considered by the experts and consumers who use these airports to be in the top 25 in the world. Cincinnati airport came in around 30th. What does that say about our long term competitiveness and future?”
In fact, Cincinnati comes in at exactly #30 in international rankings. Surely even Republicans can see something wrong with that picture—and that picture will be made worse if the $253 million for airport improvements is now gone.
So what to do? How can conservatives, in particular, think about improving aviation—without simply surrendering to the Obama administration on budget issues? Isn’t there a better way to fund national assets such as our aviation system?
We might begin by stepping back and thinking about the paradox of how something as rich as passenger aviation could be impoverished by arbitrary budget-sequesters. After all, there’s plenty of money in aviation. So why is anybody talking about cuts?
The answer, of course, is that the original sequester, as it was designed, was the problem. Controlling overall federal spending is a meritorious goal, but a robust aviation system is not only a necessity for the US, but also a money-maker—and for that reason, it shouldn’t ever suffer cuts as part of any larger government retrenchment program. It makes no sense to impose austerity on a profit center.
If Uncle Sam doesn’t account for aviation as a profit center—as a capital asset—then Uncle Sam needs a new accounting system. And the FAA would be a good place to start, because it has an affluent support base that wants the air system to get better, not worse. The trick is to simply to apply aviation resources directly to aviation problems.
Such a direct-funding system shouldn’t be difficult. Indeed, airline passengers, fully aware that they are paying a number of special taxes on their tickets, might think that such a direct-funding mechanism already exists. After all, Airlines for America identifies 17 different taxes on airline tickets and air travel. Yet as we have seen, all those taxes did not insulate passenger aviation from the sequester.
So is it possible to do that now? To guarantee that a certain stream of tax revenue goes toward a specific public purpose? The answer is not only “yes,” but “yes, it happens all the time.”
These directed revenues happen most often at the state and local level, in the form of hypothecated taxes. “Hypothecated” is a two-dollar word for “dedicated,” or “earmarked.” That is, all the revenues from a certain tax go toward a certain purpose.
Such taxes are common at the state and local level, where such taxes—even tax increases—prove to be reliably popular. Voters often feel good about paying a special sales tax, for example, to help build a park or a school or a new sewer system. The closer the citizen is to a problem, the more likely he or she will be sympathetic to arguments that more taxes could solve the problem.
Indeed, the closer one looks at hypothecated taxes, the less ideological they appear. Everything has a political dimension, but a question about, say, a new road in an area is more of a problem to be solved, and less of an ideological point to be fought over. That’s why it’s often legitimate to think of hypothecated taxes as “user fees,” and there’s rarely much controversy over those.
By contrast, the federal government does not typically operate on the hypothecated-tax principle. As far as Uncle Sam is concerned, the many federal taxes go into the same general fund from which all agencies draw. Thus the popular FAA and unpopular foreign-aid agencies share the same siphon into the tax well.
We can quickly see that the national government would naturally prefer this general-fund approach, because it commingles the popular and the unpopular.
Indeed, over time, the federal government has tended to eliminate even the semblance of hypothecated taxes. The Social Security system, for example, began in the 1930s amidst lots of stern talk about a sacrosanct “trust fund,” into which the payroll taxes of future recipients were deposited. Yet over the decades, that trust fund has become nothing more than an accounting fiction; nothing stops DC lawmakers from using the trust fund to pay for anything else.
Similarly, the walls around the Highway Trust Fund, financed by a federal gas tax, have been knocked down; today, less than two-thirds of the Highway Trust Fund’s revenues go for highways.
This federal sleight-of-hand may serve the convenience of Powertown, and it may be the only way to sustain unpopular programs, and yet fiscal slipperiness comes at a political cost: People don’t much like the federal government. According to an April 2013 survey from the Pew Research Center for the People and the Press, just 28 percent of Americans hold a favorable view of the federal government; by contrast, 57 of Americans approve of their state government, and 63 percent approve of their local government.
So maybe Uncle Sam should give hypothecation a try. A dedicated tax for defense? For Afghanistan? For education? For NASA? We would quickly learn some lessons as to what the voters like-and don’t like. Okay, maybe that’s too radical, at least in the short run; after all, how much hard truth can the Beltway withstand?
So as a modest step in the right direction, perhaps the national government could hypothecate all the taxes it needs to upgrade the passenger aviation system. DC could put forth a plan that would fully fund all the needs of the air system—and then separate it out from the overall federal maw, once and forever.
Would it work? Sure it would: As we have seen, state and local governments do it all the time.
Indeed, the hypothecation idea is fully in keeping with the government-as-a-platform vision that’s now percolating out of Silicon Valley. That is, we can think of each government function as an “app,” to be regarded on its own merits—and to to be upgraded, or even removed, as needed.
So over time, the hypothecation idea could be applied to other areas of the federal government, segmenting the whole of the national leviathan into more effective—and more popular—operating units. To think: Uncle Sam could become popular again.
James P. Pinkerton is a contributor to the Fox News Channel and a TAC contributing editor. Follow him on Twitter.