Boondoggle.gov
A report on the federalized skies.
Americans, we are told, have a newfound faith in our federal government. "How else can we explain the big debate on airline safety?" asks Democratic pollster Stanley Greenberg in the December 17 American Prospect. "The U.S. Senate wants to federalize security workers and the U.S. House wants to subject them to intense regulation independent of the airlines. Federalize or regulate? This is a Democratic dream."
The Senate won, fulfilling the Democrats' dream of putting 28,000 more people on the federal payroll. But the aftermath hasn't exactly been dreamlike.
In late December, The New York Times kicked up a stir by reporting that the Transportation Security Administration, a new federal bureaucracy, had backed away from plans to upgrade airport security by requiring personnel to hold high school diplomas. Such a requirement, it turns out, would remove one in four current employees—7,000 people—from their jobs.
That was, of course, the very point of federalizing the work. It had been easier to focus attention on the privately employed and often nonwhite security workers who had no role in the terrorist attacks than the failure of the federal employees who worked for the FBI, the CIA, and other agencies. And so Americans were told repeatedly that security workers were transient losers for whom, in the words of CNN's Bill Press, "going to flip burgers at McDonald's is an upgrade, a step up in life."
At any rate, it turns out there was no real change in the law. The mistake was in the press release—which has been corrected—and not the regulations. The bill Congress passed never required employees to have high school diplomas. It said they needed to have experience that meets the approval of the "Under Secretary." And that's what the regulations required as well.
Meanwhile, the government plans to lean on the INS to put the workers who would lose their jobs under the new law's citizenship requirement on a naturalization fast track. All this brings to mind the words of Rep. Bob Barr (R-Ga.), speaking on CNN last October: "They say that if you wave a magic wand, presto, you're a federal employee, you're all of a sudden better than the other person." The newly federalized guards may not be better than they were before, but they will be better paid and have better job security. The appropriate precedent is the Post Office, or Amtrak.
Another new bureaucracy, the Air Transportation Stabilization Board, provides a second opportunity to see how the new federal managers are doing. This agency is charged with keeping the airlines healthy, or at least handing out some money to prolong their lives.
The federal airline bailout consisted of three parts: $5 billion in direct, no-strings-attached aid; $10 billion in loan guarantees; and an exemption to lawsuits by the families of non-passengers killed on September 11. The Stabilization Board is in charge of the loans.
Like the Rose Parade, it was easy to see coming: The most marginal of airlines—the ones that simply ought to fail—would be the first to ask for federal help. So it was that America West was the first to apply for and receive a loan guarantee worth $380 million.
It didn't come easy for the country's eighth largest airline, which had flown safely though the turbulent sky of bankruptcy in the early 1990s and recorded record profits from 1997 through 1999. Thanks to poor service, equipment problems, and a weakening economy, America West was back to losing money well before September 11. It had already chewed through its $98 million share of the $5 billion freebie. Losing $1 million a day, it faced bankruptcy in early January if the government didn't deliver.
The government bargained hard, forcing the airline to revise its application twice. It called in consultants to examine the airline's routes and even recommend equipment. By the time it was done, the board managed to extract promises that America West, already among the lowest-paying airlines, would hold labor costs in check. (Those had recently increased due to such necessary expenses as hiring people to maintain the planes and get them to take off and land on time.) Uncle Sam also gets stock options for a third of the company, should it succeed. Not that it's expected to.
"In reaching this conclusion," the government wrote when announcing the deal, "the board recognizes that the proposal presents a significant risk of default." One of the board's three voting members, Treasury's Peter Fisher, opposed the plan. A seemingly reluctant director of industrial policy, Fisher released a statement with the agreement. "I fear the board's decision is likely to impede, rather than promote, real progress toward a safe, efficient and viable air transportation system for our country," he wrote.
I fear Fisher, like Barr, is right.
