Saturday, June 10, 2017

Privatizing Air Traffic Control Won't Necessarily Cost More

See Snookered by Debunked 2016 CBO Score of Air Traffic Control Reform by Marc Scribner of CEI.
"Over at, Alexia Fernández Campbell has a post discussing the Trump administration’s release of its “legislative principles” for reforming U.S. air traffic control, which closely mirror a reform proposal introduced in 2016 by House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) that would spin off the Federal Aviation Administration’s (FAA) Air Traffic Organization into a self-supporting, independent, nonprofit corporation.

Unfortunately, the author falls for a debunked piece of budget analysis sophistry that was briefly seized on by opponents of air traffic control reform last year. Worse, the Congressional Budget Office (CBO) concedes in the score itself that its assumptions are nonsensical, as I noted at the time.

She claims in her piece:

Budget analysts believe that privatizing the system would actually cost more money. Shuster’s bill, which inspired Trump’s plan, would raise mandatory spending by $89 billion and increase the deficit by $19.8 billion over the next 10 years, according to a Congressional Budget Office analysis. This is largely from the added cost of the needed equipment and technology to speed up the modernization process.

Budget analysts do not actually believe this, but were forced to write it anyway. The CBO scoring process has been compared to a dumb robot. Garbage in, garbage out. And CBO was fed garbage and thus swallowed garbage, with predictable results. As CBO explains in its score on pages 16-17:

The estimated changes in direct spending and revenues under H.R. 4441 reflect CBO’s assessment of the budgetary impacts of enacting H.R. 4441 as a stand-alone measure. Ultimately, however, the net budgetary impact of activities related to air traffic control under H.R. 4441 would depend on the details of subsequent legislation that lies beyond the scope of this cost estimate. CBO cannot predict whether such additional legislation will be enacted pursuant to H.R. 4441, but expects that the overall net budgetary impact of shifting responsibility for air traffic control to the ATC Corporation would not necessarily increase future deficits by the amounts reflected in this cost estimate if additional legislation consistent with H.R. 4441 was enacted.
Broadly speaking, while CBO estimates that the proposed corporation would spend more than the FAA otherwise will under current law for capital investments to modernize infrastructure and equipment related to the air traffic control system, CBO expects that underlying costs related to operating and maintaining that system would not change significantly under H.R. 4441. As a result, CBO expects that shifting responsibility for those costs to the proposed corporation would not materially change the magnitude of spending related to air traffic control if future appropriations for the FAA’s retained responsibilities were reduced accordingly to reflect the shift—from mandatory to discretionary—of such spending. Under H.R. 4441, CBO expects that overall amounts of such federal spending would remain more or less the same, with incremental increases in spending stemming primarily from the ATC Corporation’s authority to issue debt to finance additional investments related to modernization.
Similarly, if future tax-related legislation separate from H.R. 4441 was enacted to reduce existing aviation-related excise taxes by amounts equivalent to new user fees that would be charged by the ATC Corporation under H.R. 4441, the resulting amount of revenues available to support air traffic control (and other aviation activities) would be largely unchanged and could continue to cover most, if not all aviation-related spending. [original emphasis]

Since only the authorization title and not the revenue and appropriations titles had been scored (the latter two were not yet written), CBO assumes a business-as-usual case for current FAA taxes and spending. In reality, reform proponents are asking for aviation taxes and FAA’s budget to be appropriately reduced—currently, the FAA spends about $10 billion annually on air traffic control.
So, what the CBO assumed is that not only would the new nonprofit air traffic control provider invest into modernizing its system and collect user fees, Congress would also continue taxing and funding at the same levels to support a phantom, parallel, government-run air traffic control provider. This is absurd and ought to at least note CBO’s explanation for why its score of last year’s air traffic control reform proposal is absurd."

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