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Press Release

    Special Interests Have Much to be Thankful For

    11/20/2001

    This week, President Bush signed the airline security act to federalize the nation’s 30,000 airport screeners. The political wake turbulence caused by the inexplicable crash of American Airlines flight 587 made a protracted struggle untenable. As a result, a terrible bill became law that not only adds 30,000 union workers to the federal government’s payroll, but also establishes incomprehensible new regulations to modify and improve on the incomprehensible security regulations already in place.

    If the Federal Aviation Administration (FAA) were required to hire 30,000 new workers to fill these positions, the process would last years and do little to address short-term security concerns. Instead, current employees that pass the new background checks may be retained for more lucrative compensation. And when all 30,000 screeners are hired, the typical sclerosis of a bureaucracy will emerge. As anyone familiar with government employment polices knows, it is nearly impossible to fire federal employees, or institute flexible merit-based pay.

    Worse, the failures of government agencies – including the nation’s public school system – are always blamed on a lack of resources. When this new federal workforce suffers its first security breach, the answer will be more money, higher salaries, longer training, and more expensive equipment. A good argument can be made for such expenditures; after all, who is going to make the case for less secure air travel. But the idea that positive results are correlated with federal spending, or that federal revenue is a bottomless pit that can be tapped ad infinitum, breeds inefficiency and unaccountability. The growth of government is directly attributable to this dynamic. What may seem to some as a legitimate function of government soon turns into a bureaucratic abomination, administered by an ineffectual centralized agency whose growth cannot be reigned in.

    This scenario has repeated itself so often that it would seem legislators would have learned from their mistakes by now and begun to experiment with new ways to address social and economic problems. While many have made the case for decentralized policymaking in accordance with the Founders’ view of federalism, in many cases the government can just get out of the way and allow civil society and markets to address such problems.

    As several polls demonstrate many air travelers are uneasy about flying and many more feel that the government and airlines have not done enough to address safety issues. With the news that United Airlines would install advanced taser weapons in the cockpits on all aircraft, United’s stock price jumped by 19 percent. Similarly, on the day when the President signed the security act into law, United’s stock went up another 17 percent.

    Since both actions affected the value of the company, it is clear that investors believe the increased safety measures will assuage consumer fears and make the airlines more profitable. One of the security measures was privately initiated and paid for by the shareholders of the company; the other was instituted by the government and paid for by taxpayers. One was a business decision: United acted because it believed the costs of the new equipment and training would be exceeded by increased ticket sales. The other was a government decision, influenced by the organized interest groups with the most at stake, and paid for by everyone else.

    Some argue that the airlines are too profit-hungry to take the steps to improve the safety of their passengers, but this does not make sense: It is the hunger for profits that leads them to improve safety to address consumer concerns. The 9/11 attacks made Americans aware of the risk of terrorism, and part of this new found awareness is some trepidation about air travel. The stockholders of airlines affected by reduced ticket sales have seen their personal wealth diminish as the markets adjust to incorporate this new information, but without government intervention, the cost of the newly discovered risk would be borne by private parties in the form of decreased sales, or greater security expenditures to recapture those sales.

    To be sure, the government has an important role to play to reduce the risk of another terrorist incident. Congress was wise to install air marshals on almost every flight to prevent planes from being used as weapons of mass destruction, but that could have been accomplished through an executive order. Instead, the airline security bill became a special-interest giveaway, with the American Federation of Government Employees (AFGE) and the National Federation of Federal Employees (NFFE) as the biggest winners.

    It is comforting to know that this holiday season, both management and labor have something for which to be thankful. The airlines got the airline security law they needed to boost stock prices and encourage consumers to return to the air, while the AFL-CIO landed 30,000 new dues-paying members. In Washington it’s easy to be Santa Claus to just about everybody, but I guess that story should be saved for another season.