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It's a Sin to Fly

By Fawn Johnson
Correspondent, National Journal
March 18, 2013 | 8:30 a.m.
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Here is a puzzling quandary: If an industry--say, airlines--struggles under federally-mandated taxes that must be added to the price of tickets, how can a federal agency--say the FAA--not struggle under a mandatory 2.5 percent cut? Or can both the industry and the federal agency handle a little bit of belt tightening?

This was a question that piqued my interest at the Aero Club luncheon last week, which was keynoted by House Transportation and Infrastructure Committee Chairman Bill Shuster, R-Pa. The newly minted committee chairman must have made the airline industry cheer when he said that airlines are "the most regulated deregulated industry."

"We treat [airlines] like a piggy bank" with the various taxes and fees that lawmakers attach onto airline tickets, Shuster said. Taxes make up 20 percent of the cost of an airline ticket, according to Airlines for America. "Only alcohol and tobacco do we tax as high as that. It's like it's a sin to fly," Shuster said.

Airlines are forever on the defensive about their ticket prices, and they repeatedly remind anyone who will listen that their profit margins are extremely narrow. It's a tough industry, and Shuster seems sensitive to that fact.

Yet Shuster has a lot less sympathy for the Federal Aviation Administration, which is operating under mandated budget cuts that went into effect at the beginning of the month. "The sky isn't falling. Everybody realizes that a 2.5 percent cut in your budget is doable," he said Friday. Speaking specifically about the FAA, Shuster said, "They have monies they can move around. ...The FAA's workload has gone down 17 percent."

Nonetheless, furlough notices have already gone out for FAA workers. Greg Stanton, the mayor of Phoenix, Ariz., was in town earlier in the month to beg FAA to keep its federal resources flowing to air traffic control towers at two of his local airports to keep them from closing. Like many other state and local officials who were pleading their cases to the FAA, Stanton was told he would have to find the money elsewhere.

As far as I can tell, Shuster's sympathies lie with the airline industry and its tax burden but not with the sequester burden that is weighing down the entity that regulates the same industry. Shuster's biggest complaint with the FAA is that he has not gotten good information about how they are implementing the mandated cuts. More broadly, Shuster is like most Republicans who have lost faith with the administration on negotiating overall deficit reduction. The FAA is caught in the middle.

Given the general animosity, any communication between the FAA and Shuster is laden with political overtones and competing visions: For Shuster, the FAA has a bureaucratic mess to clean up. For FAA employees and the administration, the cuts are nothing short of a crisis.

Is it fair to compare the airline industry's tax burden with the FAA's cuts under the sequester? Are airline ticket taxes appropriate? Should they be changed in any way? Is Shuster right that the federal government treats the airline industry like a piggy bank? How serious is the FAA's budget cut? Is the sky falling or not?

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March 21, 2013 12:37 PM

US Airline Workers Need Sound Policy

By Lee Moak

President, Air Line Pilots Association, International

At a time when fierce global competition from state-backed foreign airlines should provide powerful motivation for U.S. government leaders to take every possible action to promote an economically strong airline industry, the across-the-board federal budget cuts known as sequestration mark a new low for U.S. airline employees in their determined fight to help U.S. airlines prosper and prevail in the global marketplace.

The list of U.S. government actions that could harm the U.S. airline industry, rather than advance it, has become distressingly long. The administration’s FY13 budget proposed adding new taxes to the already-oppressive list imposed on U.S. airlines, and we fear more of the same in the FY14 budget. The proposed increased passenger security tax and a $100 per flight tax threaten to intensify the burden for an industry that, as the National Journal rightly points out, is suffering taxation at a rate reserved for so-called "sins."

Add to this the administration's proposal to establish and operate a Customs and Border ...

At a time when fierce global competition from state-backed foreign airlines should provide powerful motivation for U.S. government leaders to take every possible action to promote an economically strong airline industry, the across-the-board federal budget cuts known as sequestration mark a new low for U.S. airline employees in their determined fight to help U.S. airlines prosper and prevail in the global marketplace.

The list of U.S. government actions that could harm the U.S. airline industry, rather than advance it, has become distressingly long. The administration’s FY13 budget proposed adding new taxes to the already-oppressive list imposed on U.S. airlines, and we fear more of the same in the FY14 budget. The proposed increased passenger security tax and a $100 per flight tax threaten to intensify the burden for an industry that, as the National Journal rightly points out, is suffering taxation at a rate reserved for so-called "sins."

Add to this the administration's proposal to establish and operate a Customs and Border Protection (CBP) preclearance facility at Abu Dhabi International Airport––handing Etihad Airways, a foreign state-backed airline, a clear convenience advantage over its U.S. competitors to attract passengers who seek to fly from Asia or the Middle East to the United States. Fortunately, Congress recently passed legislation that contains critical language to prohibit third-party reimbursement for CBP preclearance facilities, which will stall the Abu Dhabi facility and demonstrate again to CBP that their proposal is misguided.

Meanwhile, the 2012 annual report of the Export-Import Bank of the United States shows that it used U.S. taxpayers' backing to approve $11.6 billion in financing to allow 22 foreign airlines to purchase new aircraft. The new fuel-efficient fleets are attractive to customers and are purchased at below-market rates not available to U.S. airlines. This results in a competitive advantage for our foreign competitors along with a cost savings of approximately $5 million per aircraft compounding over time.

While harmful on their own merits, each of these individual U.S. government policies and proposals could cause exponential damage to U.S. airlines' ability to compete in the form of potential capacity cuts. The airlines' reducing capacity means they will face lower profits. In addition to the danger this poses to an industry that helps fuel the U.S. economy, reduced airline profits threaten the jobs of employees who have dedicated their careers to their companies.

The U.S. airline industry should not be forced to fight its own government to gain a fair playing field to compete in the global marketplace. What is needed is strong government leadership and a vision for airlines—and one need only look to foreign governments such as that of the United Arab Emirates for example—that creates and embodies a national commitment to foster a safe, secure, and profitable industry that contributes to the nation’s economy and provides jobs for its citizens.

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March 19, 2013 6:39 PM

Travelers Pay for System, Let It Work

By Nicholas Calio

President and CEO, Airlines for America

The American people and our economy depend on a vibrant, efficient aviation system. They pay for it, too. In 2012 alone, airlines and passengers collectively paid nearly $19 billion in taxes and fees to the Federal government, including $12.3 billion to the Federal Aviation Administration, $2.3 billion to the Transportation Security Agency, and $360 million to Customs and Border Protection. These funds are meant to maintain the efficiency and safety of the aviation system, a driver of jobs and economic growth. Rather than working to ensure they go toward their intended purpose, officials seem to be using the current budget maelstrom as the poster child for sequestration, ensuring that the 2 million people and 50,000 tons of cargo that fly every day are impacted by projected delays caused by arbitrary cuts to the CBP, TSA and FAA budgets. We understand cuts are required. We also believe it is critical that CBP, TSA and FAA realize cost savings from non-personnel spending such as contractors, travel and supplies, as many other agencies have done. This will ensure that the operation...

The American people and our economy depend on a vibrant, efficient aviation system. They pay for it, too. In 2012 alone, airlines and passengers collectively paid nearly $19 billion in taxes and fees to the Federal government, including $12.3 billion to the Federal Aviation Administration, $2.3 billion to the Transportation Security Agency, and $360 million to Customs and Border Protection. These funds are meant to maintain the efficiency and safety of the aviation system, a driver of jobs and economic growth. Rather than working to ensure they go toward their intended purpose, officials seem to be using the current budget maelstrom as the poster child for sequestration, ensuring that the 2 million people and 50,000 tons of cargo that fly every day are impacted by projected delays caused by arbitrary cuts to the CBP, TSA and FAA budgets. We understand cuts are required. We also believe it is critical that CBP, TSA and FAA realize cost savings from non-personnel spending such as contractors, travel and supplies, as many other agencies have done. This will ensure that the operational impacts on the system are minimized, and savings can still be achieved. Not doing so is both ill advised and in stark contrast to how other governments treat their airlines. Many foreign governments actively promote their airlines through favorable regulation, taxation and infrastructure policies. As a result, our global competitors are growing, reinvesting and expanding at our expense. At a time when our industry is supporting 10 million jobs and $1 trillion in economic activity, is it really wise for government officials to be using it as an example of austerity? Of course not. Airlines and the economic activity they help support have been critical to our fledgling economic recovery. In fact, every 100 airline jobs help support some 360 jobs outside of the airline industry. We would like to do more, but several factors beyond our control – including how sequestration is implemented – are unfortunately holding us back. The combination of planned furloughs, hiring freezes and reduction of overtime at FAA (including air traffic controllers), TSA and CBP employees will lead to delays that will reduce critical economic activity at a time when we can least afford it. Members of Congress have voiced their strong belief that furloughs are not necessary to achieve these savings and directed agencies to look at other areas such as travel, vendor contracts and supplies so that cuts actually reduce costs, not economic growth. For reasons still difficult to comprehend, officials have continually rejected those suggestions, arguing that they won’t help. It’s the mission of these agencies to make our aviation system work, not slow it down at the expense of those who use and fund it every day. If government officials truly believe the role of the airlines is as critical to the economy as their sequester warnings have made it out to be, they should take this opportunity to reexamine how our country treats its airline industry. Do we prioritize it as the engine of economic growth that it is, or do we use it as a prototype for the effects of budget paralysis? The answer should be clear. Airlines and passengers don’t just deserve the safest, most efficient system in the world – they’ve already paid for it.

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March 19, 2013 5:53 PM

Belt-Tightening? Hardly

By Ed Wytkind

President, Transportation Trades Department, AFL-CIO

The budget cuts being imposed on the FAA for the remainder of the year, and the cascading effects the reckless sequester will have on air travel, are hardly akin to trimming a little fat.

So let’s stop calling the sequestration a 2.5 percent “belt-tightening” for the FAA. These cuts are squeezed into seven months (rather than 12), a situation the Office of Management and Budget equates to a 9 percent budget cut for non-defense agencies. That’s real money being taken from an agency that in the best of times has large initiatives to complete while facing staffing shortages and a deteriorating funding mechanism.

The sequester occurs at a time when our economy is still in recovery mode and we should be funding programs that will put people to work expanding airport capacity and designing, manufacturing and implementing a next generation (Next-Gen) air traffic control system. But Washington is busy playing political games and is barely paying for routine maintenance of antiquated systems.

We are preparing to close towers because we can...

The budget cuts being imposed on the FAA for the remainder of the year, and the cascading effects the reckless sequester will have on air travel, are hardly akin to trimming a little fat.

So let’s stop calling the sequestration a 2.5 percent “belt-tightening” for the FAA. These cuts are squeezed into seven months (rather than 12), a situation the Office of Management and Budget equates to a 9 percent budget cut for non-defense agencies. That’s real money being taken from an agency that in the best of times has large initiatives to complete while facing staffing shortages and a deteriorating funding mechanism.

The sequester occurs at a time when our economy is still in recovery mode and we should be funding programs that will put people to work expanding airport capacity and designing, manufacturing and implementing a next generation (Next-Gen) air traffic control system. But Washington is busy playing political games and is barely paying for routine maintenance of antiquated systems.

We are preparing to close towers because we can’t pay to staff them. Pilots who need to be certified will be grounded if there is no one to approve them. And suppliers and contractors of many components will sit idle. Make no mistake, these “short-term” budget cuts will have a long-lasting negative impact.

About those furloughs. FAA employees are already receiving furlough notices, a situation already intolerable, but the real impact of sequestration is yet to come. As our colleagues at the National Air Traffic Controllers Association and the Professional Aviation Safety Specialists note, we will see reduced capacity in an already strapped air traffic system. This means fewer controllers and inspectors, shuttered control towers, fewer available runways leading to flight delays, and rising frustrations for airline passengers. And this before we add a Transportation Security Administration hiring freeze that will reduce the number of security officers. The result will be a substantial squeeze on the billions of dollars the aviation industry pumps into our economy.

Note to politicians: you may want to avoid voter town hall meetings in and around airport hub cities because the delays could get extremely ugly. The only thing uglier than angry voters are angry voters stuck in massive flight delays caused by politicians.

As the FAA and TSA are asked oh so politely by lawmakers to cinch their belts just as fliers stand in longer security lines with theirs off, let’s stop minimizing the impact of these funding cuts on our national airspace system. Let’s stop brushing off the impact on the men and women who operate, maintain and work in it. So when we pick arbitrary levels of dollars to cut like we are handing Monopoly money to the banker, remember this sequester will choke our already capacity-strained aviation system, stall much needed aviation modernization projects, and cut good jobs and salaries.

This is hardly just belt-tightening.

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March 19, 2013 2:57 PM

“Doable,” but at what cost?

By Mike Perrone

President, Professional Aviation Safety Specialists

Let’s be clear. No one is claiming that the sky is falling, but some are wrongly suggesting that the FAA’s budget cuts resulting from sequestration are “doable.” But at what cost?

Lawmakers remain deadlocked in a political stalemate over almost everything these days, including a plan to avoid sequestration. Sequestration cuts will go into effect at all agencies, including the FAA, in April and over the next several months, especially once we enter the busiest travel season of the year, the cost of the budget cut is going to become painfully clear for FAA employees and the traveling public.

The vast majority of the FAA’s 47,000 employees have their furlough notices in hand and beginning next month, FAA employees, including systems specialists and aviation safety inspectors, will be forced off the job for at least one day every two weeks. By the end of the fiscal year, this will mean nearly four million hours lost. Four million hours of protecting the safety and efficiency of this country’s aviation system. Four million hours of mak...

Let’s be clear. No one is claiming that the sky is falling, but some are wrongly suggesting that the FAA’s budget cuts resulting from sequestration are “doable.” But at what cost?

Lawmakers remain deadlocked in a political stalemate over almost everything these days, including a plan to avoid sequestration. Sequestration cuts will go into effect at all agencies, including the FAA, in April and over the next several months, especially once we enter the busiest travel season of the year, the cost of the budget cut is going to become painfully clear for FAA employees and the traveling public.

The vast majority of the FAA’s 47,000 employees have their furlough notices in hand and beginning next month, FAA employees, including systems specialists and aviation safety inspectors, will be forced off the job for at least one day every two weeks. By the end of the fiscal year, this will mean nearly four million hours lost. Four million hours of protecting the safety and efficiency of this country’s aviation system. Four million hours of making sure flights proceed as planned, that travelers make it to their destinations on time. Four million hours of working to make the system even better through modernization. Four million hours gone.

What will be lost during those four million hours? Preventative maintenance of aviation systems and equipment, which ensures efficient operation, will be slashed due to sequestration, increasing the potential for outages. Limited staff resulting from the furloughs will mean that equipment issues that could have been prevented or corrected in very short time could take hours to remedy.

The FAA’s aviation safety workforce, who is already doing more with less, will have to focus primarily on the oversight of existing operators, virtually eliminating the approval for new carriers and equipment. Airlines, aviation manufacturers and pilots need FAA safety approvals and certifications in order to operate and generate revenue. Further delaying the approval process for as many as 1,480 ongoing and parts manufacturing projects will hit the industry hard in the coming months. More time and progress lost.

These changes that the FAA is being forced to implement will not only have a direct, immediate impact to the flying public this summer, but it will resonate for years to come as an indefinite pause button is hit on critical upgrades to National Airspace System equipment, modernization efforts, and recruitment, training and retention of the vital FAA workforce.

A hiring freeze is already in place. With a large portion of the FAA safety workforce eligible to retire, this means more than limiting the number of new-hires. It takes two to five years to fully train FAA professionals. Without hiring new employees now to be ready to replace those retiring, the effects of sequestration will be felt far into the future.

Additionally, the FAA plans to shut down its training academy in Oklahoma City. Due to understaffing at facilities nationwide, FAA employees are already hard-pressed to find the time to attend training. Now, employees will not even have the option to receive the needed training to ensure smooth operation of the system. When training is reinstituted, employees will need additional time to make up for the months lost.

So, while some will continue to claim that the budget cuts are “doable,” opinions may change as sequestration’s impact on this country’s aviation system becomes more apparent. This is no way to run the safest and most efficient aviation system in the world. And it is certainly no way to retain that title. Unfortunately, it may take a bit more convincing—delayed flights, productivity hours thrown away, the clock ticking up to four million hours lost—for lawmakers to realize the cost of “doable” is far too high.

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March 19, 2013 7:15 AM

The real sin is inaction

By Steve Van Beek

Chief of Policy and Strategy and Director, LeighFisher

Paul Rinaldi is right not to take the bait and directly link the two issues. The sequester is a bipartisan Washington D.C. failure, the latest in a series of irresponsible policy decisions (and lack of decisions) with our nation’s infrastructure. Let’s remember that it was less than 18 months ago when the FAA was partially shut down after yet another policy stalemate.

In the current situation, the FAA is executing the effects of a law passed by Congress and signed by the President. Why is it hard for Congress and some analysts to understand that it is difficult for an agency to cut halfway through the fiscal year when it (1) has funds that Congress has protected from cuts; (2) has long-term obligations and contracts that cannot be unwound in days or weeks; and (3) has received little to no discretion to make cuts in a responsible way? As a member of the FAA Management Advisory Council (MAC), I have sat through the MAC’s discussions with Paul Rinaldi, other representatives of our industry, the FAA Administrator and the U.S. DOT Deputy Secretary. To a ...

Paul Rinaldi is right not to take the bait and directly link the two issues. The sequester is a bipartisan Washington D.C. failure, the latest in a series of irresponsible policy decisions (and lack of decisions) with our nation’s infrastructure. Let’s remember that it was less than 18 months ago when the FAA was partially shut down after yet another policy stalemate.

In the current situation, the FAA is executing the effects of a law passed by Congress and signed by the President. Why is it hard for Congress and some analysts to understand that it is difficult for an agency to cut halfway through the fiscal year when it (1) has funds that Congress has protected from cuts; (2) has long-term obligations and contracts that cannot be unwound in days or weeks; and (3) has received little to no discretion to make cuts in a responsible way? As a member of the FAA Management Advisory Council (MAC), I have sat through the MAC’s discussions with Paul Rinaldi, other representatives of our industry, the FAA Administrator and the U.S. DOT Deputy Secretary. To a person, each of the MAC’s industry representatives believe the FAA is doing all it can to mitigate the effects of the cuts.

The only useful effect of sequestration will be if it serves as a clarion call for all segments of aviation to work together—we certainly need a new aviation policy. Part of this agenda should undoubtedly be a new system of taxes and fees. The current system is flawed and has not been fundamentally adjusted for over 15 years—notwithstanding great changes in the airline industry including ticketing practices, use of air traffic control and airport resources. Add to this a bewildering collection of fees imposed by the Department of Homeland Security that both discriminate against aviation and lack accountability (with methodologies and service levels that remain hidden from industry scrutiny under the guise of “national security”) and you have an agenda for change.

But let’s remember, many of the fees imposed on the aviation industry are for services the FAA provides and for capital investments the industry requires. Those fees represent the cost of doing business and should not be conflated with either discriminatory taxes imposed on the industry or the mystifying fees imposed for security and border control services.

Recently, MAC members have offered recommendations to place the FAA on a firmer policy, financial and governance foundation. We will continue to work on solutions to ensure these industry dislocations do not occur again.

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March 18, 2013 8:27 PM

FAA budget cut is serious, damaging

By Paul Rinaldi

President, National Air Traffic Controllers Association

The FAA’s mandated half-billion dollar cut to its operations budget over the remainder of FY13 is very serious. Simply put: The National Airspace System is a national treasure and sequestration will destroy that treasure.

Already, there is a hiring freeze in place and the FAA plans to shut down its training academy in Oklahoma City. Furloughs are now scheduled for every FAA controller and employee beginning next month; 11 days for each one every two weeks. Worst of all, this Friday we’ll find out which air traffic control towers the FAA will soon close. This holds enormous negative ramifications not only for the local pilots, communities and economies that rely on those airports, but also will create additional and potentially unmanageable burdens on the FAA radar facilities that work those airports at a time when this vicious cycle of sequestration will mean reduced staffing at those facilities.

This is no way for Washington, D.C., to run what is the world’s safest and most efficient system. And if our concerns about increased flight delays are r...

The FAA’s mandated half-billion dollar cut to its operations budget over the remainder of FY13 is very serious. Simply put: The National Airspace System is a national treasure and sequestration will destroy that treasure.

Already, there is a hiring freeze in place and the FAA plans to shut down its training academy in Oklahoma City. Furloughs are now scheduled for every FAA controller and employee beginning next month; 11 days for each one every two weeks. Worst of all, this Friday we’ll find out which air traffic control towers the FAA will soon close. This holds enormous negative ramifications not only for the local pilots, communities and economies that rely on those airports, but also will create additional and potentially unmanageable burdens on the FAA radar facilities that work those airports at a time when this vicious cycle of sequestration will mean reduced staffing at those facilities.

This is no way for Washington, D.C., to run what is the world’s safest and most efficient system. And if our concerns about increased flight delays are realized when furloughs decrease our staffing, it’s also no way to treat the two million passengers each day who deserve the very best and most efficient service from the system.

Airports, airlines and passengers will all be immediately and directly affected by sequestration cuts that reduce air traffic services. If the NAS is forced to reduce capacity, airlines will have fewer flights, and fewer passengers will fly. That, in turn, will affect airports that rely on passenger fees, landing fees, and other revenue generated by passengers. At a hearing held by the Senate Commerce, Science and Transportation Committee in July 2012, Airlines for America President Nicholas Calio noted that airlines could become less competitive, and may have to cede international routes due to reduced revenue. This would force them to reduce the scope of their markets, putting U.S.-based businesses at a competitive disadvantage.

As a consequence of the sequestration cuts, the FAA predicts that flights to major cities such as New York, Chicago, and San Francisco could experience delays of up to 90 minutes during peak hours because fewer air traffic controllers on duty means fewer aircraft in the sky so that safety can always be assured.

We believe that if the cuts and furloughs are fully implemented, the FAA’s estimates could turn out to be conservative. According to an informal survey of major air traffic control facilities, we have determined that reduced numbers of controllers around the country will cause a ripple effect of flight delays. Major airports could be forced to shut down a runway that would otherwise be open simply because they’ll have fewer controllers in towers. Others will need to shift controllers to the busiest parts of the day, thus decreasing their capacity to handle incoming flights at other times.

The system we all use and enjoy today is the result of years of planning and research. But permanent reductions in discretionary spending are creating the very real possibility of a downsized FAA and consequently, a downsized national airspace system.

The current budgetary environment is putting the future safety and efficiency of the system at risk. As controllers we consider safety essential, and we believe the general public and all users of the airspace do too. So while we understand the need to reduce our nation’s debt, we feel strongly that compromising the safety and efficiency of the nation’s airspace is not the way to do it. No matter how you slice it, the current approach is potentially creating more problems than it is solving.

The preparations to implement sequestration are very frustrating. We want to grow our system, not cause it harm. No one believes this is the most effective way to reduce federal spending. No one believes it will solve our nation’s fiscal problems. And yet, because Washington, D.C., has not yet come up with a better approach, trained professionals will be forced to put aside their good work to implement an extremely short sighted policy.

It’s a sad day in the great history of aviation in this country.

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