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?