With FAA Reauthorization, Congress Fiddles While Everyone Else Burns
by Sam Rosen-Amy, 7/28/2011
Add this to the list of the nation’s current budgetary woes: according to Bloomberg news, the Treasury is losing about $30 million a day, or close to $200 million a week, because Congress has allowed the Federal Aviation Administration’s congressional authorization to lapse and, as a result, Treasury isn’t collecting taxes on airplane tickets. The House of Representatives is trying to ram through a provision that will make it harder for aviation workers to unionize, and the debate is holding up the latest in a long, long line of short-term extensions of the FAA’s authorization. Although it has been extended twenty times since it expired in 2007, Congress failed to re-authorize the FAA by July 22, meaning Treasury no longer has the authority to collect airline taxes. To add insult to injury, airlines have used this as an opportunity to raise their prices and reap more profit from consumers.
In other words, while Congress is tearing itself apart over raising the debt ceiling and figuring out how to fix the nation’s deficit “problem,” its inactivity is costing the federal government hundreds of millions of dollars in forgone revenue. While that’s a drop in the bucket compared to the size of this year’s deficit, which is close to $1.6 trillion, a few hundred million dollars is still a significant amount of money. All in all, it’s yet another example of the ridiculous, hypocritical behavior that runs rampant in today’s Congress. If the House Republicans were serious about lowering the budget deficit, they shouldn’t be knowingly costing the government money while trying to force social policy through the FAA reauthorization.
Coincidentally, Congress isn’t the only jerk in this story. The major airlines are also proving their (lack of) mettle. With Treasury not collecting taxes, ticket prices should fall. Theoretically, airlines figure out what price they should charge, taking into account operating costs and a profit margin, and the government then taxes based on that price. Without taxes, the cost to consumers should fall to the base “what airlines charge” price. But that apparently isn’t the case. According to the Atlanta Journal-Constitution, most airlines are actually raising their ticket prices to make up the difference, costing consumers approximately an extra 10 percent.
The Journal-Constitution cites Delta Airlines representatives (the same corporation pushing the anti-union provisions in the reauthorization) as blaming fuel costs, which are apparently quite high. NPR, on the other hand, quotes an airline industry rep as saying “This short-term additional revenue for airlines, which does not mean a fare increase for consumers, benefits all stakeholders—customers, employees and investors—by temporarily improving tiny industry margins to better cover costs and enable airlines to invest in their product and service.” But neither argument makes sense. If the airlines needed the money so much to cover rising fuel costs, why didn’t they raise their prices before? And the industry’s claim that it isn’t, in fact, raising fares on consumers is particularly galling.
In reality, the situation is a remarkably bald-faced grab for money. The airlines clearly have no qualms scooping up the money Congress apparently doesn’t want. Anyone want to take bets on whether ticket prices fall when the FAA is reauthorized and the Treasury starts collecting taxes again?
Image by Flickr user Crank Media Guy used under a Creative Commons license.