It Would Be a Gas If Trump Took the Fast Lane and Eliminated the Gas Tax

Every few years, when gas prices get high enough to be politically dangerous, politicians "discover" the idea of a gas tax holiday. Senator John McCain proposed it in 2008, President Joe Biden in 2022, and now President Donald Trump this week. It is peculiar to have politicians tacitly admit that high taxes harm consumers, but I will set aside that irony. Nevertheless, it does set an uncomfortable question: If temporarily suspending the tax would help consumers, why should the tax exist in the first place?

After all, nobody proposes a hiatus from something that is harmless or helpful. The very existence of multiple calls for a gas tax holiday should give us good reason to pause. Much like emergency waivers of the Jones Act after natural disasters, gas tax holidays inadvertently expose the hidden costs of a policy that politicians generally insist is reasonable. 

Before delving into issues about the gas tax, it would be worth noting that the gas tax is 18.4 cents per gallon, which will not do that much to alleviate the average cost of a gallon, which is $4.50. Now let's get into the main issue of its regressive nature, meaning that it takes a larger share of income from lower-income households than from higher-income ones. That is hardly a surprise for a consumption tax tied to a necessity like transportation fuel. For many Americans, driving is a price of participating in the labor market. 

The burden is uneven because transportation is not evenly substitutable. Higher-income households are more likely to have flexible work arrangements, shorter commutes, and/or access to multiple modes of transportation. Conversely, lower-income households are more likely to rely on older vehicles, need to take longer commutes, and have jobs that require physical presence. Rural commuters similarly have constraints, whether with longer baseline distances or fewer substitutes for automobile travel. 

The broader economic problems with the gas tax are longstanding. I previously examined its inefficiencies in detail, including its distortion of transportation choices, weak alignment with actual road usage, and broader market-side effects. Much like the Cato Institute argues, this is why state governments should  meet their infrastructure needs instead of the federal government.

The recurring gas tax holiday debate implicitly admits that the tax is burdensome. The question should be what to replace the federal gas tax with. States could implement their own, especially since most roads are not federally owned. But greater fuel efficiency and higher prevalence of electric vehicles is making the gas tax more passé. There is the option of mile-based user fees, as well as a "quant" framework that accounts for usage. Regardless of what it is replaced with, one thing is for certain: it is difficult to call a gas tax "necessary infrastructure funding" when it regularly needs a vacation to survive public opinion. 

Grounded by Government: How Blocking a Merger Helped Sink Spirit Airlines

Last Saturday, Spirit Airlines announced that it is shutting down its doors. Some were treating this bankruptcy as if it came out of nowhere or it were simply an issue of a poor business model. It is true that there are businesses that go under because they made poor life choices. With Spirit, however, the beginning of its demise was made with a key decision well before last Saturday. 

The earlier decision did not happen in Spirit Airlines' boardroom or from the fact that Trump decided not to bail out Spirit (which would have been a terrible idea), but in Washington. Starting in 2022, Spirit Airlines and JetBlue attempted to merge. But Senator Elizabeth Warren (D-MA) wouldn't have any of that. She led the charge that would ultimately block the merger in 2024. The argument used was that Spirit needed to remain independent to maintain a competitive market in what a concentrated market. 

Warren thought she was helping Spirit, but was in fact hurting it. Why? Because she had a static view of how the market worked. She thought the main factor for competition was the number of firms. But in a capital-intensive market like the airline market, there are times when mergers can help make the market more competitive. 

When firms are structurally fragile as was the case with Spirit, consolidation can be a way to stabilize capacity, preserve service networks, and sustain price discipline over time. By focusing on firm count instead of capacity (e.g., routes, seats, financial viability), the policy gave the appearance of preserving competition. In practice, Spirit and JetBlue were less equipped to compete in the market while further solidifying the market concentration of the big four airlines: American, Delta, Southwest, and United.

If Spirit and JetBlue were able to merge, they would have created a larger and more financially resilient airline in the low-cost segment of the market. In industries like aviation, fixed costs are high and margins are thin. Scale can be the difference between restructuring to grow and failure. But Spirit and JetBlue were not given that opportunity to become a strong mid-tier competitor. 

Spirit's employee count went from 11,331 employees in 2024 to 7,482 employees in 2025 before it went under. That decline reflects more than normal business cycles. It signals a firm in financial distress heading toward bankruptcy that could have been saved had it had the chance to merge. As Spirit's revenue weakened and restructuring pressures mounted, the airline reduced capacity, scaled back operations, and cut labor costs to stay afloat. Yet that was not enough to save Spirit. 

While Spirit's ultimate demise is the most visible part of this unnecessary demise, the effects on JetBlue are still important. Without the merger, JetBlue was unable to expand. It remained in a constrained capacity focused on cost constraints and modest route expansion. In a capital-intensive industry, the absence of economies of scale shaped JetBlue's long-term competitiveness. 

These firm-level decisions also made their way downstream. Changes in route activity affect airport activity, especially those who relied on these low-cost routes. Tourism flows are expected to feel a hit, especially those leisure-heavy destinations. This all affects airport revenue, local travel demand, and the availability of affordable travel destinations for travelers. 

There is a broader lesson to be had. Look at Dodd-Frank's "too big to fail" approach. It was supposed preserve competition and market stability. Instead, smaller banks exited at larger rates, the number of new banks declined substantially, and larger banks increased their market share through consolidation. Instead of playing by the regulators' rules, markets adapt in a way that often benefits that largest market players. In retail and tech, the government had similar impulses of "the size of the firm matters" when blocking the Albertsons-Kroger merger and scrutinizing whether Amazon was a monopoly. 

The airline industry was no exception. Spirit and JetBlue had a chance to be a better contender in the airlines market. Instead, the government stepped in to help in the name of "market protection" and ended up making the market less competitive. The deeper question is whether this "government knows best" model can meaningfully help if they misread the dynamic, evolving nature of markets. In case we did not have enough examples, Spirit Airlines is another casualty to remind us that the answer to that question is a resounding "No!"

The Weight of Reality and How Fat Positivity Meets the Economics of Airplane Seats

Southwest Airlines made some changes to its airline policy that went into effect today. It might sound relatively uneventful at first glance, but one of its policy changes re-ignited a culture war. No, it was not announcing assigned seating, although Southwest distinguished itself by not having assigned seating. It was its decision to charge obese customers (or what Southwest calls "customers of size") for an extra seat if they take up two seats' worth of space on an airplane. 

Not Just a Tight Fit: The U.S. Versus the World

On the one hand, airline seats have been shrinking since the 1980s. On the other hand, economy seats across the world have a seat width of 16 to 18 inches and a seat pitch of 30 to 32 inches. Yet it is only in the United States that this amounts to a battlefield in the culture wars. Why? The United States is made up of a lot of fat people. I wish that were hyperbole. According to a 2024 study from The Lancet, about three quarters of Americans are either overweight or obese. A 2024 report from the Food and Agriculture Organization (FAO) found that the United States is the most obese country in the developed world. 

Fat Acceptance v. Economic Reality

The National Association to Advance Fat Acceptance (NAAFA), which apparently is a thing, took issue with Southwest's decision and framed it as an accessibility issue. The fact that there is a NAAFA or that the word "fatphobia" made its way into the English language is part of the problem. As I pointed out in my 2022 piece entitled We Should Not Shame the Obese, But We Should Not Glorify Obesity Either, obesity should not be normalized or glorified because obesity comes with serious health and economic consequences. 

While there are genetic and environmental factors that influence weight, too often people treat it like someone else's fault, whether it is the food industry, sedentary jobs, or society writ large. As I wrote last Rosh Hashanah, it is easy to blame circumstances for outcomes, but taking ownership of one's life means accepting the consequences of one's actions. Is it easy to maintain a good diet, sleep hygiene, and exercise regimen? It is not easy, but it is necessary for living a healthy life. As the saying goes, "if you do not make time for your wellness, you will be forced to make time for your illness." Treating being obese as a harmless identity or glorifying it undermines personal responsibility and a public understanding of those consequences.

Whether or not the people at NAAFA want to hear it, one of those consequences and downstream effects of obesity has to do with fitting in airline seats. There is an economic reality that the fat acceptance crowd does not want to hear. The number of seats on an airplane is limited, and this economic scarcity creates constraints. This is complicated by the fact that in spite of high revenue, airlines make about a 3-4 percent profit margin. According to the data from the NYU Stern School of Business (as of January 2026), this is actually a low profit margin compared to the overall average of 9.7 percent. It is especially low compared to pharmaceuticals at 18.5 percent, financial services at 22 percent, or insurance at 12.4 percent.

It's Economics, Not Oppression of Fat People

Rhetoric about discrimination against fat people collapses when it runs into economic reality. Airline margins are thin and airline seats are revenue generators. Because of these economic limits, the choice is not whether to charge, but rather who pays the cost. If the airline absorbs the cost, seats will become more expensive for everyone. If the non-plus-size customers pay for it, it creates crowding and resentment. If it is the plus-size customer, then that is cost-based differential pricing because a passenger who requires more physical space imposes higher capacity costs on the carrier. 

Competition Could Fix This....If the FAA Would Let It

There is another factor that the libertarian think tank Competitive Enterprise Institute (CEI) details in its analysis on this issue: a lack of market competition in the airline industry. CEI points out that airline consolidation and a lack of true competition reduce carriers' incentives to innovate or offer differentiated seating options, which incentivizes airlines to rely on blunt, uniform policies like charging for extra seats. Since competition is constrained, customers are left with few options when it comes to pricing or such customer quality measures as seat sizes. As a result of this market structure, airlines are left to allocate that scarce space in socially awkward and tense ways. CEI identifies such barriers as airline slot controls, exclusive-use gate leases, and barring foreign competitors from competing on domestic U.S. routes as culprits. I personally think it would be great if the Federal Aviation Administration removed those barriers, but whether they get around to it is a whole different story. 

Airline Economics > Culture War Outrage

When all is said and done, this is not about the moral failing of airlines or whether fat people are "oppressed." Blaming Southwest will not alter physics and tweeting about discrimination against fat people does not change such realities as airlines operating on wafer-thin margins, the finite number of seats, the lack of market competition, or that Americans take up more space than they used to. The truth is that this poorly functioning market cannot allocate seats as efficiently as it ought to. This is not personal or a moral condemnation of obese people. Planes cannot defy physics and passengers cannot contort themselves to fit into seats. Until the U.S. airline market faces real competition or until waistlines shrink, airline seating will remain as uncomfortable as the culture war arguments over it.

Privatizing Air Traffic Control Can Work, But Only With Smart Execution

If you live in the United States and are looking to travel by airplane domestically anytime soon, you might want to reconsider. Last Thursday, the Federal Aviation Administration (FAA) announced a proactive measure to reduce flights by 10 percent at 40 high-traffic airports across the country. The reason for this reduction is there are air traffic control (ATC) staff shortages created by the government shutdown that has yet to end. Similar to when I discussed SNAP benefits last week, it astounds me how something as essential as air travel is more vulnerable when there is a government shutdown. Unlike essential services funded independent of annual appropriations, ATC operations under the FAA grind to a halt during political impasses, which shows how dependence on government budgeting makes even critical infrastructure hostage to politics. This latest fiasco, which could have been easily avoided, is one of many reasons why air traffic control needs to be privatized. 

FAA's Failure to Modernize ATC

When it comes to ATC, the FAA has decidedly and woefully dropped the ball. Take a look at this capstone memorandum that the Office of Inspector General released in September 2025. This summary of 50 OIG audits covers the FAA's Next Generation Air Transportation System (NextGen), which was the FAA's modernization program that began in 2003. This two-decade, $36-billion program to modernize achieved only 16 percent of its intended benefits. You can read more criticism based on this OIG memorandum here. I will say that the Government Accountability Office (GAO) and its September 2024 report concurs. According to the GAO, 51 of its 138 systems are unsustainable, whether due to lack of parts, outdated functionality, or an inability to fund, the latter of which is rich is given how much money the government has already thrown at ATC modernization. 

FAA's Institutional Challenges

The GAO is correct to point out that the FAA is slow to modernize. That is not a mere glitch or an issue of throwing enough money at the problem. The Cato Institute argues in its Handbook for Policymakers that the FAA, being funded by congressional appropriations and constrained by political oversight (e.g., the FAA is re-authorized every five years), makes it inherently and systematically ill-suited to manage ATC. The reason is because the incentive is to protect such programs as NextGen instead of innovating. Because every budget line is subject o congressional oversight and political trade-offs, FAA managers face incentives to avoid risk and preserve existing programs, even when modernization would yield long-term savings. 

Instead of cost-saving reforms, Congress is incentivized to demand politically motivated programs. This does not address the cost growth, schedule delays, or performance shortfalls that are endemic within the federal procurement regulations. Whether privatization could eliminate every challenge, what is clear is that the chronic delays in NextGen highlight how the FAA's political funding model and risk-averse procurement system hinder innovation. 

Canada as a Model for ATC Privatization

The FAA's performance is a contrast to how Canada has managed ATC, a structure that the Cato Institute has championed. In 1996, Canada privatized its ATC into a self-funded nonprofit corporation called Nav Canada. ATC funding was converted from a ticket tax to a user fee. Nav Canada has won multiple awards for having modern ATC technology and for being one of the safest ATC systems in the world. To support this point, a 2005 GAO report discussed what happened when Canada, Germany, New Zealand, and Australia privatized ATC in the 1980s and 1990s. The result was that privatized systems cut costs, invested in new technologies, and either maintained or increased safety. 

Understanding the Natural Monopoly in ATC: Privatization's Limitations

There is a nuance I would like to discuss today that I did not cover in my 2015 piece on ATC privatization. Much like when I analyzed water fluoridation earlier this year, the ATC industry has components of a natural monopoly: high fixed costs, safety and regulatory barriers, and large scale. Competition is possible for the airport towers (terminal services) in terms of contracting those services out to private providers, but the en-route services have the hallmarks of a natural monopoly (Eno Center for Transportation). The en-route, national network, which is the biggest component of ATC, is going to function as a monopoly, whether private or public, due to strong economies of scale and network externalities. Even the NAV CANADA success cited by the Cato Institute is privately owned, yet it remains a monopoly because it is the only ATC provider in Canada. Plus, safety oversight is still provided by the Canadian government through Transport Canada.

This gets to another point: a private monopoly has stronger incentives to innovate and contain costs because its survival depends on performance rather than political appropriations. This allows for increased likelihood to adopt newer technology, lower costs, and improve efficiency, whether those incentives are profit motive, market discipline, customer accountability, or operational autonomy that allows for faster and smarter implementation. 

Challenges of Privatization: Why Execution is Key

At the same time, privatization by itself does not guarantee success. A private monopoly still makes ATC prone to avoiding price capture, access denial, under-investment, or over-charging. The United Kingdom semi-privatized in the early 2000s. However, due to the financial difficulties following 9/11, the UK's National Air Traffic Services (NATS) had to be bailed out by the UK government in 2002. Even the aforementioned 2005 GAO study points out that these improvements were not strictly due to privatization.  It is not privatization itself, but rather governance during a transition to help ensure success.

Principles for Successful ATC Privatization

For privatization to succeed, there needs to be an independent, stakeholder-based board structure. A user-fee system linked to transparent cost-recovery and actual usage helps. So does an independent safety and economic regulator because it ensures safety without micromanagement. Many of these privatization efforts needed contingency funds to make sure that they were solvent (GAO, 2005). As the UK example shows, the transition needs to be gradual, negotiated, and with safeguards. If not, privatization can go off the rails, so to speak. It is the managerial, financial, and regulatory reforms that the governance allows for that determine privatization's success. Privatization does not guarantee success, but it at least establishes the correct incentive structure that the FAA simply does not offer. 

Conclusion

Short of full privatization, converting ATC into a public utility while implementing a user-fee payment system is one of the best courses of action. As the Reason Foundation details, there are 98 countries that have transitioned towards a user-fee payment system. They have more advanced technology and they are independent of the government budget process, the latter of which does not make it prone to rent-seeking, shutdowns, or other shenanigans that come with government budgeting. When done correctly, privatization is a great way to improve ATC. Until the American people can demand serious FAA reform, the United States will continue to suffer from subpar air travel. 

Let's Get Real: The REAL ID Is Unnecessary and an Invasion of Privacy

The September 11 attacks in 2001 left an imprint on the American psyche that had not been as strong as the Pearl Harbor attack in 1941. It ended up shaping how Americans perceive safety and what they were willing to give up for that feeling of safety. It is not only how we got the Patriot Act, but the REAL ID Act. What the REAL ID Act did was set minimum security standards for state-issued driver's licenses and identification cards. 

The premise behind improving the accuracy and reliability of these identification documents was to make it more difficult to obtain fraudulent IDs and prevent terrorists from using them. Yes, the REAL ID Act was passed in 2005. The reason why I bring it up now in 2025? After multiple delays of the deadline, REAL ID is finally here, even though 17 states have less than 50 percent REAL ID compliance. 

Forget for a moment that all but one of the 9-11 hijackers had identification documents and were already in the United States legally. It has been over twenty years since September 11 and yet the United States has not had a terrorist attack remotely close to 9/11's impact since then. The country has been safe from catastrophic terrorists attacks without REAL ID, which was the whole impetus behind creating REAL ID. If the REAL ID were so crucial for the safety of air travelers, it should have been implemented by now. So why exactly do we need REAL ID? 

While it will not protect us from terrorists, REAL ID will certainly infringe upon the freedom of U.S. citizens. REAL ID acts as a de facto national database because it consolidates personal data into linked state databases. While it is not technically one large system, the linkage of the smaller databases make it act as if it were. Because it is a larger system with more data, it becomes more alluring for hackers and identity thieves. REAL ID makes it more harmful to national security by giving criminals another credential to opportunity. 

With all this information centrally accessible, do you think that the federal government is going to stop there? REAL ID is nothing more than an excuse for additional surveillance, as the Electronic Frontier Foundation correctly illustrates. An intuitive reason why REAL ID opens up such mass surveillance is because REAL ID makes the erroneous assumption that treats all citizens as potential terrorists until proven otherwise. In 2013, I expressed similar surveillance concerns with the NSA collecting metadata. Even then-Homeland Security Secretary Michael Chertoff bragged about how REAL ID could be required for such activities as cashing a check or hiring a babysitter. Because that does not reek of mission creep at all!

Then there are the matters of applying a double standard to aviation versus rail, the constitutional issues with prohibiting interstate travel, foreign-born or lower-income individuals having additional hurdles to compliance, or enforcement costs. REAL ID does nothing substantive to improve national security while it results in a serious encroachment on privacy while hindering the right to travel. As such, REAL ID should not be going into effect--it should be abolished.

9/21/23 Hodgepodge: Paper Straws, Train Privatization, and Italy's Latest Windfall Tax

Sometimes life tires us to the point where we cannot fully do what we expect of ourselves. That is how I feel half-awake after working for 10 hours, but I still wanted to post something. Rather than do a full-on analysis of a single political topic, I decided to go with the hodgepodge option of some articles I came across in recent weeks:

• Italy's windfall tax. A windfall tax is when the government decides to impose a surtax when a certain company or sector has large and unexpected profits. Last month, Italy imposed a one-time 40 percent windfall tax, which is capped at 0.1 percent of the bank's assets. According to an analysis from Tax Foundation, this tax will cost €9.2 billion to affected firms, which is three times of anticipated tax revenue. A windfall tax suppressing economic growth does not surprise me. A report from the International Monetary Fund shows that a windfall tax on the fossil fuel industry would boost the renewable energy sector (Baunsgaard and Vernon, 2022).
• Paper Straws Are Bad for the Environment. Last month, a study from the journal Food Additives and Contaminants was released (Boisacq et al., 2023). The authors found that paper straws contain higher levels of poly- and perfluoroalkyl substances (PFAS). These "forever chemicals" mean that it takes longer for paper straws to break down in nature than their plastic or steel counterparts. In short, these PFAS could mean that paper straws are worse for the environment. Another reason to add to my list of why plastic straw bans are a bad idea. 
• Florida and Private High-Speed Rail. This week, Florida is unveiling its new high-speed rail from Miami to Orlando. The libertarian Reason Magazine published an article using Florida's high-speed rail as a success story of privatization in high-speed rail, as well as point out that California's high-speed rail is a boondoggle in spite the massive federal subsidies the state has received. You can read the Cato Institute's handbook on Amtrak and how privatization helps with rail here. 

Citywide Zero-Fare Bus Systems Are a Costly, Ineffective Boondoggle

Last week, I was getting on the bus and I noticed something uncanny: almost no one was paying fare to get on the bus. I thought perhaps this was a remnant from the COVID era when they suspended bus fares to maximize social distancing between the bus driver and passengers. Alternatively, I thought people skirting fare payment was another symptom of higher crime here in the Washington D.C. area. It very well could be neither one of those things. In December 2022, the D.C. Council unanimously approved eliminating the $2 bus fare for all D.C. buses, which made D.C. the largest U.S. city to implement zero-fare buses. 

This plan was to take effect in July 2023. However, it was in May 2023 that the Washington Metropolitan Area Transit Authority (WMATA) asked that the plan be delayed for a year. As of date, WMATA still shows the $2 charge on its website. Fare evasion has become an issue to the point where the D.C. Council is trying to pass a bill to step up fare evasion enforcement. Regardless of whether WMATA approves the elimination of bus fares begs the question of whether the idea of free-fare buses are wise transit policy. 

The premise behind offering zero-fare transit is to boost declining ridership. There are some who view zero-fare buses as a way to improve transit access to lower-income individuals. Zero-fare buses do indeed increase ridership. You would hope that giving something away at no cost to an end-user would increase usage. In spite of increased ridership, zero-fare buses did cause other unintended consequences. 

As the 2012 National Academies report entitled Implementation and Outcomes of Fare-Free Transit Systems points out, increased ridership also increased delays, overcrowding, and "problem passengers." The increased rowdiness from these "problem passengers" could actually increase a need for security services that exceed the contact between law and enforcement and riders for evading fares (e.g., Studenmund and Connor, 1982). These are actually some of the reasons why Austin and Denver abandoned their free-fare transit. 

Another argument for the policy is to divert people from using their cars in favor of public transit, which would help with carbon emissions. A third rationale would be to ease bottlenecks on already-congested transport networks. To quote the Left-leaning news outlet CNN, "fare-free supporters also hope dropping fares will improve congestion, carbon emissions, and noise pollution from cars by getting more drivers to take transit. But results from European cities reveal little evidence it accomplishes these goals." 

A September 2020 study from the International Association of Public Transport showed this lack of evidence by concluding that "there is no evidence that free fare public transport (FFPT) alone is not enough to bring about modal shift, social inclusion, and economic development to a city." The lack of modal transfer was observed in the Estonian capital of Tallinn (Cats et al., 2017), as well as Trenton, New Jersey and Denver, Colorado (Studenmund and Connor, 1982).

Then there is the ill-conceived notion that this would actually be free. As Nobel Prize economist Milton Friedman was fond of saying, "there is no such thing as a free lunch." Scarcity is a key concept in economics because we live in a world of limited resources. As such, supply will almost always, if not always, exceed demand for a good or service. Part of economics is to find ways to best allocate limited resources in the midst of scarcity. 

Public transit is no exception and couching support for zero-fare buses in terms of "return on investment for empathy, compassion, and social equity" does nothing to skirt that reality. As a matter of fact, the reason why WMATA asked for a delay for zero-fare buses is because WMATA is anticipating a $750 million budgetary shortfall in 2025. I could hear a clamoring for increased taxes to help pay for zero-fare buses. Here is the thing: a March 2022 report from the Congressional Budget Office (CBO) pointed out that two-thirds of the income for transit agencies comes from government sources (i.e., taxation). Budgetary woes were an issue for transit agencies across the United States pre-COVID. The pandemic only exacerbated these shortfalls. Zero-fare advocates cannot contend that lost funds need to be recuperated somehow. 

Zero-fare systems deprive transit systems of funds that they can use to improve quality of service. According to a 2019 survey of transit riders across multiple U.S. cities from transit advocacy group TransitCenter, the main area of improvement identified by transit riders was quality of transit services. Concerns about fares were much lower on this list of priorities. This lines up with WMATA survey results from Fall 2022 that indicated that fast, frequent, and reliable service are top priorities for WMATA passengers. 

Much like with bans, a blanket zero-fare policy are a blunt instrument that causes further damage to the transit system that they are trying to save. Using zero-fare systems to deprive transit agencies of much-needed revenue would plausibly make transit less reliable, less frequent, and less safe. 

Ideally, I would have transit be privately owned, operated, and funded (also see Cato Institute analysis here). Short of that, you could have a targeted fare policy in which you offer lower-income household reduced fares to balance transit agency budgetary concerns with access to public transit. Unfortunately, I see the zero-fare crowd gaining traction because it is an easy political win that does nothing to help improve bus service quality or the budgetary woes of transit agencies.

The Argument for France's Short-Haul Flight Ban is a Load of Hot Air

There are those who think that climate change is the single greatest threat to mankind. Climate change activists think they are reaching for the stars in helping the world....or in France's case, reach for the skies. A couple of weeks ago, the French government banned flights that could be taken by train in 2.5 hours or less. The purpose of such a ban is to lower carbon emissions in the fight against climate change. Whether it is regulations encouraging electric vehicle production, banning gas stoves, or a carbon tax, we should ask about the merits of the policy of a short-haul flight ban. 

First, as I brought up in April, climate change is not a crisis. Using implausible assumptions in climate change modeling does not do any favors, especially when it comes to environmental policy. However, for argument's sake, let us assume that climate change is something we need to address urgently. The short-haul flight ban is still a problem, and I am not talking about my more general kvetch with economic bans. 

It is unlikely that this ban will have any major impact on carbon emissions. The three routes being prohibited under the ban are from Paris to three cities: Nantes, Bordeaux, and Lyon. These three routes account for 5,000 out of the 200,000 domestic flights (or 1 out of 40 flights). It is not simply a matter of how many flights, but how much fuel is burnt. A study from the Journal of Transport Geography shows that flights shorter than 500 kilometers across 31 European countries accounted for 27.9 percent of departures but 5.9 percent of fuel burnt (Dobroszkes et al., 2022). Airplanes are responsible for 2.5 percent of global carbon emissions (Oxford). Assuming that a) the European rates above apply to overall trends, and b) the whole world banned short-haul flights, 5.9 percent of 2.5 percent is only 0.15 percent of global carbon emissions. 

As Mercatus Center economist Veronique de Rugy points out, this ban comes with the other negative consequence of it being more deadly. Macron's idea of banning short-haul flights is to incentivize greater train usage. Forget that extra time spent on the train or that taking the train burns about 57 percent more fuel per capita than a plane ride (ibid). Harvard University found that the probability of dying in a plane crash is about 1 in 11 million; it is 1 in 5,000 for an automobile. That is an increased likelihood of death by a factor of 2,100! Given that at least some French citizens would divert their travel from plane to automobile, it would not be a surprise if we see an increase in French traffic deaths.     

I can think of larger examples of political theatre, whether it was the harmful lockdowns, ineffective COVID travel bans, plastic straw bans, or the Transit Security Administration's security checks at the airport. At the same time, France is trying to focus on low-hanging fruit that do not solve major problems while causing bigger problems. This potentially harmful symbolism is par for the course with political theatre. La plus ça change, la plus c'est la même chose. 

Let's Hope Biden's So-Called "Infrastructure Plan" Doesn't Become Law

Last month, Congress and the White House enacted a $1.9 trillion so-called relief bill in which there was little relief to be found. Let's not forget the other $5.3 trillion that was passed last year in coronavirus relief, aid, and "stimulus." If it was not enough that the U.S. government has driven our debt-to-GDP ratio to a new high, Biden wants to spend even more money. This time, it's not to deal with coronavirus, but rather to purportedly deal with infrastructure. Last week, Biden proposed an eight-year, $2.3 trillion infrastructure plan, although the bipartisan Committee for a Responsible Federal Budget puts that figure at $2.7 trillion. When you look at it, Biden's plan is hardly original. It comes off as a combination of President Eisenhower's pitch to expand infrastructure back in the 1950s and the trope that Obama used in 2009 to justify the American Recovery and Reinvestment Act [ARRA].

Before delving into the details of Biden's plan, I would like to ask even if we have an "infrastructure crisis," especially since if you look at the media, everything is a crisis. When the centrist Brookings Institution analyzed local transportation policy (Turner, 2019), they found that "the situation is obviously not worse than it was than 20 years ago. In fact, there are fewer potholes on the interstate." If anything, a 2020 research brief from the Cato Institute shows that infrastructure has been improving. I'm not here to say that our infrastructure couldn't use an upgrade, but rather that we are hardly in crisis mode when it comes to national infrastructure. Aside from a questionable sense of urgency, what other reasons are there to object to Biden's plan? 

Raising the corporate tax rate to 28 percent would harm the economy. Biden is looking to undo the corporate tax rate cut from the Tax Cuts and Jobs Act and increase the federal corporate tax rate to 28 percent. We can ignore the fact that the Congressional Budget Office [CBO] found that higher taxes are not the answer to funding this. The only plausible way to generate the funds for federal investment without running a deficit is to cut non-investment discretionary spending (CBO, 2016, p. 13). 

There is the cost of raising the corporate tax rate. According to a February 2021 Tax Foundation analysis on Biden's proposed tax increase, such an increase would result economic output by 0.8 percent over the next decade, as well as eliminate 159,000 jobs and cuts wages by 0.7 percent. These findings do not surprise me. I have covered the topic of the corporate tax before (see here and here). I came across research from the OECD that found that corporate taxes are one of the most harmful to economic growth. They also reduce labor productivity, create a higher tax burden, shift the tax incidence to the working class (and not to the shareholders), and disincentivize investment. Speaking of investment.....

More federal dollars in investment translate into less net investment. The CBO calculated that each dollar of federal investment increases total investment by two-thirds of a dollar, i.e., for every dollar of federal investment, there is only $0.67 of actual investment (CBO, 2016, p. 4). To frame it in a slightly different way, when the federal government invests a dollar, state and local governments, as well as private actors, reduce their investment by $0.33. The joys of disincentive and the crowding-out effect! The CBO confirmed this in a separate analysis of highway infrastructure funding. Guess what the CBO found? A $1 increase in federal highway infrastructure grant money me that state and local governments reduce their spending from anywhere between $0.20 and $0.80 (CBO, 2018, p. 1).

Lower rates of return from public-sector investment. According to the CBO, the average rate of return on private-sector investment is 10 percent. For the public sector, that is 5 percent (CBO, 2016, p. 4). In other words, when the government invests, the rate of return is about half of what it would be compared to the private sector. 

Already-existing federal regulations will increase cost of capital projects. The federal government has a number of regulations that affect the cost of labor, which in turn, affects the rate of return mentioned above. The Davis-Bacon Act requires union-rate wages. Project labor agreements, which were enacted during the Obama administration, requires union-style work rules. As I discussed in 2017, "Buy America" provisions increase the cost of raw materials and equipment required for the projects. When you take out the competitiveness in the procurement process, limited options and labor market rigidities increase prices of projects. That means that we can invest in fewer investment projects, which is a way of saying that federal investment is inefficient. 

Electric vehicle subsidy seeks to benefit the wealthy. Part of the proposal is $175 billion to subsidize electric vehicles (EVs). Right now, EVs account for less than 1 percent of the vehicle fleet. By 2035, they are projected to be at 13 percent of the vehicle fleet (New York Times). Who disproportionately buys electric cars? The wealthy. Congressional Research Service found that 78 percent of those who purchase electric cars make over $100,000 annually. Aside from price, EVs are having issue gaining traction because of smaller ranges and longer refueling times. Technological development could change these factors and make EVs more accessible and more alluring. But at least in the short-to-medium-term, Biden's $175 billion is going to subsidize the wealthy. Plus, let us not forget that the production and charging of electric vehicles relies on fossil fuels. 

Biden's agenda with climate and electricity. Biden would like to have the United States have 100 percent carbon-free electricity by 2035. When I criticized the Green New Deal a couple of years ago, I pointed out that such associations as the Union of Concerned Scientists and the National Academy of Sciences predicted that using carbon-free energy would not be feasible before 2050. On the plus side, Biden is not removing nuclear power from the equation, which is vital if the long-term goal is carbon-free electricity. 

Amtrak subsidies. Biden would like to subsidize Amtrak with $80 billion. Amtrak is tricky because of its quasi-public status. While it is run as a for-profit corporation, it still receives public funding. I haven't scrutinized Amtrak since 2013, but I would contend that privatizing Amtrak is a better solution than throwing money at a company that has lost money every year since it was founded in 1971. 

Much of this bill has nothing to do with infrastructure. CFRB correctly points out that $621 billion of the bill has to do with traditional infrastructure (i.e., transportation infrastructure). Biden seems to add the word "infrastructure" at the end of the other spending that he would like to incur and make it seem like it is an infrastructure bill when it comes off more like an omnibus spending proposal. Here is a list of some of the things in Biden's proposal not having to do with traditional infrastructure:

• $400 billion to expand home and community-based health services
• $213 billion to retrofit houses
• $100 billion to modernize public schools
• $100 billion in workforce development
• $35 billion in climate change research and development
• $25 billion to "advance racial and environmental equity"
• $25 billion to upgrade child care facilities 
• $12 billion for community colleges

Conclusion

I can point out research that shows that infrastructure spending does not boost the economy short-term (Krol, 2020). I can drudge up the Solyndra debacle or the billions spent on light-speed rail in California. What I will say is that this bill is an excuse for government to spend more money and shovel out pork while under the guise of "helping us out." In many respects, this proposal takes money from one hand and puts it into another, all the while slowing economic growth with deleterious tax policy. Biden is not fixing the problem. He is merely throwing money at a problem without any mechanisms for cost control. We can talk about user fees, shifting spending to state governments, or using tax incentives to spur research and development in traditional infrastructure, but what is clear is that federal spending on infrastructure projects is only going to make matters worse. 

4-16-2021 Addendum: I came across an Ivy league economic analysis on the plan from the Wharton School of Business. A few things that are projected as a result. One is a decrease of economic output by 0.9 percent. The second is a three percent decrease in capital stock. Third is a 0.7 percent decrease in wages by 2031, which is ironic given this is supposed to be a "jobs plan." 

Are One-Way Streets Better Than Two-Way Streets for Urban Planning?

A couple of weeks ago, I got back from my trip to Buenos Aires in Argentina. Looking at the title of today's piece, you are probably wondering what urban planning has to do with my vacation in Buenos Aires. At least when I wrote on the Argentinian economy last week, the connection was clearer. But there does happen to be a connection. When I was in Buenos Aires taking taxis, I noticed that there was a lot of traffic. How Buenos Aires did not make the 2018 Top 200 List for the INRIX Global Traffic Scorecard, I will never know because the traffic there was worse than I have experienced in most major U.S. cities. While traveling throughout the city, I also noticed something else: a lot of one-way streets. I began to wonder: is there a connection between one-way streets and traffic congestion? It then got me thinking of the pros and cons of one-way streets. I will address the cons and scrutinize those since they get more coverage in the one-way/two-way debate.

• Negative impact on local businesses and economies. The idea behind this argument is that there is more exposure for the store because cars in both directions see the building. To further that argument, traffic on two-way streets tends to be slower, which gives greater opportunity to notice local businesses. As for impact on the local economies, one would think that increased business revenue and property tax revenue would cover the costs. However, conversions to two-way streets have had mixed results for the local economy (Riggs and Appleyard, 2018; also see case studies here).
• More difficult navigation. There has to be a certain level of awareness to be able to navigate one-way streets, even with such navigation apps as GoogleMaps or Waze. You would think with such apps, overshooting your route wouldn't happen. What I noticed in Argentina (as well as in the United States with Uber and Lyft drivers) is that even with technology, you can miss a turn. 
• Less efficient traffic. This argument is an offshoot of the previous argument. The conventional argument for one-way streets is that directing traffic in one direction allows for more traffic to pass through, usually at a higher speed limit. Many transportation planners find that a higher vehicle moving capacity automatically translates into greater efficiency. However, a study from professors at Penn State and Berkeley (Gayah and Daganzo, 2012) found different results using a trip-serving capacity. Essentially, the time spent navigating the grid is offset by the moving capacity. For shorter trips, this study found that two-way streets were unequivocally preferable. since two-way streets provide more direct routes. As for longer trips, one-way streets did not possess a particular advantage over two-way streets. This does come with some skepticism since two-way street configurations require more left-hand turns, thereby slowing down traffic.
• Are one-way streets less safe? The intuition behind this theory is that one-way streets are more dangerous than two-way streets because the average speed on a one-way street is higher than a two-way street. This makes it particularly hazardous for pedestrians and cyclists. On the other hand, two-way streets have more conflicting maneuvers, most notably left-hand turns.

I am not an urban planner, and such a debate is quasi-public policy at best. From my layperson view, two-way streets seem to be the better of two options. I would nevertheless say that it depends on the layout of the city, amongst other factors, that would ultimately determine whether one-way streets would be more prudent for cities than two-way streets.

The Green New Deal Is More Alarming Than Climate Change Itself

For many years, the Democratic Party has talked about fighting climate change. Sure, there was the Clean Power Plan, but there was nothing on a grand scale...at least not until last week when Congresswoman Alexandria Ocasio-Cortez (D-NY) and Senator Edward Markey (D-MA) released the Green New Deal (GND), as well as the FAQ that has since been archived on the Internet before Ocasio-Cortez took it down from her website. For Ocasio-Cortez, addressing climate change is a major issue. She said that the world will end in twelve years, although the UN report from which she pulled that assertion stated that we have twelve years to limit its effects and keep it in check, not that twelve years was when the world was going to end. She feels so strongly about it that she called climate change "our World War II."

I understand that what was released was a non-binding resolution, as opposed to a formal piece of legislation. At the same time, the GND struck me as peculiar. Yes, there were ideas to address environmental issues. However, there were also elements seemingly having nothing to do with climate change or the environment, including "safe and adequate housing," racial justice, creating "millions of good, high-wage jobs," and an economic environment free of monopolies. NPR stated that the GND "combines big climate change-related ideas with a wish list of progressive economic proposals." The GND has many vague, far-reaching goals, but is short on details of how to accomplish its goals. In spite of this major shortcoming, we're going to make do here and do the best to analyze the feasibility of some of the GND's goals that are directly related to climate change and the environment.

Shift 100 percent of national power generation to renewable resources: Part of what makes this untenable is that the GND has this shift taking place by 2030. As of 2017, 11 percent of U.S. energy consumption and 17 percent (7 percent of which is hydroelectric) of electricity generation came from renewables (EIA), which is a far cry from 100 percent. The Union of Concerned Scientists are hopeful that we can reach 80 percent by 2050. A study from the National Academy of Sciences predicts that we cannot reach 100 percent renewable energy until 2059 (Clack et al., 2017).

Removing nuclear power from the equation: The GND is not simply about shifting away from fossil fuels. As the GND's FAQ section stated, the GND will not consider nuclear power as an option. If your goal is to have zero-carbon energy, removing nuclear power is unwise. Why? For one, nuclear power currently accounts for 20 percent of U.S. energy (EIA). Two, as I brought up before, nuclear power is the only zero-carbon energy source with high enough capacity and scale to meet demand for energy. Any realistic plan of zeroing out carbon requires more nuclear power, as a 2018 study from MIT argues. If Ocasio-Cortez truly viewed climate change as an emergency or as catastrophic, she would not want to remove nuclear power from the energy portfolio.

Eliminate air travel with high-speed rail. The resolution calls for overhauling the transportation system, which includes high-speed rail. The GND's FAQ calls for removing air travel, even though it admits that it might not be possible in ten years. Let's forget about Hawaii and Alaska or the need for international air travel for a second. A high-speed rail system sounds fine in theory. At least in Europe and East Asia, they have high-speed rail systems that compete with airplanes. Why can't the United States do that? After all, China is larger than the United States, although China racked up massive debt to pay for the high-speed rail system, not to mention China's population density per square mile is over four times that of the United States (United Nations).

The thing with comparative politics is that what might work in one country may or may not work in another country. Replacing air travel with high-speed rail would mean ensuring that major cities are connected. Let's take a look at an example of a Left-leaning state that has tried to implement high-speed rail: California. California has been trying to build a high-speed rail route from Los Angeles to San Francisco since 2008. As of last year, it could end up costing anywhere between $77.3B and $98.1B. It is a project of a decade's worth of delays and rising costs (L.A. Times), and I say that because the initial cost was supposed to be $33B. Even better is that the Governor of California abandoned the project today, thereby illustrating how difficult it is to implement a high-speed rail system, regardless if it is in a state that is strongly supportive of the idea.

What's even more worrisome is that assuming medium ridership, it would take 70 years to offset the greenhouse gas emissions because high-speed rail is an energy-intensive undertaking (Chester and Horvath, 2010). One study found that for high-speed rail to work, it needs average of 10 million one-way trips, and needs to divert the ridership mostly from airplanes (Westin and Kågeson, 2012).

I wouldn't expect the Green New Deal to replace all 5,000-plus of the U.S.' public airports. At the same time, it is not unreasonable to assume that such an endeavor would cost trillions. I think high-speed trains have the potential to replace airplanes in shorter trips, and I think it makes more sense to try high-speed rail in areas with higher population density (e.g., the Northeast). But trying to develop a nationwide high-speed rail system is not realistic or sensical.

Upgrade buildings to be energy-efficient. Nearly half of commercial buildings in terms of floorspace were built prior to 1980 (EIA). According to the latest American Housing Survey from HUD, the median year in which a residential home was built is in 1977. I point the age of the housing out to show that the prevalence of older buildings will either make it more challenging to upgrade the buildings or would mean knocking down old buildings and replacing new ones. It is difficult to comment without further details, but it is not hard to imagine an astronomical price tag. Plus, if the GND were successful, Ocasio-Cortez would still have to contend with the reality that land-use and zoning regulations are done at the local level.

A word about cost. Yes, this was a resolution, but the lack of details on the authors' part is a letdown. Even so, let's try to estimate costs of some of the initiatives. When running for President in 2016, Green Party candidate Jill Stein had a much less ambitious Green Deal, and she estimated that her plan would cost $700B to $1T a year. This figure could be used as a low-bound estimate, but we know that it would be an unrealistic cost expectation given what the GND has covered.

Engineers from Stanford calculated that meeting power demand through all renewable energy would have capital costs of $14.6T (Jacobson et al., 2015), although another study figures it would be more expensive (Clack et al., 2016). If we take the costs from the study that is more flattering for the GND and spread them out over ten years, that would amount to $1.46T a year. It would be difficult to determine the cost of high-speed rail because, as previously discussed, it costs significantly more than initial cost projections.

If we were to add in the GND programs having nothing to do with reducing greenhouse gas emissions, the cost of the GND would be even higher. Investment management firm Bridgewater estimates that a universal basic income would cost $3.8T a year. The Mercatus Center found that a national single-payer healthcare system would cost $3.26T a year, which is not far off from the Urban Institute's estimation of $3.T. If we use Bernie Sanders' College for All Act as a proxy for the cost of free college tuition, then it would cost $47B a year. Providing affordable housing is tricky to measure. The Left-Leaning Center for American Progress estimated that "Homes for All" would cost $20B a year, but that was only for construction costs.

Just using the cost estimates provided above that are most favorable to the proponents of the GND, the GND would cost no less than $8.53T a year. This does not even factor in the cost of the other initiatives, including sustainable farming, making buildings energy-efficient, and replacing combustible-engine vehicles with environmentally-friendly ones. Given what we have already, the annual cost for such the GND would be easily over $10T annually, and could feasibly reach the equivalent amount of the U.S.' GDP. Compare this to the cost of the original New Deal of $653B [in 2009 dollars] (or $777B in current dollars) that took place over six years, and the New Deal pales in comparison to the GND. And while we're on the topic of the New Deal, when FDR passed the New Deal, the debt-to-GDP ratio was only 40 percent. As of 2018, the debt-to-GDP ratio was at 104 percent, and it is only projected to get higher.

A word about burden of proof. If the United States government was even beginning to consider spending this much money, it better do what is intended in terms of bringing the global temperature. It was not something that the Clean Power Plan could do since it was only projected to reduce the global temperature by 0.2ºC. A similar issue with the Paris Agreement. What would happen if Ocasio-Cortez got her wish, and the United States ceased emitting greenhouse gases? How much would it reduce the global temperature? The Heritage Foundation estimates it at 0.13ºC, which would be consistent with what other estimates show for comparable GHG reductions. Another study estimated that the world would need to reduce oil consumption by a third, natural gas reserves by half, and coal reserves by 80 percent to reach the 2ºC benchmark (McGlade and Eckins, 2015). The burden of proof is on the proponents' side. Since past climate change initiatives could not adequately reduce the global temperature (even if implemented perfectly), it will be more difficult for Ocasio-Cortez to illustrate how implementation of her plan would succeed in reducing the global temperature, even if that is in conjunction with other countries' plans. We cannot simply say "doing something is better than nothing" because that is how we got Obamacare and the damage it caused the U.S. healthcare system.

Postscript. Instead of detail, the GND provides false hope and blind optimism. The truth is that the GND is no plan at all because it is not a remotely actionable blueprint. Additionally, the fact that it adds provisions having nothing to do with reducing greenhouse gas emissions further minimizes the seriousness of the resolution. If the Democrats could take the House, the Senate, and the White House in 2020, there would still be the reality that many politicians come from states that are dependent on oil, natural gas, coal, and nuclear power. The probability that this would become a resolution, much less actual legislation, is low. Senator majority leader Mitch McConnell (R-KY) is going to bring the GND to a Senate vote in the near future, so we'll get to see shortly just how unlikely it is.

If it is not going to pass, why talk about it? Because it shows how the political Left is shifting in this country. The fact that there are already 60 Democratic co-sponsors in the House shows just how much this shift is taking place. Much like I have been perturbed by the Republican's populist shift on such topics as trade or immigration since Trump was elected, I don't like how the Democrats are shifting further to the Left in a populist bent because it will lead to further polarization in this country.

You don't have to lean hard to the Left to care about the environment. I have called for a modest carbon tax to fund research on renewable energy as a solution. If the GND were simply about lowering greenhouse gas emissions, that would be one thing. I would happily have a conversation about that policy goal. But that is not what the GND is. The GND simultaneously is pie-in-the-sky utopianism while playing the fear card by saying "we need to work on this fast or the world is going to end." Yea for false dilemmas! The GND is less about saving the environment and acts as a pretext for shoving progressivism down the throats of the American people. It is a guise for an unprecedented amount of government intervention in the lives of Americans, as is illustrated by the number and types of initiatives listed in the GND, not to mention the amount of government intervention that would be required to make the GND work. Based on the cost and implications of the GND, the GND is the very sort of resolution that embodies the aphorism of "the road to hell is paved with good intentions."

United Airlines' Fiasco and Why We Need Greater Airline Competition

Saying that United Airlines had a bad week last week is an understatement. Last Sunday, United Flight 3411 was ready for takeoff from Chicago O'Hare International Airport. The passengers boarded, but United attempted to accommodate four United employees that they were looking to board last-minute. With the four employees, the flight had more passengers than seats. United tried asking passengers to voluntarily give up their seats. They then asked Dr. David Dao, a 69-year old doctor who was looking to get back to Kentucky to tend to patients the following morning. Dao, who was a paying customer who had already boarded the plane, was then forcibly dragged off the plane, and suffered a concussion, had a broken nose and sinuses, and lost two teeth. It looks like Dao has a strong enough case to sue. This sort of abuse of passengers leaves us understandably upset, even if United ended up changing its policy on displacing customers. And if that debacle weren't enough, a passenger on a United flight was stung by a scorpion that fell out of an overhead bin.

United's stock only dropped four percent since the Dao debacle, which looking at its stock history, is not a huge decline. Even so, it has only been a week, it is too soon to tell how the transpired events will effect United's long-term stance. I could say that our media-saturated world will leave us forgetting this incident in a matter of weeks (if not sooner) because of a quick news-cycle, and United will be back to "business as usual." You could think that people will massively boycott United because of its unacceptable treatment of Dao. As I pointed out three years ago, boycotts work best when they are targeted, massive, and last long enough to do damage. A successful boycott of United gets more complicated when considering the consolidated nature of the airline market. Over the past decade, airline companies have merged and acquired to boost its market share. As the Washington Post points out, there are over 10 major airports where United has 10 percent or more of the airport's market share. For Houston and Newark, United accounts for over half of their airports' travel (see Department of Transportation [DoT] statistics here). The airline industry is an oligopoly, which means that the market is dominated by a small number of sellers. 80 percent of flights are carried out by four major carriers: American, Delta, Southwest, and United (see below, as well as DoT stats). Because there are few alternatives for customers, United does not care nearly as much about customer service or satisfaction as a seller would in a different market.

If a boycott is going to do next to nothing to stop the oligopolistic beast, then what would be more effective? We need to make the airline industry more competitive because there are more efficiency gains, prices go down, and quality goes up (Gil and Kim, 2016; Snider and Williams, 2011). One solution that tends to be popular on the Left is "break up the monopolies." As the DoT data show, there are not monopolies or near-monopolies. Sure, there are airports that have high enough market concentration at certain airports, but that doesn't constitute as a monopoly. Obama's Department of Justice went through a lengthy investigation, and found that the airlines weren't colluding, which also helps. The airline industry is more competitive than governments are, but less so than most private-sector markets. The Government Accountability Office (GAO) found that the number of competitors really didn't shift all that much from 2007 to 2012, which is significant considering that is when United acquired Continental (see below).

If we want to think of ways to improve competitiveness in the airline market, here is an alternative to breaking up monopolies. Foreign airlines are presently not able to fly domestic routes. Instead of having this insidious law, how about bringing in competition by letting foreign airlines fly our friendly skies? As the Cato Institute illustrates, privatizing airports can be another route. A couple years ago, I brought up the idea of privatizing air traffic control. Here are a couple more examples of the FAA getting in the way of airline innovations.

While I presented some good and bad alternatives, the practical consideration is whether anything will actually be done to improve airline competitiveness. My answer to that question is "no." The oligopolistic nature of the airline makes boycotting all the more challenging. We currently have a protectionist, populist president who is interested in "America First," which means we probably won't see foreign airlines fly domestic routes anytime soon. The Trump administration also has not indicated that it is looking to improve upon competitiveness in the airline industry. Irrespective of the Trump administration's present stance on the issue (or lack thereof), Trump should focus on airline competitiveness and make flying great again.

D.C. Metro On the Wrong Track: Why Privatize Urban Public Transit Systems

This past weekend was the beginning of the Washington Metropolitan Area Transit Authority's massive SafeTrack program. The purpose of this initiative is that it will attempt to improve the safety and quality of the DC Metro's crumbling rail infrastructure. For those who live in the Washington DC area, such as myself, you already know much of a pain it is to ride the Metro on a normal day.  Now add considerable delays, reductions in service, and shutdowns of stations caused by SafeTrack, and you know that the next nine months of the DC Metro undergoing the SafeTrack initiative are going to cause a whole lot of disturbances and inconveniences. Whether or not the SafeTrack initiative will actually engender significant improvements remains to be seen. What it does signal, though, is the latest in the public sector's failure to provide adequate transit.

Earlier this year, the DC Metro was ranked the best metro system by financial analytics firm SmartAsset. How could I possibly have an issue with the DC Metro, I mean, aside from the service cuts that Metro riders will experience over the next nine months? In 2015, the DC Metro saw the lowest ridership in the past decade, as well as declining customer satisfaction. The WMATA has such an atrocious safety record that the federal government had to step in last year to oversee Metro safety. If you need to know how atrocious the safety is, the Federal Transportation Administration released a report in 2015 showing there were 3,000 serious unresolved maintenance issues, some of them dating back to 2003. The WMATA has a hard time handling snowstorms. Smoke incidents and fires have become more commonplace, as one study shows. A 2016 report from consulting firm McKinsey shows that 63 percent of all DC Metro delayed are caused by maintenance issues.

In 2015, Moody's downgraded the WMATA's credit rating from Aa3 to A1 and changed the outlook to negative.  Just last month, Moody's downgraded the credit rating again to A2, but gave WMATA a more stable outlook. Considering the deficits WMATA continues to run and the fact that 78 percent of its operating budget is spent on wages and benefits (the joys of union-induced cost increases!), I'm hardly surprised that the DC Metro budget is unsustainable. On the other hand, the Left-leaning Urban Institute points out that a significant chunk the DC Metro's operating budget comes from local and federal subsidies, which is higher than its Northeastern counterparts. The reason why this is noteworthy is because its translates into less reliable forms of funding than a more steady tax revenue. Conversely, WMATA has had problems for years dealing with a tri-jurisdictional public rail transit system. None of this considers incompetent management, operators running red lights, obsolete rails, or aging rolling stock.

One could argue, much like the Urban Institute, that it's an issue of funding or how splitting funding commitments complicates revenue generation. However, I would posit that the issue is much more profound than that, mainly that the government does not have the same incentives that the private sector would have to improve service quality. Privatizing urban public transit is not a new proposition. The Cato Institute made a case for privatization back in 2010. More recently, a March 2016 working paper from the National Bureau of Economic Research (NBER) found that a completely privatized bus service would have saved $5.1 billion in 2011, which was 30 percent of bus operating expenses that year (Jerch et al., 2016).

Bus lines have the potential to transport more people in an hour than the WMATA's eight-car rail trains. Since buses have lower capital costs and shorter lifespans, they are more able to respond to competitive forces in the market. Being able to adapt is important, especially since transit rail has an issue of being able to adapt. Bus lines are one possibility to adapt. Telecommuting, car-sharing, and carpooling are other possibilities. Once the technology is developed, self-driving cars will render the Metro obsolete. All the Metro does is crowd out the private sector. Instead of implementing SafeTrack or pouring billions into an increasingly insipid infrastructure, what the respective governments should do is stop expanding Metro and get out of the way so the private sector can develop and provide safer, less congested, less costly, and more efficient forms of urban transport.

5-23-2017 Addendum: The Cato Institute comes up with a convincing list of ten reasons as to why we should stop subsidizing public transit. Here is a report the Manhattan Institute released earlier this month, as well as an article from American Enterprise Institute on the costliness and inefficiency that is public transit.