It’s not uncommon to hear the claim made that the “stimulus” would have had a greater economic impact had the money been focused on infrastructure. But proponents of public “investment” in infrastructure seem to forget that the government allocates capital on the basis of politics rather than economics. Government is naturally inefficient because it is immune to the market signals that guide private actors who stand to lose their own money should an investment not pan out.
The Federal Aviation Administration is trying to implement a $35 billion overhaul of the nation’s air traffic control system that would replace old-fashioned radar technology with modern satellite-based GPS navigation. But according to the Associated Press:
It didn’t take a Ph.D. in economics to recognize that the federal “Cash for Clunkers” program would put upward pressure on used-car prices. In nominating it “the dumbest program ever” back in August, Chris Edwards noted that “low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.”
The New York Times reports that the nation’s only privately financed commercial airport is set to open in Branson, Missouri.
Unlike government transportation projects such as the Big Dig, this private project has gone well so far: “‘I think it’s some kind of record,’ Jeff Bourk, executive director of the airport, said of the speed of the construction. ‘On other projects I’ve been involved in, there’s a lot more red tape.’”
On the broader issue of America’s airports, the Times notes:
Every one of the 552 airports providing commercial air service in the United States receives some kind of federal money, according to the Federal Aviation Administration, and these airports are owned by public entities, municipalities, transportation districts or airport authorities.
In airports, America embraces socialism, while free enterprise has taken hold abroad. Many major cities around the world have privatized their airports in recent decades, as I discuss here.
The growth in private airports faces a number of hurdles in America. One problem is that government airports receive federal, state, and local subsidies, which makes it hard for private companies to compete. Another problem is the tax-deductibility of state/local (”muni”) bonds, which gives government facilities a financing advantage over private projects.
You often need a crisis, real or imagined, to get major policy changes enacted. There are two looming challenges in our backwards and bureaucratic air traffic control system that might nudge Congress toward reform. The first is that the government system is having a hard time keeping up with the continued growth in air travel.
The second, as Government Executive magazine reports today, is that a large group of controllers are nearing retirement and the government might have a hard time finding replacements.
These challenges add to the woes of the Federal Aviation Administration, which has mismanaged the air traffic control (ATC) system for decades. The FAA has struggled to modernize ATC technology in order to improve safety and expand capacity. Its upgrade projects are often behind schedule and far over budget, according to the Government Accountability Office. (Discussed in here).
Privatization of U.S. air traffic control is long overdue. During the past 15 years, more than a dozen countries have partly or fully privatized their ATC, and provide some good models for U.S. reforms.
The Washington Post reported yesterday that the cost of new combat ships from Lockheed Martin and General Dynamics will likely be at least $350 million each, instead of the originally budgeted $220 million.
That 59 percent cost increase is routine for big federal procurements. The table below summarizes official government estimates of costs for various defense, energy, and transportation projects.