The Federal Aviation Administration has issued stop work orders to 219 contractors working on $11Billion of runway and control tower projects funded by the federal Aviation Trust Fund. Some trust fund funded projects are continuing. The FAA has sent home 4,000 of its employees paid from the trust fund and estimates that 20,000 contractor employees have been laid off. This does not impact airline flight schedules or FAA air safety operations. The stop work orders came after Congress failed to reauthorize the taxes and fees, primarily the passenger ticket tax, that finances the trust fund. The fund balance has shrunk significantly in the last few years as air traffic fell during the recession so it can not pay its bills without the revenues which it no longer collects. This shutdown may last for months.
This is a preview of a similar difficult negotiation over the much larger Highway Trust Fund later this year. No stop work orders are expected because the authorization for the federal fuel tax is not schedules to expire. But the flow of new project starts will be affected.
The House and the Senate have each passed an aviation tax/fee reauthorization bill but are unable to resolve two key differences. The Senate version includes a provision to change the labor rules that apply to airlines and railroads. It would permit employees to approve union representation with a vote of 50% plus one of voting employees. The current law is 50% plus one of all eligible employees. This is a top demand of labor unions; the National Labor Relations Board has announced that it considering administratively mandating this change for other industries. The House will not accept this change.
Similarly, the House bill includes a provision eliminating the subsidy for passenger air service, paid to airlines so they can reduce ticket prices, for thirteen small rural airports. This is a $15 Million annual spending cut. Ten of the airports are within 90 miles of a hub airport. Three others are so small that the subsidy averages over $1,000 per passenger. The Senate refuses to accept this change.
This dispute is trivial compared to the grand debate on the debt limit and deficits. But it does illustrate the ideological divide between the two parties and the recent hardening of positions that is making compromise difficult. Generally, republicans represent the interests of the now minority of voters who pay federal income taxes and do not get a significant share of their income in a monthly government check. Democrats, in general, represent the interests of the now majority of voters who either pay little or no federal income tax or rely on the government, directly or indirectly, for a large share of their income¸ in some cases, nearly all of their income.
This divide has been in the background for several decades but has been overshadowed by divides over foreign policy and domestic social issues. Now it dominates domestic politics after the 50% jump in the accumulated federal debt in last three years. Both sides consider their position essential for the maintenance of the standard of living that their supports now enjoy. Compromise may not be possible. But there is still a good change that the divide may be papered over and pushed back for a decision after the next election. Compromise will be much easier if one party controls both houses of Congress. Unfortunately, the price of waiting for a solution is an extended period of subpar economic growth.