In the Imperial City, two liberal Senators are proposing to bring back price controls for the airlines – a stupid, stupid, stupid, stupid, stupid, stupid idea. Excerpt:
If you care about keeping airline prices low, buckle up. Legislation introduced in the U.S. Senate would impose strict government price controls on airlines, disrupting the industry and endangering billions of dollars in consumer welfare.
The U.S. Senate’s version of the bill to reauthorize the Federal Aviation Administration (FAA) contains a provision by Sens. Ed Markey (D-MA) and Richard Blumenthal (D-CT) called the FAIR Fees Act. It establishes “standards for assessing whether baggage, seat selection, same day change, and other fees are reasonable and proportional to the costs of the services provided.”
At first blush, this proposal might appear to be pro-consumer. After all, what’s wrong with mandating “reasonable fees” and protecting flyers?
But despite the innocuous-sounding language, FAIR Fees would interfere with the successful business model that has slashed airfares and boosted consumer welfare. There is no shred of evidence to justify onerous rate regulation in a sector as competitive as the U.S. airline industry. As history has shown again and again, government bureaucrats are incapable of setting prices better than the market.
Ironically, the U.S. airline industry is one of the best-known historical examples of the federal government’s harmful attempts to manipulate market prices. From before World War II to the late 1970s, federal agencies tightly regulated America’s airlines, setting fares, routes, and schedules. The results were disastrous — artificially inflating prices, stifling competition, and mis-allocating resources.
Hint for Senators Markey and Blumenthal – this is what price controls always do.
Remember the Seventies? The “gasoline shortages?” There were no shortages. While OPEC did screw around some with supply, the main problem was President Nixon’s imposition of price controls on gasoline and raw petroleum. (Add this to a bunch of stupid economic wage and price controls imposed by the ill-fated Nixon Administration, which led to the economic malaise of the late Seventies – a malaise broken by the Reagan Presidency.)
Fixing an artificial price cap on any commodity will always – always – have bad consequences. In the case of the airlines, we’ll return to what air travel was in the regulated Seventies; fewer routes, fewer flights, less service and the airlines will still find even more ways to pass rising costs onto passengers.
Now, honestly: This bill is going nowhere. In the current Republican-led Senate, it will never see a floor vote. If by some fluke the Democrats do take control of Congress, passage is still not likely, and certainly not by enough of a margin to overcome a Trump veto. This is pure and simple election-year grandstanding by a couple of Congressional economic illiterates. (But I repeat myself.)
But it would be nice, just for once, to see a little common sense in the halls of Congress. Just once. That’s all I ask.