And now for the latest example of underregulation

Passengers at Chicago's O'Hare International Airport line up after American Airlines canceled nearly 45 percent of its daily schedule Wednesday.
REUTERS/John Gress
Passengers at Chicago’s O’Hare International Airport line up after American Airlines canceled nearly 45 percent of its daily schedule Wednesday.

Thanks to Ronald Reagan, Americans know by heart the perils of overregulation: Government’s meddling in the affairs of private business stifles innovation, entrepreneurship, creativity, competition and so on.

But now, as the George W. Bush years draw to a close, the perils of underregulation seem evermore apparent: Dangerous toys imported from China; diseased cows slaughtered for meat; a Justice Department disinterested in white-collar crime, and a lax attitude at nearly every federal agency with initials — from the FCC to the FHA, from the FDA to the EPA.

“The market isn’t the solution to pollution,” quipped Michael Silverstein in the blog Moderate Voice, reflecting a widespread impression that the ideology of unbridled markets has overstepped its bounds in many areas.

Not so long ago, the clever bundling of subprime mortgages was pronounced “innovative” by Wall Street and Treasury Secretary Henry Paulson. That seems a cruel joke now, considering the financial horrors brought on by the shady practice. “Far from being overregulated, U.S. companies have been getting away with murder,” Gerard Baker wrote in the Times of London.

Who are the customers?
But now comes another prime example: Slackers at the Federal Aviation Administration have been looking the other way while hard-pressed airlines skimp on maintenance.

“FAA needs to clean house from the top down,” U.S. Rep. James Oberstar, chairman of the House Transportation Committee, declared last week as Congress uncovered a cozy relationship between FAA inspectors and Southwest Airlines. The Minnesota congressman described “a “systematic breakdown” in the culture of the agency.

The culture Oberstar referred to might be summarized as “voluntary compliance,” the idea that regulators and industry representatives should sit down to discuss which regulations ought to be taken seriously. On today’s editorial page, the New York Times offered a critique.

“The FAA has been deferring in frightening ways to the airlines on safety inspections,” the paper said. “The industry inspects itself, reporting its own safety lapses to ward off fines. The agency audits the companies’ paperwork, a task that has grown more complicated as airlines cut costs by outsourcing maintenance. The airlines were allowed to undercut audits they did not like by requesting reviews by upper-level federal managers who often seemed ready to ignore or forgive almost anything.

“When a federal agency refers to the industry it oversees as its ‘customers,’ as the FAA did with the airlines, a boundary has been dangerously crossed,” the paper continued. The Times praised Oberstar for his reminder that “the FAA’s only customer is the air-traveling public.” And it concluded: “The FAA’s unacceptably laissez-faire system of safety enforcement is powerful evidence of the damage done by Ronald Reagan’s ideological campaign of deregulation.”

More troubles expected
The Southwest incidents, in which planes with cracked fuselages were allowed to fly, posed the most serious lapse of safety in a quarter century, Oberstar said. The FAA fined Southwest $10.4 million, its largest fine ever, but only after the scandal broke.

In response to a subsequent FAA maintenance audit, doing perhaps what it should have been doing all along, planes from United, Delta, Alaska and Midwest as well as from Southwest were grounded, setting off a wave of canceled flights affecting a quarter-million air travelers.

No company was harder hit than American Airlines. Concerns about wiring on its 300 MD-80 jets, which make up 45 percent of its fleet, forced the grounding of 570 flights today. That comes after 930 cancellations Thursday and brings the week’s total to nearly 3,000.

The airlines suggest that the current wave of canceled flights won’t extend beyond the weekend. But the FAA predicts the problem will persist into June, and, beyond that, airline analysts expect more troubles ahead for the financially strapped industry.

“Air traffic systems, computers and other crucial equipment are aging, as are many of the planes themselves,” Tom Raum wrote for the Associated Press. “Critics of the industry say that cutbacks on maintenance and inadequate government safeguards are starting to take a toll.

“Meanwhile, record-high jet fuel prices have squeezed airlines and led to a new round of bankruptcies [most recently ATA, Skybus, Aloha and Frontier] in an industry whose finances have always been shaky,” he continued. Customer dissatisfaction over delays and lost luggage has been growing. Trouble keeping flight schedules disrupts cargo, mail and other business aside from the passenger impact, and places “new strains on a U.S. economy teetering on the edge of recession,” the report suggested.

An era of deliberate deregulation of airline route structures began in 1978, resulting in cheap fares and enormous growth in air travel. But deregulation also brought cutthroat competition and the temptation to cut corners on everything from smiles to food service. Despite all of that, the industry’s remarkable safety record has remained intact. Only now is there reason to believe that shortcuts on safety may have become part of the corporate and regulatory cultures.

“Nobody at the top ever gets fired,” complained Sen. Jay Rockefeller, chairman of the Senate Commerce aviation subcommittee. “…It’s catastrophic economically, and it’s embarrassing to the nation.”

Not everyone sees it that way, of course. A Wall Street Journal editorial last month, “Red Tape Rising,” complained that the Bush administration has been far too eager to expand government regulation. “Last year, Bush rule-making agencies imposed $11 billion of new economy-wide regulatory costs,” the paper said, citing a Heritage Foundation study.

Still, the political pendulum seems to be swinging a bit back toward regulation. In a rare display of contriteness, at least one airline chief executive didn’t point fingers at others.  “I take full personal responsibility,” American’s Gerard Arpey told reporters, adding that he was “profoundly sorry we have gotten ourselves into this situation.” He said the groundings, customers service problems, inspections and repairs will cost the airline “tens of millions” of dollars.

As sometimes happens, Comedy Central’s Jon Stewart may have offered the best summary of the situation.

“It’s all sort of ironic, when you think about it,” he said. “When you fly, YOU are inspected quite thoroughly, whereas the plane itself is, perhaps, occasionally vacuumed. See, with this administration, if a passenger blows up a plane, it’s a ‘failure in the war on terror,’ but if the plane just blows up on its own, it’s ‘the market self-regulating.’ ”

Steve Berg, a former Washington Bureau reporter, national correspondent and editorial writer for the Star Tribune, reports on urban design, transportation and national politics. He can be reached at sberg [at] minnpost [dot] com.

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