[Congressional Record (Bound Edition), Volume 147 (2001), Part 13]
[Extensions of Remarks]
[Pages 18406-18407]
[From the U.S. Government Publishing Office, www.gpo.gov]



         AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT

                                 ______
                                 

                          HON. HENRY A. WAXMAN

                             of california

                    in the house of representatives

                        Tuesday, October 2, 2001

  Mr. WAXMAN. Mr. Speaker, on September 21, the House passed H.R. 2926, 
legislation providing billions of dollars of financial relief to the 
airline industry from the September 11 terrorist attack. Unfortunately, 
H.R. 2926 was rushed through the legislative process without any 
independent assessment of the actual losses incurred by air carriers or 
consideration by the relevant committees. And it was considered on the 
House floor under a rule that prohibited any amendments and limited 
debate to one hour.
  Although I support the well-meaning intentions that motivated H.R. 
2926 and the paramount need to provide aid to the victims of the 
September 11 tragedies, I oppose this fundamentally flawed bill and 
want to take a few minutes to explain my reservations.
  H.R. 2926 fails to address essential measures, such as airline 
security and assistance to displaced workers, but includes numerous 
provisions with cost ramifications that have not been considered 
carefully. While the bill provides specifically for $15 billion in 
relief to the airlines, the final cost of the bill could easily be far 
higher. Further, the bill establishes a compensation scheme for victims 
that could commit federal taxpayers to pay more to the families of 
deceased Wall Street executives than to the families of the 
firefighters who lost their lives trying to rescue others. This may 
well be a policy choice that Congress would have ultimately made, but 
it is not a policy choice or precedent that Congress carefully 
considered or even debated.


               no provisions to improve airline security

  The most important element of an airline relief bill is improving 
airline security. Unless airline security is improved, any airline 
bailout may fall. No matter how many billions of taxpayer dollars are 
given to the airlines, no airline can stay afloat if Americans refrain 
from flying.
  Unfortunately, the bill contains no funding for airline security 
measures. It also contains no provisions to enhance security, such as 
making airline security a federal responsibility. The legislation thus 
does little to assure Americans that flying will be safe again.
  The rationale for failing to address airline security is that airline 
security should remain an airline responsibility and should not be 
``federalized.'' But this is exactly the same reasoning that is 
responsible for our current, deeply flawed system of airline security. 
In past years, the airline industry has resisted implementing stringent 
security measures on the grounds that the costs are prohibitive. As 
recently as the week following the September 11 attacks, an Alaska 
Airlines executive testified that he believed Americans would be 
unwilling to pay a three-dollar surcharge on their airline tickets to 
fund security measures.


                    no support for displaced workers

  In the aftermath of the September 11 attacks, airlines reportedly 
have already laid off over 100,000 workers, and some airlines are 
refusing to honor the standard severance provisions of their labor 
contracts. H.R. 2926, however, provides no relief whatsoever for these 
workers and their families. It contains no funds for laid-off workers 
who now lack health insurance. It contains no assistance for job-
training that would help these workers find new employment. And it 
contains no funds to help support laid-off workers and their families 
during the search for new employment.
  At the same time that the legislation ignores the needs of laid-off 
workers, the bill protects airline executives who earn millions of 
dollars in compensation. The legislation provides that to qualify for 
loans, airlines must freeze current executive compensation at 2000 
levels for two years and limit severance pay to twice that amount. This 
means that airline CEOs can continue to earn astronomical salaries and 
receive multi-million dollar severance packages.
  Airlines do not have to limit executive salaries at all to qualify 
for the other benefits provided in the legislation, such as the $5 
billion in grants awarded by the bill, the limits on liability, and the 
potential federal payment of increased airline insurance premiums.


               excessive relief for the airline industry

  The airline industry deserves federal support after the September 11 
attacks. But I am concerned that the level of relief in the bill may go 
beyond what is reasonable.
  After the September 11 attacks, the Federal Aviation Administration 
grounded all airplanes for two days and gradually resumed service 
thereafter. This order caused a cash crunch for the airlines. They 
could take in no revenue during the shutdown, but remained responsible 
for many fixed costs. Airlines estimated that these losses amounted to 
$330 million per day. The airlines' strongest case is for federal 
relief to compensate them for this loss. (It should be noted, however, 
that even without a federal order, the airlines--which had the primary 
responsibility for safety--would have likely halted flights until new 
safety procedures were in place.)
  But the legislation provides many other forms of relief. The 
rationale for this additional relief is tenuous at best. There was no 
independent review of the need for these transfers of billions of 
dollars from federal taxpayers to the airlines.
  $5 Billion in Grants. Under the legislation, $5 billion in grants are 
available to the airlines that can be used to offset any future losses 
between now and the end of the year that are attributable to the 
attack. Many other types of businesses will have downturns in revenues 
resulting from the attacks, but only the airline industry is likely to 
receive this special relief. Moreover, the bill provides minimal 
guidance on how the airlines are to calculate the losses. For example, 
the bill leaves open the possibility that an airline could choose to 
reduce its

[[Page 18407]]

flights between now and the end of the year, lay off thousands of 
workers, but still obtain a substantial amount of the profit it would 
have realized had it flown a full schedule.
  $10 Billion in Loan Guarantees. The bill also provides $ 10 billion 
in federal loan guarantees. This measure was rushed through the 
legislative process without a reasoned examination of the need for this 
component in light of other relief provided by the package. Even the 
Administration initially opposed inclusion of this measure. In a 
September 20 hearing before the Senate Banking Committee--just one day 
before enactment of the bill--Treasury Secretary Paul H. O'Neill 
testified that if Congress approved the Administration's $5 billion 
grant proposal, ``the idea of loan guarantees makes no sense.''
  Federal Payment of Insurance Premiums. The bill allows the government 
to pay increases on insurance premiums for the airline industry, as 
well as for any vendors, agents and subcontractors of airlines, from an 
existing federal airline insurance fund. The rationale for this 
provision is difficult to understand, particularly since other 
provisions in the bill limit airline liability for the September 11 
attack and future terrorist attacks. But the costs are potentially 
enormous, as the provision covers not only airlines, but a broad range 
of related entities. The existing insurance fund contains only $83 
million, but it is likely that the costs of increased premiums would 
substantially exceed that amount. Thus, to cover this cost, the federal 
government would have to appropriate additional money for the insurance 
fund.
  Further, making the federal government responsible for any premium 
increases provides a disincentive for the insurance industry and the 
airlines to negotiate low premium costs.


                 problematic victim Compensation Scheme

  The legislation contains provisions to provide federal compensation 
to the victims of the September 11 attacks. I strongly support this 
humanitarian gesture, but I have questions about the details of the 
victim compensation scheme, and whether Congress has adequately 
considered the implications of this provision.
  The bill provides that a Special Master should use a tort model to 
determine the extent of compensation to individuals, basing 
compensation in part on the ``economic'' losses suffered, which 
includes the ``loss of earnings or other benefits related to 
employment'' of the victim. This model makes sense when a defendant has 
been held responsible for a wrongful death. But when the compensation 
is being provided by the federal taxpayer, it may result in inequities.
  As a government, we should not value the life of a Wall Street 
executive more than the life of a firefighter, secretary, or janitor. 
But under a strict application of the tort model, Wall Street 
executives with large incomes would have greater ``economic'' damages 
and hence would be entitled to larger federal payments than 
firefighters, secretaries, or janitors who also lost their lives.
  The language in this area of the bill provides the Special Master 
with some discretion, and I hope the Special Master will use this 
discretion to ensure that the victim compensation is administered 
fairly. But I regret that the haste in which this legislation was put 
together made refining the victims compensation provisions impossible.
  There is a second important question that Congress didn't address: 
Should the compensation system in this bill be the model for future 
victims of terrorist acts or natural disasters? Past victims of 
terrorist attacks have not received the generous compensation amounts 
H.R. 2926 envisions. Apart from the obvious fairness question of how 
best to give victims and their families similar compensation, there are 
cost considerations that Congress did not evaluate if the model in H.R. 
2926 is to be used in future cases.
  In short, compensation to the victims of the September 11 tragedies 
is appropriate and important. H.R. 2926, however, fails to thoughtfully 
address:
  How to allocate compensation among victims killed or injured on 
September 11;
  Whether past victims of terrorist attacks should be similarly 
compensated;
  Whether the compensation system will be a model for future victims;
  The estimated aggregate cost of this compensation system;
  How federal compensation will be coordinated with other compensation 
that the victims and their families will receive from charitable funds 
and other sources.


         Unknown and Potentially Significant Cost Ramifications

  In addition to the problems described above, the legislation also has 
another provision that could end up costing the federal taxpayer 
billions of dollars. The bill allows the Secretary of Transportation to 
determine that an air carrier is not liable for claims regarding losses 
suffered by third parties above $100 million in the aggregate arising 
from any terrorist acts that occur in the 180-day period following the 
enactment of the bill. Where the Secretary makes this certification, 
the government is responsible for liability above that amount. In the 
event of another airline-related tragedy or tragedies resulting from 
terrorist acts, this provision potentially could result in the 
expenditure of many billions of additional government funds.


                       Lack of Independent Review

  The many substantive problems with the airline relief bill are the 
result of a defective process. Although the bill commits federal 
taxpayers to providing tens of billions of dollars in relief, there was 
no meaningful opportunity for review of the merits of the legislation 
by independent experts without a stake in the outcome.
  In particular, Congress erred by not adequately involving the General 
Accounting Office in review of this legislation. Nonpartisan and 
independent, GAO specializes in evaluating expenditures of federal 
programs. Yet Congress made no request for a formal GAO analysis before 
enacting the bill.


                               Conclusion

  H.R. 2926 reflects a commendable and understandable response to a 
heart-breaking national tragedy. Unfortunately, the process used to 
draft the legislation prevented the careful review that is needed to 
ensure the bill is an effective and fair response to terrorist acts.
  By omitting any provision dealing with airline security or 
compensation for displaced workers, this legislation unwisely focuses 
just on responding to the immediate needs of the major airlines. That 
need is unquestionably urgent, but addressing it without resolving 
other urgent problems is a mistake.
  H.R. 2926 received so little scrutiny that it's impossible to assess 
how much the bill will cost federal taxpayers. At a minimum, this 
legislation will obligate the federal government to provide $15 billion 
in financial assistance, but the actual costs could be far higher. And 
if this bill becomes a model for other affected industries or future 
victims of terrorist attacks, the total costs could multiply rapidly.
  In the aftermath of the September 11 attacks, our nation has learned 
to put a premium on the value of shared sacrifice.
  Shared sacrifice was embodied by the firefighters who charged into 
the World Trade Center to rescue people they never met and who died in 
the effort. Shared sacrifice, we're told, is over 100,000 workers 
losing their Jobs in the airline industry, and many being denied 
promised severance benefits. And shared sacrifice will be exemplified 
in the commitment of the men and women in our armed services who are 
being sent into battle.
  But under H.R. 2926, we have found there are limits to shared 
sacrifice. This bill asks for no sacrifices from those who earn 
millions in the airline industry. To the contrary, it allows airline 
executives to continue to earn millions of dollars in salary and 
compensation, while at the same time imposing no new security 
responsibilities on the airlines and providing no relief to laid-off 
workers.
  That is inexcusable.
  Congress and the Bush Administration are going to have to respond to 
unexpected demands and urgent needs in the coming months. It is 
essential that our legislative responses be thoughtful, carefully 
responsive to actual problems, and effective.
  Given the haste in which it was considered, H.R. 2926 likely fails 
these tests. We can do better in future challenges, and we owe it to 
our nation to do better.

                          ____________________