Threatening changes in a local microcosm
Here in Dallas, one of the hottest economic topics concerns whether Congress should repeal the Wright Amendment. The Wright Amendment is a statute enacted by former U.S. Speaker Jim Wright that severely limits long-haul air travel out of Dallas Love Field. The law was originally passed in the 1970's as a measure to protect the newly created DFW International Airport. In effect, the Wright Amendment (and subsequent amendments thereto) states that passenger service could only be provided from Love Field to locations within Texas and the four neighboring states (Louisiana, Arkansas, Oklahoma, and New Mexico). Subsequent amendments have extended this zone to include Louisiana and Mississippi. The law specifically bars airlines from issuing tickets designed to get around the Wright Amendment (for example, issuing a ticket from Dallas Love to Houston Hobby, then from Houston Hobby to, say, Los Angeles).

In other words, the Wright Amendment grants DFW an effective monopoly on long haul air service in one of the nation's fastest growing metropolitan areas. The effect? Ticket prices for long-haul travel are much higher for North Texas residents than for comparable flights in any other part of the country.

Now, Southwest Airlines is engaged in a major campaign to get the Wright Amendment repealed. DFW, largely backed by American Airlines (the 800 pound gorilla at DFW) is fighting Southwest's campaign tooth and nail. Yesterday, Congress held hearings on the matter.

American/DFW's stand is, essentially, that the number of airline passengers will not increase much at all, and that repealing the Wright Amendment will hurt American and DFW because a portion of the long haul passengers will use Dallas Love Field. If DFW is correct, then it follows that reallocating a finite number of passengers between the two airfields will hurt DFW. Call this argument the "protectionism" argument.

Southwest's argument, however, is that lower fares will grow the size of the airline passenger market. Southwest believes that, by introducing more competition into the marketplace, fares will be reduced and more people will be able to afford to fly. Call this the "capitalism" argument.

In the end, I think Southwest is correct. Deregulation of the airlines industry has resulted in exponential growth of the airline's passenger base. This has happened time and again in markets served by multiple airports, like Miami, Houston, New York, Chicago, etc., etc. The impetus for Southwest's political campaign arises from hundreds of thousands of people fed up with more of the status quo -- overpriced fares at DFW.

In short, the real dispute is whether DFW/American should continue to enjoy an effective monopoly in the local market. Understandably, American does not want to allow competition to force it to roll back fares. DFW says it is afraid that it will lose passengers to Love Field and that the passenger base will not expand anytime soon, but the argument seems disingenuous considering that DFW recently completed a multi-billion dollar expansion project adding a new terminal. DFW is ten times Love's size, has lots of room to expand, and is about to be connected in on passenger rail service in the metroplex. Love, however, cannot expand -- it is hemmed in by business and housing -- and could not accommodate a vast influx of passengers even if it wanted to. Moreover, Southwest's business model would not work at DFW due to DFW's high fees in comparison to Love Field.

So why is this important? It is a great demonstration of how and why some economic mindsets succeed, and how others, more entrenched in their views, want little more than to enjoy a current advantage without regards to the benefits a change might bring. Apply the mindset to Congress. In 1994, Republicans were in the Southwest mindset -- let's bring some change to the marketplace of ideas; let's modify the status quo and see what we can accomplish for our base and the public; let's stop catering to special interests and make Congress for the people. Let's voluntarily impose term limits on ourselves, so that we can avoid becoming like the Democrats.

Now, ten years later, the Republicans in Congress are more like DFW/American -- we have power, we can do what we want, and we don't have to do anything more than throw a few scraps to our base. We certainly do not want to change the status quo because that might be dangerous to our grip on power. And term limits? Hah. We don't need no stinking term limits.

A rough analogy, but applicable. Wright will eventually be repealed. DFW and American will have to adapt to the changes, or founder.

The same applies to Republicans in Washington. Discontent among conservatives fueled the 1994 Republican takeover of Congress. Discontent among conservatives may well lead fracture the party and hand control back to Democrats unless Republicans can recognize and adapt to conservative demands for change.
- posted by MrSpkr @ 09:55