During the 2008 global economic meltdown, people who wanted to know what had caused the crash became familiar with the “Minsky Moment”: the commonsense theory, developed by economist Hyman Minsky, that good times create bad times. If the housing market goes up for long enough, investors feel that it will always continue to go up. This complacency feeds speculation that ends in collapse. Now, the gleeful piling on over the (admittedly bad) bedside manner of Mayor Pete — Pete Buttigieg, President Joe Biden’s hapless Department of Transportation secretary — in East Palestine, Ohio, obscures the fact that we’re having a Minsky Moment in regulated transportation: It’s been so safe for so long that it’s becoming unsafe.
Free market fundamentalists may wish otherwise, but rail and air transportation, just like financial markets, are not free market industries, and they are not going to be. Most people do not have the time or the knowledge to study carefully whether their bank is going to go bankrupt. They just need a safe space to put their money, so the government guarantees most bank deposits. These guarantees, in turn, mean that the government must regulate banks to make sure they don’t take undue risks. This system works most of the time, except for when both the banks and the government think that financial wizardry has eliminated all risk.
Similarly, we do not expect consumers to choose an airline based on how safe it is. Because safety happens behind the scenes, they would have no way of knowing whether an airline was safe until it crashed, and a major airline crash is bad for the whole industry and for the economy. For the same reason, we don’t, or shouldn’t, leave it up to airlines to buy aircraft based on safety. Theoretically, Boeing had a free market reason to make sure that it designed and built the 737 MAX so that it didn’t crash twice within 4 1/2 months because two plane crashes of a brand-new model within 4 1/2 months are bad for business.
In the absence of robust regulatory scrutiny, however, Boeing took multiple shortcuts with the plane. Why? Because short-term pressures (stock price) outweighed the long-term pressures: Maybe, someday, a plane might crash, but that pretty much never happens. Decades of safety — our last commercial plane crash was in 2009, and it wasn’t a large jet — caused Boeing and the regulators at the Department of Transportation’s Federal Aviation Administration, who were supposed to be keeping an eye on it, to do something unsafe.
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From one perspective, then, the shutdown of flights for a 90-minute period in early January this year was good news. The FAA ordered the halt because the system that sends notifications to pilots about hazards, such as a closed runway, stopped working after a software update. Pilots could have depended on other sources of information, such as destination airport towers, for the updates, but the government chose not to take that risk. That regulators chose to incur the ire of hundreds of thousands of people who suffered through more than 10,000 delayed or canceled flights rather than take a chance is how “safety first” is supposed to work.
Yet on a day-to-day level, something is going wrong, and regulators should heed the early warnings before a catastrophe. Between 2013 and 2019, the FAA, which ultimately reports to Buttigieg, reported an average of 13 serious runway “incursions” per year — that is, when a plane narrowly avoids hitting another plane, vehicle, or person on a runway or when there is “significant potential” for collision — or an average of just over one per month. Last year, though, the FAA reported 18 such incidents, the highest level in any year but one in the previous decade.
And now, in just the first two months of 2023, pilots have narrowly avoided four separate crashes with other planes on four separate runways, from California to New York City, including a near-crash between two commercial jets in Hollywood last week. In at least one of these incidents, the Queens one, pilot error appears to be at fault. Then, there’s the United 777 that almost crashed into the Pacific Ocean in December. Multiple errors by multiple parties on multiple occasions are a sign of bigger problems: fatigue, stress, a system still trying to recover from COVID-19 stretched past its capacity.
Like planes, trains don’t regulate themselves: How are the people in East Palestine supposed to use the free market to punish Norfolk Southern after its Feb. 3 derailment of 11 cars carrying hazardous material? Boycott the company’s freight-rail service?
To the chagrin of Republicans who want to blame Biden, though, and Democrats who want to blame former President Donald Trump, the early evidence doesn’t show any catastrophic failure of existing regulation here. The train was under the speed limit when a sensor detected an overheated wheel bearing, and the crew tried to stop the train but couldn’t in time. Investors should consider whether railroads need more frequent sensors across the track networks.
The crash is a reminder, however, that railroads have successfully resisted tighter regulations in recent years. The industry prevailed upon the Trump administration to repeal an Obama-era rule phasing in all-car braking on hazardous-material trains — brakes that would have allowed the East Palestine train to stop more quickly. Except, that rule would not have applied to this particular train because most of its cars weren’t hazardous. At any rate, Biden has been in office for more than half his first term now, and Buttigieg didn’t attempt to revive the rule until after the East Palestine crash.
Nor does Biden’s pick for FAA chief demonstrate that the president is intent on a renaissance in airline regulation and enforcement. Biden’s choice, Phillip Washington, manages the Denver airport, but he has no experience in aviation regulation. (He was in the Army, which encourages a respect for rules.)
Most relevant to Biden’s approach to big transportation, though, was Biden’s 2021 choice for the person who oversees all of these big systems: Buttigieg, a former rival for the 2016 Democratic nomination. Buttigieg is an honorable man, a military veteran, and a smart guy, but his civilian government experience was as the mayor of a Midwestern city, South Bend, Indiana, whose population is only 100,000 people.
Buttigieg’s vision for Biden’s Transportation Department was of a kinder, gentler, progressive transportation department: one that supports bike lanes, encourages more diverse construction crews, and tears down the highways that tore apart cities in the middle of the 20th century. He seems to have wanted to use this job as a way to build his profile for another try for president. Ironically, though, when it came to an actual disaster where he could have shown empathy and hands-on management, he flailed, not visiting for three weeks.
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It’s Biden’s judgment, in choosing Buttigieg, that’s in question here, especially if he’s supposed to be the grown-up president after Trump. DOT’s main role is as a megaregulator of airplanes that carry nearly 2 million people every day and of freight railroads that bring hazardous cargo through America’s residential neighborhoods every day. The transportation secretary’s job is not to be in the public eye. It is to keep both eyes on powerful industries that are intent on capturing both political parties and that are constantly tempted to cut corners.
A successful DOT chief stays out of the public eye — can you name the last three? — by keeping everyone safe. So far, that hasn’t been the case.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.
