In the understandable fury to improve airport security, the Senate has passed an airline security bill that would federalize baggage screening and handling.

Transferring security enforcement from private industry to the government may be an emotionally satisfying response in these charged times—but it ignores the fact that airlines are still a service industry, and that privatization has proven to significantly outperform government bureaucracies both in the delivery of services and controlling costs.

The bill is now being held up while House Republicans and Democrats debate the pros and cons of privatization and federalization. Many in the press have blamed House Republicans for not acting, claiming that the real reason Republicans don’t want a federalized system is that it would create more unionized civil servants who tend to vote Democrat. Republicans, who have acknowledged that the airlines have not done well enough with either security or service, have lost the battle of rhetoric here by doing a poor job in explaining the case for privatization.

Meanwhile, Democrats have failed to explain how a federal agency using civil servants would do a better job. Federalization would create a government monopoly on baggage service that happens to have security implications. What happens, however, to passengers who have baggage problems? Do they write a letter to a bureaucrat in Washington? Does Congress establish a Committee on Oversight of Lost Luggage and Rude Baggage Screeners?

The fact of the matter is that a federalized system would lack all of the incentives to combine security with good service—incentives that the marketplace imposes on private industry.

Given the airlines’ security history, how could we be sure that private industry is now towing the line? First of all, legislation can ensure that a privatized system would have to meet all of the same minimum standards that a federalized system would have.

Secondly, Sept. 11 created a distinct market incentive for better security that did not previously exist. Passengers are now willing to pay more per ticket for better security, so airlines will now be able to hire professional baggage screeners at more than minimum wages and still turn a profit. In the post-Sept. 11 world, airlines can actually market the fact that they have better security with more service features. Word will get out about which airlines do it better, so profit incentive will work in their favor. Incompetent private security companies, therefore, are likely to be fired, again because the market now dictates that. Airlines now have an incentive to provide better security with a level of service that the market will bear.

The federalization legislation is, in part, based on this assumption. Under the legislation passengers would pay an additional $2.50 boarding surcharge. But this plan does not take into account that if actual average security costs are higher than the surcharge, non-flying taxpayers will be subsidizing those who fly.

Thirdly, passengers would be paying the $2.50 surcharge regardless of the quality of security or service. People may be willing to pay slightly more money than $2.50 per ticket for better security and more efficient service, but that freedom of choice would be unavailable under federalization. For example, airlines can fire incompetent baggage screeners. It is much more difficult to fire civil servants because they are protected by unwieldy civil service laws.

A federal agency also cannot be fired for incompetence and therefore lacks any incentive to exceed minimum standards. The federal government is also immune from lawsuits, so passengers would have no legal recourse against anybody. Anyone in business knows that the threat of liability for failure to do a job well is one of the best incentives to perform.

This is, of course, why the airline industry supports federalization. It would immunize them from liability for those messy little issues like real security and lost luggage.

Finally, the only real means of enforcing a federalized system is congressional oversight, but congressional committees are already overburdened with overseeing federal agencies which fail to perform or that abuse their authority. Congress can still oversee how private agencies perform and how well the FAA enforces the standards.

It is true that the FAA hasn’t been stellar in its enforcement of private security companies to date. But what makes people think it would be any more capable of ensuring that federalized screeners would do any better?

So forget the demagoguery on the issue. Congress can pass a law that creates the proper minimum standards for either federalization or privatization, but only with privatization can we expect better security combined with better service.

Mark Fitzgibbons is a lawyer who writes about constitutional issues.

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