Posted on 08/22/2021 5:16:31 AM PDT by Kaslin
In a typical year, freight trains in the United States move about 1.7 billion tons on over 140,000 miles of track. The massive tonnage hauled by freight rail every year means that most American consumers own goods transported on freight trains. Yet, despite the importance of freight rail to American consumers and the broader economy, the Biden administration has proposed several potential changes that could undermine the profitability of freight rail companies and enhance government control of the industry.
Given the importance of freight rail, any government intervention could have catastrophic effects for consumers. Policymakers only need to look at the history of freight rail in the United States to understand why increasing government control of freight rail could be profoundly damaging.
Criticism of the freight rail industry centers around the allegation that track owners overcharge other carriers to use their track and that the industry has undergone significant consolidation since 1980. Following these critics, President Joe Biden announced an executive order demanding that the Surface Transportation Board (STB) increase competition among freight rail companies. Most notably, Biden wants to ensure passenger trains have the right of way, encourage reciprocal switching, which would allow other carriers access to private track, and further scrutiny of mergers and acquisitions in the industry.
Unfortunately, the demands outlined in Biden’s executive order could be profoundly harmful to the freight industry, leading to a loss of consumer welfare and a loss of investment that has helped keep the industry afloat in the face of competition from other modes of transport.
Before deregulation and the passage of the Staggers Rail Act of 1980, America’s rail freight network was in freefall. After decades of onerous regulations, including rate regulation and inflexible labor laws, most major freight railroads faced bankruptcy due to low volumes, low productivity, and almost non-existent revenues. Simply put, onerous government regulations made it almost impossible for rail freight to operate in the United States.
Since the deregulation in 1976, the freight rail industry has seen substantial investments that have allowed it to innovate and provide consumers better service. Before 1976, freight rail companies were subject to stringent price controls, which limited their ability to reinvest in rolling stock, infrastructure, and maintenance. It’s estimated that because of price controls, “the average return on investment was 1.2 percent, ”leading to over $4 billion in deferred maintenance and delayed capital spending.”
Deregulation, including the Staggers Rail Act of 1980, which eliminated price controls on large freight rail carriers, has allowed rail companies to invest “approximately $740 billion” of “their funds…on capital expenditures and maintenance expenses.” As a result, today, almost all major freight carriers earn a high enough return on investment, in some cases as much as 15%, to continue investing in their services and innovating.
This significant level of investment has not only allowed freight companies to provide better services to their consumers, but it has also allowed them to create environmentally friendly rolling stock and develop better safety technology. Returning to burdensome government regulations would undoubtedly see these investments evaporate as operational costs increase and revenue declines.
The significant investments by private rail freight companies occurred despite a drop in prices after deregulation. According to the Association of American Railroads, rates dropped approximately 44 percent since 1981. In the immediate aftermath of deregulation, it cost around 8 cents per ton-mile. In 2003, that fell to almost 3 cents per ton-mile before climbing to approximately 4.5 cents in 2019.
Given that transport costs often make up a large portion of business costs, low per ton-mile fees ultimately result in lower prices for consumers. Conversely, returning to stringent regulations could ultimately see the per ton-mile fee rise and be passed onto consumers in the form of higher prices for goods as the cost of transporting goods across the country increases.
Understanding that prices declined and investments increased in the aftermath of freight rail deregulation, policymakers should be keenly aware of the dangers of reimposing burdensome regulations on rail freight in the United States. Given the significant number of goods that are moved on freight trains every day, increased regulations could harm a large number of consumers and leave the industry unable to invest and innovate.
Rather than taking the United States back to the 1970s, the Biden administration should focus its efforts on making it easier for rail freight carriers to operate, not harder.
He saw this coming ...
or was given a heads up
Battery powered trains will make them happy.
Bump for later.
——undermine the profitability of freight rail companies——
There we have it. The problem is that the rail freight is profitable. To a progressive, profit is taking from those that don’t have and given to those that have.
The profits must be redistributed to those more deserving than the stock holders. Stock holders use the toil and sweat of the loser underclass blue collar working man to effortlessly fill their bank accounts
It’s the Labor, the Biden way.
Labor and Biden must be destroyed to allow capitalism and business to flourish
I used to tell my farmers the only mgt decision left for them was what color paint was on their machinery.
The only mgt decision for freight may be what color the box cars are. oops, the graffiti artists take care of that.
Five major rail carriers in the lower 48. Two east (CSX, NS), two west (BNSF, UP) and 1 north/south (CN).
Class II FEC is owned by the Mexicans, and a lot of the short lines are controlled by RailAmerica (Genesee & Wyoming) which is controlled by the Canadians.
More evidence of Bidstupidity...
Most notably, Biden wants to ensure passenger trains have the right of way
Coal bad. Biteme riding the trainvto/from Delaware good. Third graders in charge.
WHAT passenger trains????
What % of American travel is done on a train?
Another regulation to FORCE us onto trains???????
Never going to happen.
We suffer from too many smart people.
The government and RRs tore up the tracks and gave up the rights of way decades ago. They’re either gone or bike trails now.
Back when Congress forced the PennCentral to take the New Haven, I said (and I was 10) to my parents that the government doesn’t know how to operate a railroad. They didn’t know then and I know they still couldn’t. I wouldn’t let them run a lemonade stand in the Mohave Desert in a heat wave. 🤓
One thing about Connecticut is they landbanked the right of ways. If a railroad wants a row, they could rebuild the track.. The Housatonic Railroad and the Central New England both reactivated rows...
Don’t the rail freight companies own the tracks? If so, isn’t this commandeering private resources?
I blame this less on Biden himself and more on the wannabe social engineers with very little practical experience that his admin has empowered.
It seems that so many want to recreate cities where everyone walked everywhere (ignoring the problems those cities had), then do not even consider that cities before cars had major waste problems (horse manure), because goods and services needed to be brought to city dwellers (a horse drawn freight wagon had very similar dimensions to a box truck)
The Freight railroads do not help themselves with their terrible customer and public relations, Amtrack causes the majority of their delays themselves, due to old worn-out equipment breaking down and time tables so tight that they cannot make up time once they get delayed. Also Rail boosters are correct about the subsidies road transport gets, but all transport is subsidized. Rail, due to the way the industry is structured has a lot of trouble hiding the subsidies. Seaports are almost never owned by the shipping companies, the railroads own the intermodal hubs where containers are loaded and sorted.
Be very wary of those who want to recreate the past especially if it is a past that never was.
Unions
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