What if regulatory reform never happened?
For almost a century, overly stringent regulations drove America’s rail network toward disrepair. Within a framework that prevented railroads from accurately pricing their services, railroads increasingly struggled to maintain their networks. By the 1980s, the problems caused by burdensome railroad regulations even began to undermine the economy.
With the passage of the Staggers Rail Act of 1980, President Carter and Congress created a balanced regulatory framework and put railroads on the path toward success. If Washington had failed to act, here’s how things might have played out:
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- Freight Roads are Nationalized
- The U.S. Economy Suffers
- Americans Suffer from the Fallout
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FREIGHT RAILROADS ARE NATIONALIZED
During the 1970s, more than 20 percent of the nation’s freight rail network was owned by bankrupt railroads. Without regulatory reform, the railroads continue to be slowly nationalized because the private operation of the network is no longer sustainable. Federal ownership of railroads results in insufficient funding and misguided decision-making. Under the control of the federal government, railroads are unable to meet the needs of shippers and the U.S. economy.
THE RAIL NETWORK IS STIFLED
Because regulations prevent railroads from earning enough capital to maintain their networks, railroads are slowly nationalized and must rely upon annual congressional appropriations to fund operations.
In this uncertain environment, railroads cannot develop a long-term plan for the network. Short-term planning increases costs for railroads and prevents the major investments necessary to enhance efficiency and reliability, pursue new business opportunities and tap new markets. With no affordable freight rail option, some markets never materialize.
SHORT LINE RAILROADS NEVER DEVELOP
In this new world, short line railroads — smaller rail operations that connect rural and small town populations to the larger network — are never realized. As a result, critical rail operations between thousands of small towns and businesses never materialize.
In a world without short line railroads, the only option for businesses in rural communities and small towns is less efficient modes for moving their goods. Facing a competitive disadvantage and potentially higher costs, these businesses struggle to remain competitive in an increasingly globalized economy. For some businesses, the rising cost of transportation and lack of access to global markets forces them to lay off workers and even close their doors.
PASSENGER RAILROADS WANE
America’s freight railroad infrastructure has always served as the foundation for passenger rail. Under the continued burden of regulation, passenger rail options suffer along with freight rail.
Local commuter railroads, such as Long Island Railroad in New York or Chicago’s METRA system, are among those passenger railroads dependent upon a federally owned and operated freight rail network. These passenger rail systems (which today carry hundreds of thousands of passengers each week) can never reach their full potential because a nationalized freight rail system can’t support their existence. Meanwhile, the reliability of interstate passenger rail service, which has already been nationalized as Amtrak, is undermined. Here again, taxpayers are asked to fund rail service that fails to fully meet the nation’s needs.
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THE U.S. ECONOMY SUFFERS
In this new world, short line railroads — smaller rail operations that connect rural and small town populations to the larger network — are never realized. As a result, critical rail operations between thousands of small towns and businesses never materialize.
In a world without short line railroads, the only option for businesses in rural communities and small towns is less efficient modes for moving their goods. Facing a competitive disadvantage and potentially higher costs, these businesses struggle to remain competitive in an increasingly globalized economy. For some businesses, the rising cost of transportation and lack of access to global markets forces them to lay off workers and even close their doors.
NEW MARKETS GO UNREALIZED
With limited funding available for capital expansion and long-term planning, fewer opportunities to serve new customers are explored. Projects such as construction of rail lines to carry cleaner burning coal from the Powder River Basin of Wyoming or crude oil from the Bakken Region in North Dakota are slow and inefficient, if they happen at all.
At the same time, an inefficient freight rail network makes American exports — produced far from coastal ports — less competitive in a growing global marketplace. This disadvantage affects U.S. businesses and local economies hampering growth and hiring.
TRANSPORTATION COSTS REMAIN HIGH
The efficiencies of scale and subsequent innovations that have been pioneered by private railroads in recent decades never happen. Intermodal shipping — which has transformed the U.S. supply chain and lowered costs for customers — never achieves its full potential. As a result, shippers are forced to pay higher transportation costs and increasingly rely on trucks and ships to carry their loads. Publicly funded highways become more congested and require more taxpayer investment to maintain capacity.
THE RAIL NETWORK CONTINUES TO DEGRADE
Consistent underinvestment and misguided management leads to the physical degradation of the entire network.
Because maintenance is regularly delayed, railroads consolidate rail traffic and abandon infrastructure, leading to artificial congestion and a decline in efficiency. Also, without proper planning and preventive work, repairs are made only when absolutely necessary, costing railroads and taxpayers more money.
Finally, nationalized railroads do not have money to invest in technology that could yield more efficient, safer and cost-effective freight transportation. Railroads struggle to maintain outdated technology and continue to lose their competitive advantage.
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AMERICANS SUFFER FROM THE FALLOUT
The consequences of a poorly maintained rail network directly harm consumers’ economic well-being and the American public in ways big and small.
GOODS ARE MORE EXPENSIVE
When business costs escalate, consumers eventually make up the difference. Such is the case when higher transportation costs force businesses to charge more at the checkout line. The cost of everything from produce to electronics climbs with the higher costs to ship goods.
CONSUMER CHOICES ARE LIMITED
Because some manufacturers cannot afford the rising costs to transport their goods, consumers see reduced choices.
ROADS ARE MORE CONGESTED
On the highways, commuters navigate a heavier volume of 18-wheel vehicles, which are being enlisted in greater numbers to meet the demands of shippers. With so many big rigs on the roads, traffic delays become even more commonplace, and the danger of congested travel leads to more traffic accidents. The nation’s interstate system quickly becomes overburdened, and there is an even more urgent need to invest hundreds of billions of dollars in maintaining the network.
The increased volume of trucks contributes to a growing problem of greenhouse gas emissions and pollution, since on average, shipping freight by rail instead of truck reduces greenhouse gas emissions by 75 percent.
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