New regs threaten to send shipping off the rails

freight train

Matthew Kandrach, The Washington Examiner:

Here’s a fun fact: The U.S. freight rail network – 140,000 miles fully maintained by private operators that save taxpayers billions — accounts for 40 percent of all freight moved in the U.S. by ton-miles.

This includes bulk commodities such as grain, chemicals, and coal, which ultimately become finished goods, as well as consumer products bought directly on store shelves. Unlike other modes of transportation, the infrastructure that sustains this movement of goods is paid for entirely by the industry – some $26 billion annually of late – not by you or me through our taxes.

Much of this can be traced to the economic deregulation of the sector back in 1980, an overwhelming success as measured by progressives, conservatives, government, labor, and industry alike.

“Several decades ago, Congress significantly reduced federal regulations on U.S. freight railroads,” reads a report by the American Consumer Institute. “In the period that followed, industry competition intensified, leading to increased productivity, lower transportation costs and widespread consumer benefits.”

Consumer groups are not alone in this view. In fact, a large swath of organizations, including ours, recently wrote to Congress encouraging a continuation of the current regulatory framework that has proven so successful. Making this letter to the Congress especially urgent are the consideration of wonky-yet-consequential policy proposals that would unravel the current framework, including a measure that would force railroads to let their competitors operate on their infrastructure at government-set rates.

Aside from being a striking government overreach, this proposal skews the market for railroad transportation by playing favorites, in the end hurting both industry and consumers. “[Regulators argue] that an expansion of reciprocal switching would increase competition among the railroads,” says the Heritage Foundation’s James Gattuso. “But, in reality, such forced access only adds inefficiencies and imposes needless costs on rail networks.”

As we argue, it is troubling that a small set of railroad shippers are seeking major policy changes that would hinder railroads from serving customers and the large contingent of other shippers such as UPS. These rent-seeking shippers are the only parties seeking regulatory changes – most likely because backdoor rate regulation would pad their bottom lines.

It’s a real lesson in all that is wrong with Washington, D.C.: Well-heeled interests can monopolize and hijack policy debates on a whim.

Consumers and voters are left in the dark amid the proceedings of unelected bureaucrats, yet they are the ones who face the consequences. Because there is virtually no part of the economy the transportation sector, including rail, does not ultimately touch, the increased costs would inevitably be passed on to consumers. Further, as government intervention into rail pricing and routing takes hold, railroads would undoubtedly become less efficient and be less suited to invest in its capital intensive network, resulting in greater reliance on taxpayer subsidized trucks on our roads and highways.

The disruptive regulations at issue were proposed last year by the Surface Transportation Board (STB), an obscure independent agency created in 1995 and reauthorized in 2015 for the first time ever. “The Board” currently has three board members – two Democrats and one Republican – and is awaiting Presidential action to fill two current vacancies unfilled for all of 2016 by the previous administration.

Thankfully, this makes the path forward to sanity quite easy. The Trump administration should only nominate individuals who agree with the very basic premise that the deregulation of the private freight rail sector quite literally saved the industry and should not be upended at the hands of moneyed business interests. The powerful Senate Commerce Committee, which maintains jurisdiction over the board, should follow suit.

Observers cautiously expect action by the end of the year or early next year. With potential consequences impacting America’s economy, transportation infrastructure and ultimately consumers’ pockets, we should all hope that regulators reject the call for further government interference in this often overlooked yet critical sector.

Matthew Kandrach is President of CASE – Consumer Action for a Strong Economy, a free-market oriented consumer advocacy group.

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