Administration Considers New Regulation of Railroad Industry; would amplify supply chain problems

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The U.S. supply chain continues to face unprecedented challenges, with U.S. consumers feeling the brunt as products are delayed and associated costs increase. As last year drew to a close, consumer goods prices increased by 7% the previous year – a 40-year high.

The Russian invasion of Ukraine, which impacts commodities ranging from grain to energy, will only make matters worse.

“The fighting has shut down auto factories in Germany that depend on components made in Ukraine and has affected supplies for the steel industry as far away as Japan,” reports the Wall Street Journal. “The conflict is also bottling up vast commodity exports from Ukraine and Russia, driving up the prices of oil, natural gas, wheat and sunflower oil.”

Such a moment requires not just leadership, but restraint on the part of lawmakers not to impose new costs, including through regulation of industries closely tied to the supply chain. That includes U.S. freight railroads, which will face scrutiny from policymakers in congressional and Surface Transportation Board (STB) hearings this month. Specifically, policymakers are considering – and some will argue for – new market interventions in the rail sector, arguing that such regulation is necessary to reduce costs.

The facts – and history – tell a radically different story, however.

When the president Jimmy CarterJimmy CarterThe cure for our oil addiction The Hill’s Morning Report – What’s next for the Russian-Ukrainian conflict? Western sanctions don’t hurt Putin, they make him stronger MORE was in office, he signed legislation that largely deregulated freight railroads. Notably, this bill originated in a Democratic-controlled Congress and has been reaffirmed on bipartisan grounds in the years since. The markets work and they also work in the railway sector. Thanks to these regulatory reforms – which have essentially prevented the government from running trains and pricing their services – economists believe that American consumers are enjoying $10-20 billion in annual profits.

However, in a decree sign Last year, President BidenJoe BidenEnergy and the environment – Russian takeover sparks nuclear jitters On The Money – Job growth explodes in February Senate invited to speak with Zelensky on Saturday MORE urged the STB to “strengthen regulations on reciprocal switching agreements”. The innocuous and bureaucratic language, if adopted in a regulation, threatens to set us back 40 years to a time when railroads were bankrupt, productivity was low and consumer prices were high.

Under this recent proposal, a railroad with physical access to a specific shipping facility is obligated to accept rail traffic to the facility for another railroad that does not have physical access. While this may seem reasonable at first glance, these regulations could result in reduced rail traffic for the carrier and increased traffic congestion, much like the inefficiencies that are already hampering the current supply chain while adding significant costs. to railway operations.

The case for new regulation of freight railways, however, does not stand up to scrutiny. Freight rail operators are facing intense intermodal competition trucks and water transport. As gasoline prices continue to climb, railroad prices have risen less than trucking. Additionally, while trucking benefits from publicly funded roads, railroads invest approximately $19 billion per year to maintain their own infrastructure. Comparing the environmental impact, rail adds significantly less greenhouse gas emissions per tonne shipped, compared to their trucking counterparts.

A deepening independent report commissioned by the very agency currently considering new regulation concluded that rail operators’ revenues “do not appear excessive from a financial market perspective” and cautioned against the type of regulation the administration is pursuing.

This opinion was affirmed in To analyse of economist Robert Shapiro, former adviser to president obamaBarack Hussein ObamaLive coverage: Russian attack on nuclear power plant draws condemnation Pelosi says Boebert and Greene ‘should just shut up’ Collins to meet Biden’s Supreme Court nominee on Tuesday MORE and a top White House ally Biden. “The proposed regulations would force railways to engage in shunting activities that make no economic sense to them and have no general economic basis, which would jeopardize railways’ revenues, investments and ongoing operations. American railroads,” he wrote.

Government is not there to pick winners and losers or, even worse, to transfer resources from one sector to another. Open-access rail is akin to utility regulation, and experts agree that’s not the right — or fair — approach for an industry competing with unregulated trucking.

With supply chain shortages and rising inflation weighing on the economy, this proposed settlement could not have come at the worst time. Yet the STB has yet to provide quantitative analysis demonstrating that this regulation would benefit consumers.

It is time for the White House and the STB to abandon this risky proposition.

Steve Pociask is president and CEO of the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us @ConsumerPal.

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