For those of us who took government or civics classes (offered a long time ago in an educational galaxy far, far away), Congressional hearings once generally adhered to their definition – an opportunity for lawmakers to hear from experts on a given topic or piece of legislation prior to deciding on where to take public policy next. Unfortunately, hearings can serve other purposes, often predetermined by the slate of witnesses scheduled to appear.
Was this the case with a hearing held earlier this week at the House Transportation and Infrastructure Committee’s Subcommittee on Railroads, Pipelines, and Hazardous Materials? Perhaps so. Though the agenda described the event as an opportunity “to hear from government and stakeholder witnesses about the state of freight rail safety and issues pertinent to keeping rail operations, rail workers, and communities safe,” the list of participants predetermined the agenda’s direction. Of eight witnesses, two were from government agencies, one was a longtime former government regulator, three were from labor unions, and just two were from the private freight rail sector.
Predictably, the union witnesses concentrated their fire on long evolving trends in the rail industry, such as automated inspection of tracks for deterioration and more efficient crew staffing of trains. That’s because their organizations stand behind the narrative that freezing old labor structures in place somehow serves safety and the economy as well as their own membership.
Wrong. Rail safety has either been unaffected or actually helped by these trends. In conjunction with traditional track inspection personnel, the automated systems can cover more miles, more often, and see more flaws that could cause problems for traffic in the future. As for optimal crew sizes, just three years ago the Federal Railroad Administration (FRA) concluded there was little to no evidence that safety could be compromised by single-person crews when deployed properly on certain routes, and in any case a major reason for accidents is often human error. When combined with technologies such as positive train control, smaller crews can function safely while at the same time allocating scarce labor consciously instead of according to arbitrary rules mandating minimum crew sizes on every route. This in turn serves rail customers better, which is important at a time when supply chains must wring out every possible efficiency.
The hearing involved the continuation of overheated discussions about rail regulation that have been taking place ever since the Biden administration took office. In fact, just a month ago, the Subcommittee held a hearing to discuss reauthorization of the Surface Transportation Board (STB), where several of the same issues were raised. As NTU’s comments to the Subcommittee noted at that time, the FRA, a safety regulator, denied a railroad’s petition to expand successful automated real-time track inspection technologies (which supplement human “trackwalkers”).
This change of course has alarmed rail safety advocates and has even spawned a lawsuit from an affected railroad, claiming FRA has acted arbitrarily, capriciously, and in contravention of the Administrative Procedure Act. NTU is familiar with such behavior from other agencies, and the financial parallel is stronger than many would believe. FRA’s edicts create burdens on rail carriers that raise overhead costs at a time of acute labor shortages, thereby potentially affecting the shipping rates with which STB, more of an economic than a safety regulator, is concerned. Shipping rates, in turn, impact supply chain economics and the financial stability of both railroads and shippers – raising concerns among taxpayers that they could be on the hook if this sector’s health declines. Such is also case with FRA’s recent move to propose a new rule mandating minimum crew sizes on trains. Here again, the added labor costs from this dictate would be passed along to shippers and their customers. Or, equally troubling, these higher costs could artificially shift shipping decisions to favor other transportation modes, creating additional economic and fiscal repercussions.
The threat of taxpayers being taken for a ride on the rails is no idle one. Since 1971, the federally backed Amtrak system (a favorite of President Biden’s) has acted as the chief provider of interstate passenger rail, costing taxpayers tens of billions of dollars total (more than $3 billion in 2020 alone). Indeed, prior to the Staggers Act of 1980, freight rail faced a similarly subsidized future through the Conrail scheme. Though not functioning perfectly, Staggers encouraged private investment in freight rail and halted taxpayer losses from that side of the business at $7 billion when Conrail was transferred to private hands in 1986.
The prospect of a taxpayer bailout if freight rail is overregulated to the point of economic distress is still nagging, if not imminent. Yet, there are other economic and fiscal consequences at stake, which Robert D. Atkinson at the Information Technology and Innovation Foundation (ITIF) explained in a recent analysis released just ahead of the Subcommittee’s hearing. Atkinson noted that the labor movement’s traditional zero-sum fears about productivity and technology improvements displacing workers are historically untrue – in fact these trends have increased workers’ incomes and, in the process, have promoted job creation. Equally important for taxpayers, the resulting upswing in economic activity also means healthier government revenue collections without raising tax rates. As Atkinson put it:
According to the U.S. Bureau of Labor Statistics, from 1988 to 2020, rail productivity (passenger and freight) more than tripled. The industry produced 213 percent more output per worker in 2020 than it could 32 years prior. Compare that to the overall U.S. business economy, which increased just 90 percent…. If the overall economy increased its productivity at the same rate as the rail industry, U.S. GDP today would be $11.7 trillion more per year. And assuming no change in tax rates, federal tax revenues would be at minimum $1.9 trillion higher in 2020, almost double the level of the federal budget deficit in 2019 before the COVID crisis.
The Biden administration and its allies in Congress should be seeking policies to emulate, rather than denigrate, this demonstrated success, especially with an economy that could very well be teetering toward a recession. Regulatory safety and economic soundness need not clash with each other, as this week’s Subcommittee hearing should have been able to explore more deeply. In the future, open minds require more open ears.