Congress must be careful when addressing rail policy

Freight rail is a highly efficient industry that is essential to the U.S. economy and to economic recovery. It provides more than a million direct and indirect direct jobs and supports many thousands more that rely on it to ship goods hither and yon.

Use whatever metaphor you like: It is a backbone, the lifeblood, the sinew. Without it, the lumber in Maine wouldn’t make the trip to Texas or to a port along the East Coast bound for markets around the globe.  The grain in the Midwest wouldn’t make it to market in California or to Asia through the ports of the Pacific Northwest. You get the picture.

{mosads}So in a discussion of freight rail rates, it is always a tad frustrating when I read of critics asserting that rates are “unfair” or “too high.”

For starters, these critics are usually massive chemical, utility and agribusiness companies with great market power and, often, major investments around the world. I congratulate one of these companies that just announced a doubling of its profit for the first quarter of 2010.  So apparently rail rates are neither “too high” nor “unfair.” In fact, rail freight rail rates are a bargain.

Take into consideration this factoid: According to the American Association of State Highway and Transportation Officials (AASHTO), if all freight were moved by trucks instead of trains, costs to American consumers would jump by almost $70 billion a year. Why? Rail rates in 2009 are 55 percent lower than in 1981, meaning the average rail shipper can move twice the freight today for the same price it paid almost 30 years ago.

When these shippers complain about rail rates, it is a bit like New York Yankees fans complaining about their team, which won the 2009 World Series: ultimately there isn’t much to gripe about.

An independent team of consultants commissioned by the Surface Transportation Board found that rate increases in recent years were the result of rising input prices, such as fluctuating fuel prices and other costs and did not reflect a greater exercise of railroad market power over shippers.

For railroads to keep delivering on their benefits to the economy and economic recovery, they have to earn the sufficient revenue needed to upgrade and modernize the 140,000-mile U.S. rail network. Our country has great expectations of our rail system, and great investments are required.

That’s surely why Congress must be careful as it addresses rail economic policy. If the federal government starts running the nation’s railroads, there is a big question mark about whether rail companies would earn the revenues needed to invest in the nation’s rail network.

Financial reform, national security, economic recovery. Congress has so many weighty issues on its collective plate. Let’s not make a problem where there is none.

Hamberger is President and CEO of the Association of American Railroads
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