Regardless of political persuasion, many agree that the government has, over time, shackled the economy with a crippling aggregation of regulations that slow economic growth and job creation.
President Obama’s former overseer of federal regulation, Cass Sunstein, conceded that industries are buffeted by overlapping rules from multiple agencies.
“You can have one regulation from one department, another from another department, a third from a third, and they could all overlap,” Sunstein said. “Then the private sector will be burdened and baffled. The problem of cumulative burdens deserves a lot more attention.”
That’s certainly an understatement in relation to many U.S. industries, but it is even more so for freight railroads. From the selling and building of automobiles or houses, to electricity production, to selling goods to export markets, to manufacturers seeking new domestic customers, America relies on freight rail to get raw goods and products to market in the U.S. and beyond.
But what is the cost to small businesses, consumers, heavy industry, the energy sector and agribusiness of the steady accumulation of poorly conceived regulations on such an essential industry? What is the downside of enacting rules that undercut incentives for private railroads to invest in their own private infrastructure so that taxpayers don’t have to — 140,000 miles of steel rails that serve the public good and provide an economic injection that ripples across other industries?
The Cost of Excessive Regulation
The answer is as troubling as the questions. The extensive regulation on freight rail means the difference between a fiscally self-sufficient world-class freight rail system providing the transportation for so much of the nation’s economic success — or, if the trend continues, an industry mired in the kind of regulation that drove it to financial ruin in the 1970s.
The downside of regulation extends beyond the narrow interests of freight railroads. It threatens many national policies tied directly to a healthy freight rail system and rail’s ability to serve the nation’s economy with speedy and effective transportation. These include:
- Improving the capacity, efficiency and productivity of freight railroads overall to allow other businesses to grow.
- Increasing U.S. exports.
- Achieving U.S. energy independence.
- Increasing freight railroad’s share of freight traffic to lower carbon emissions.
Improving On-time Amtrak & Ensuring Reliable Service for Commuters
Data shows that the annual paperwork cost necessary to be in compliance with safety regulations issued by the Federal Railroad Administration accounted for at least 5.3% — or 25 million hours — worked in the industry in 2015 at a cost of $1.3 billion. The tally does not include time spent doing paperwork for the many other agencies that oversee industry safety. Nor does it include any of the compliance costs beyond paperwork, such as extra and unnecessary operating expenses. And it does not include the impact of economic regulation, which can distort the marketplace and disrupt railroads’ incentives and ability to invest in infrastructure to meet future demand.
A Coordinated Approach Needed For Rulemaking
Railroads are succeeding and helping other industries succeed, despite that burden. But this success has been hard won against a powerful and haphazard regulatory tide by decision makers in D.C.
Continued success will require a delicate hand at the federal level and a coordinated approach to economic and operational regulations. The rule process is in dire need of repair. It should develop regulations that adapt to and promote innovation and industry investment in infrastructure, not undermine them as they currently do. Above all, rules should be underpinned by scientific data resulting from a process that is inclusive, transparent and streamlined.
Policymakers must prioritize a smarter regulatory process to ensure the nation’s essential transportation service — and the national policies and industries that depend upon it — are given the opportunity to succeed.