Issues & Insights

Biden Rail Policy Puts U.S. Economy On The Wrong Track

A BNSF freight train in station. Source: Prayitno, licensed under the Creative Commons Attribution 2.0 Generic license (https://creativecommons.org/licenses/by/2.0/deed.en)

Long before candidate Joe Biden stepped aboard the “No Malarkey” Express, he was known as “Amtrak Joe” for his avid use and vocal support of American rail. But now one wonders where that  Joe Biden has disappeared to, in the wake of a recent head-scratching executive order that creates painful burdens and overwhelming disruption to the economic engine that is the nation’s crucial freight rail industry.

Freight rail is maintained by private operators that save taxpayers billions. But Biden’s order advises the Surface Transportation Board (STB) to mandate so-called competitive switching or reciprocal switching. Under the order, private rail operators are compelled by the government to open their tracks and facilities to competitors at rates set by government.

In short, competitors who have invested nothing into building or maintaining a rival’s rail infrastructure are given access and allowed to profit from it.

It’s akin to the government mandating that Holiday Inn can book rooms at the Ritz Carlton at a big discount. Not only is it patently unfair and anti-competitive, but it punishes the companies doing the bulwark of building and maintaining vital transportation infrastructure.

Aside from being a striking government overreach, the Biden 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 late James Gattuso of the Heritage Foundation. “But, in reality, such forced access only adds inefficiencies and imposes needless costs on rail networks.”

What’s behind the executive order is a small set of giant, powerful and highly profitable railroad shippers who 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 motivated to improve their bottom line – because backdoor rate regulation would increase their profitability.

Biden’s false claim that his executive order directing layers of additional regulation would spur competition stands in stark contrast to a previous White House occupant to whom he is frequently compared. It is in direct contradiction to the transformative deregulation signed into law by President Carter. The Staggers Rail Act of 1980 got the government out of such utility-style central planning that has served as the footing for railroads to serve the entire economy and in turn, U.S. consumers.

Republicans and Democrats rarely agree on anything these days, but they are united on not reverting to the failed system that existed before rail deregulation. A large swath of organizations and individuals across the political spectrum wrote to federal policymakers encouraging a continuation of the current regulatory framework that has proven so successful.

Signatories included former transportation committee chairmen, Speakers of the U.S. House, past chiefs of the Department of Transportation. Biden’s order would be a return to the failed past.

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.

With potential consequences impacting America’s economy, transportation infrastructure and ultimately consumers’ wallets, we should hope that regulators reject the Biden administration’s malarkey and leave freight rail alone to do what it does best.

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

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3 comments

  • Article is much appreciated. These arcane command-and-control mandates also create chaos and worsen our psychological well-being and the economy. Yet are ignored by the mainstream media. Adding time-wasting complexity to shipping will exacerbate current shortages and spike inflation. As President Trump once said: The Democrats are unfit to govern. Another example alongside Kabul, Benghazi, burned-out downtown USA business districts, etc. Definitely a destructive pattern. But I would not too vociferously blame Biden, as he is just a cog in the Democrat party wheel, and those behind him would be even worse. For chaos, over-regulation, mandates, cancellation culture, high crimes and election chicanery, the Democrats are the unrivaled go-to party. GOP excels in misdemeanors.

  • Reminds me of Ronald Reagan’s words:

    If it Moves, Tax it. If it Keeps Moving, Regulate it. And if it Stops Moving, Subsidize it.

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