Just about everyone has felt the pinch on their pocketbooks from inflation, and elected officials are scrambling to explain why this supposedly “transitory” problem has persisted. Economists have cited supply chain disruptions as one of the big causes, making it all the more important that government policy toward the infrastructure carrying those supplies is thoughtful.
So it is with the Surface Transportation Board, and taxpayers have a big stake in decisions taking place right now at this lesser-known transportation regulatory body in Washington.
STB, which oversees a vital railroad regulatory relief law enacted in 1978 known as the Staggers Act, is considering major revisions to the way the freight market works. These include a proposal for the STB to order “reciprocal switching” in specific cases — allowing a customer served by one rail carrier to transfer their load at a designated point with a second carrier. Customers call this competitive choice; railroads call it forced access, and a form of price control.
From the taxpayers’ perspective, it is all about balanced policy: railroads must have the resources to continue private investment, and customers must be able to secure affordable, market-based shipping services. Without this synergy, taxpayers will witness another decline in one of the nation’s most vital infrastructure components, and ultimately, increased pressure for direct federal involvement with loans, subsidies and other strictures.
It’s happened before: After bankruptcies of freight lines in the 1970s, the federally backed Conrail consumed $7 billion in government funds before finally being returned to the private sector by 1986. The Amtrak passenger service has never left the dole, surviving on taxpayer support approaching $2 billion annually.
How can a “balanced policy” be maintained? Recently the National Taxpayers Union made some recommendations for STB during a public comment proceeding.
—Be Inclusive with Analysis. Soon many key provisions affecting the Highway Trust Fund will expire, including taxes related to heavy vehicles. How Congress resolves these taxes could significantly affect the operations of modal competitors to railroads, which in turn could lessen or worsen the economic fallout of railroads’ and shippers’ reactions to any future STB reciprocal switching decisions.
More broadly, railroads and their customers are affected by the recent expiration of the 2017 tax-cut law’s favorable treatment of business interest deductions and expensing for research and development costs. Furthermore, a massive expansion in the Superfund excise tax in 2021 is hitting many rail customers hard. And while STB can’t affect tax policy, these real-world financial concerns must be taken into account when the board weighs pleas for reciprocal switching.
—Consider the Ripple Effects. Even as they try to expand their bureaucratic turf, regulators often insist that their missions limit how far they can look to determine the effect of their policies. STB need not fall for this double standard. If reciprocal switching puts more freight trains onto lines that commuter and passenger railroads currently use, what would that do to performance, reliability, and — in turn — ridership of those services? Taxpayers already heavily subsidize passenger rail with billions every year; if ridership further declines, the political pressure would rise for more money from our wallets to make up for the losses.
And, if future decisions involving reciprocal switching create fluctuations in demand for other modes of freight transportation — such as businesses being more inclined to ship their products over roadways — would there be a long-term effect on the Highway Trust Fund? How would other road users and the general taxpaying public be affected as a result?
—Sweat the Small Stuff before It Gets Big. As an agency ponders the “what” of a policy, it should think about “how” as well, starting with workload management. Otherwise, mission and budget creep set in, and taxpayer headaches begin.
With STB, this means what criteria will be employed to differentiate a pure rate dispute case from one involving reciprocal switching? Will consolidation of cases be required to avoid “venue shopping”? Will there be a “fast track” proceeding to spare both parties time and expense if certain facts of a case are acknowledged?
Railroad rate and route cases can drag on for years, costing the parties involved millions of dollars they could otherwise invest in growing our economy. STB, and Congress for that matter, should be working on less cumbersome voluntary dispute resolution mechanisms now, especially for small shippers. Building from this starting point, and using the principles outlined above, could help STB build a rail regulation policy that benefits everyone, including taxpayers.