CSE Urges Opposition to Railroad Re-regulation Amendments to Transportation Bill

February 12, 2004

Dear Senator,

On behalf of over 300,000 members of Citizens for a Sound Economy (CSE), I urge you to oppose any amendments to the transportation reauthorization bill, TEA-21, that would re-regulate the railroad industry in America. Amendments that attempt to impose the regulatory mandates included in S. 919 threaten the tremendous consumer gains that have been generated since the deregulation of the railroad industry in the Staggers Act in 1980. One study found that economic deregulation in the railroad industry has provided consumers benefits of more than $9 billion a year.

Since Congress passed the Staggers Act in 1980, average rates have fallen significantly, productivity has shown substantial gains, as has capital investment. These changes have generated customer benefits in terms of lower prices and better quality service. Today, railroads play a vital role in the nation’s transportation sector, carrying over 40 percent of the nation’s inter-city freight. Deregulation generated these benefits, while providing railroads the flexibility to adapt to evolving market circumstances. Re-regulating the industry puts these gains at risk.

Much of the debate has been driven by some customers who have access to only one railroad from a specific location and therefore consider themselves “captive.” Importantly, it must be remembered that the Surface Transportation Board already has authority to provide relief in situations where a railroad is engaging in anti-competitive behavior. Sweeping new mandates will do far more harm to the economic structure of the railroad industry than the more targeted approach that is currently available to shippers who have concerns over pricing practices.

Of course, new regulatory measures may temporarily lower rates for some shippers, but in the long- run railroads would lose investment capital as well as the ability to maintain infrastructure and equipment and to ensure appropriate levels of safety. This would result in a decline in rail service, an increase in risk for private investors, and ultimately more subsidies for freight rail services from taxpayers.

CSE believes that any attempts to introduce new regulations threaten the industry’s capabilities for raising capital and thus thwart innovations that generate additional consumer benefits. It is our hope that members of the Senate will reject any amendments that aim to establish new economic regulations for the railroad industry. Thank you for considering our views in this matter.

Sincerely,

Paul Beckner,
CSE President and CEO