Economists: Rereg would imperil productivity gains

B. Kelly Elkin and Mark E. Meitzen, economists with Laurits R. Christensen Associates, say that “President Carter was exactly right” when he pledged, after signing the Staggers Rail Act 30 years ago: “By stripping away needless and costly regulation in favor of marketplace forces wherever possible, this act will help assure a strong and healthy future for our nation’s railroads. Consumers can be assured of improved railroads delivering their goods with dispatch.”

“Consumers saw the payoff almost immediately,” write the Christensen economists in an opinion piece. “By 1982, rail rates had started a steady decline that, in real dollars, continued through 2004. Today, real rail rates average about two-thirds what they were in 1980. The railroads’ financial condition stabilized. And the railroad industry’s productivity has increased at triple the rate of the airline and trucking industries, as well as of the broader private sector. [But] despite all of the benefits from railroad deregulation, there is some concern that more regulation is needed.”

“Shippers are troubled,” they say, by some of consequences of the Staggers Act: “Today, the U.S. freight railroad industry is essentially two duopolies …  four companies account for more than 90% of railroad volume. Many shippers are served by only one railroad. The once-blistering rate of productivity growth has slowed in the past 10 years. And railroads are retaining a larger share of productivity gains.”

These shippers “question whether the Staggers Act has become outmoded. The calls for rail reform are now more intense than at any time since the law was signed.”

While railroads and their customers have real problems, “these challenges aren’t reason to abandon the law, which has allowed essential market flexibilities while providing a regulatory backstop for captive rail shippers to seek rate relief,” say Elkin and Neitzen. “The Staggers Act has allowed railroads wide latitude in responding to market conditions. The outcome has been tremendous productivity gains in the industry, which has lowered customer costs while bolstering railroads’ financial health. The Staggers Rail Act has delivered what it promised, and, at 30, it can still be trusted.”