In a Soft Economy, Railroads Provide Firm Footing


Recent figures released earlier this month from the Commerce Department show consumer spending in April grew at the quickest pace in nearly seven years. Meanwhile, home prices are approaching near-record highs in the U.S., leading many to believe the market is getting stronger.

Yet other measures, including the monthly small business optimism index by the National Federation of Independent Business (NFIB), which registered a 92.6 in April compared to nearly a 100 just a year prior, paint a mixed picture.

Taking a step back, it is clear why someone such as Christine Lagarde, the leader of the International Monetary Fund, recently warned the world is losing momentum and “the recovery remains too slow, too fragile.”  While better off today than when in the depths of the most recent recession, the U.S. and the world at large still lack the growth and certainty we all seek.

Leading candidates for political office, including the presidency, continue to use these less than desirable figures to further political agendas such as protectionism. Some warn against free trade, unrealistically longing for days gone by.

Against the backdrop of this wild election season, however, the fundamental question at hand must be: How do we encourage investment to spur growth and ensure smart public policy is in place so as not to let economic softness become the new norm?

The U.S. freight railroad industry, a fundamental bedrock to the economy, demonstrates the profound pay off of consistently high investments made during good and bad times. According to Towson University’s Regional Economic Studies Institute, major U.S. railroads in 2014 alone generated approximately 1.5 million jobs, $274 billion in annual economic activity, nearly $90 billion in wages and $33 billion in tax revenues.

Put differently, high private spending by railroads facilitates high paying jobs within the industry that infiltrate communities (think schools and community services), nine jobs in other sectors and produces more state and local tax revenues each year than most states collect in taxes. These dollars collectively provide jobs and public funding, even as the industry faces less than desirable traffic volume numbers.

The figures are particularly important because as the Association of American Railroads, which commissioned the Towson study and released it as part of its June 2016 “State of the Industry Report,” makes clear, public policy is as paramount as investments. In fact, we argue that smart public policy enables the freight railroad industry to earn the revenues it needs to not only operate and facilitate this economic boon, but also continually improve safety and performance while helping the environment and reducing negative impacts on publicly funded roads and bridges.

While it could seem like a distant figure to many of the decision makers in the policy community, freight rail was once on the brink of collapse because of too much government meddling. While thoughtful minds on both sides of the aisle certainly support proper oversight and a “watchdog,” they can equally agree that government mandates in place before 1980 nearly killed a critical transportation mode.

Today, as the Washington landscape readies for a changing of the guard, the industry stands proudly behind the economic data presented by Towson University. It is proof that the current economic regulatory system is working and must not be unnecessarily disrupted. As Brookings Institution scholar Clifford Winston says in the report, Washington must “resist the urge to introduce new regulations to the freight rail industry and let market forces continue to compel the railroads to operate efficiently.”

From now until November and especially in Cleveland and Philadelphia in a month, economic growth will dominate almost all discussions. But as candidates and the people who will soon elect them listen closely, they should take a step back and understand that a healthy economy takes a number of foundational building blocks. Amid economic softness and political volatility, we should all understand and appreciate the rock solid power of U.S. railroads and the policy that today enables its existence.

Patricia M. Reilly is Senior Vice President of Communications at the Association of American Railroads.

Morning Consult