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Opinion: Michigan railroads are celebrating 40 years of deregulation

Ian Jefferies

The freight rail industry is a significant economic enabler in Detroit and the entire state of Michigan.

“Rail has long played an outside role in moving Michigan’s auto industry, from the early 1900s and Henry Ford’s Highland Park assembly plant to today,” the Michigan Chamber of Commerce’s Dan Papineau wrote in The Detroit News this year. “Freight trains today move 75% of the over 17 million new cars and light trucks purchased in the U.S. More than this, they’re involved in every stage of auto manufacturing, from hauling the raw iron ore and coke for steel to delivering finished auto parts.”

Freight rail’s scale of operations provides one of the most cost-effective ways to transport vehicles built in Michigan, Jeffries writes.

This makes good sense: Freight rail’s scale of operations provides one of the most cost-effective ways to transport vehicles built in Michigan. Indeed, the impact is felt across industries and the labor force — Michigan is home to nearly 3,500 miles of freight rail infrastructure and some 3,000 rail workers who help to spur immense economic activity — think farmers, steel producers or retailers who use railroads to compete. They take trucks off Michigan’s strained and dilapidated interstate highway system, graded D+ by the American Society of Civil Engineers, in the process.

Yet this American success story hinges on a balanced federal regulatory system enacted on bipartisan grounds 40 years ago this month. Oct. 14 marked four decades since President Jimmy Carter signed the Staggers Rail Act into law — a seminal piece of public policy that allowed for greater industry autonomy while also instilling a safety net for customers who need one.

In doing so, Congress and Carter largely removed the government from setting rates between railroads and customers. The law to this day, overseen by the U.S. Surface Transportation Board, protects railroad customers against unreasonable railroad actions while allowing railroads and their customers to largely work together without undue government interference.

Rail deregulation was necessary and the smart choice over the other option of nationalization. Decades of overregulation and treating railroads like utilities left them unable to earn the revenue needed to maintain expensive networks.

Carter said at the time: “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. …It will benefit shippers throughout the country by encouraging railroads to improve their equipment and better tailor their service shipper needs.”

The foresight of Congress was remarkable.

Since unleashing market forces, railroads have invested more than $710 billion in private capital. Additionally, average inflation-adjusted rail rates are 43 percent lower today than in 1981, while the train accident rate is down 30 percent since 2000 alone.

“The freight railroad safety record is second-to-none,” Michigan State Rep. John Chirkun wrote in an op-ed. “Massive private sector spending on the rail network over the past three decades, on both traditional infrastructure and exciting new technology, has made an already safe rail network even safer.”

It is no wonder why the current system maintains broad support across political fault lines. The market structure remains essential for railroads to meet future freight demand.

To sustain the freight railroad industry’s role as a crucial piece of the national economy, as well as regional economies, public policies that reflect today’s modern economy and do not prevent the industry from succeeding must remain in place. We hope the 40th  anniversary of this deregulation will serve as a success story about what can happen when policymakers work together.

Ian Jefferies is president and CEO of the Association of American Railroads