A new report shows the U.S. manufacturing sector is booming. According to The Wall Street Journal, "Makers of items ranging from bulldozers to semiconductors to food products are on the upswing as various measures of spending, sentiment and employment have climbed, while stock markets have hit record highs."
Like any economic sector in the U.S., the fortunes of a given industry inevitably relates to public policy made in Washington, D.C. In the case of manufacturing, which includes industries ranging from energy to automobiles to telecommunications, America’s manufacturing resurgence could be significantly influenced by a number of issues currently up for debate.
For example, ripping up the North American Free Trade Agreement (NAFTA) could seriously harm U.S. businesses, while tax reform could spur investment in the economy, greatly benefitting manufacturers in the process.
One of the greatest threats though to the suddenly booming manufacturing sector is a troubling scheme to reregulate freight rail in America.
A host of railroad shippers are engaged in an ongoing misinformation campaign lobbying unelected bureaucrats at the Surface Transportation Board (STB) for preferential treatment through socialist-style rate regulations. This type of meddling into routing and pricing nearly killed the U.S. freight rail sector once before. It was only saved when Congress, which maintains oversight of the STB today, partially deregulated railroads by passing the Staggers Act of 1980, an overwhelming success, even according to those wanting to unravel it.
The most damaging proposal would require railroads to provide competitors with access to their property, customers and infrastructure. "Under the proposed system, Railroad One gets access to Railroad Two’s customer because the government forces Railroad Two to provide that access across its lines — not because it is the optimal route," Edward Hamberger, the president and chief executive officer of the American Association of Railroads, wrote in a recent op-ed. It is like net neutrality for railroads.
Not only is it absurd to force a company to share its costly infrastructure with a competitor, the proposal would likely cause severe problems across the entire rail network because it would create unstable and unpredictable capacity. All businesses that rely on efficient rail service would be punished. "[The regulation] would mean $7.8 billion in additional expenses for the railroads and could wipe out as much as 80 percent of the railroads’ budget for track and equipment updates," says columnist Brian McNicoll.
The net effect will be a depressed freight rail sector – the equivalent of an outdoor manufacturing assembly line. The diverse manufacturers making gains in today’s global economy and American taxpayers, who bear no responsibility for this private infrastructure mode, will also be harmed.
Opposition to the proposal is overwhelming – from small businesses to shipping giant UPS to the 24 free market organizations that recently signed a letter opposing efforts to impose forced switching on railroads. Railroad regulation proponents claim their “solutions” will foster greater "competition" and are rooted in "free markets." In reality, their solution is nothing more than direct government intrusion into private sector practices working well today.
It is no time to cave to rent seekers — doing so would not only hurt private freight railroads, but manufacturers and the economy writ large.
The STB and Congress will both have an opportunity to weigh in on freight rail reregulation efforts. Let’s hope these leaders are wise enough to avoid injecting the private railroads with a harmful dose of socialism. The future of U.S. manufacturers depend on keeping America’s freight rail sector free from excessive and unfair regulations.
Drew Johnson Drew Johnson is a senior fellow at the National Center for Public Policy Research. To read more of his reports — Click Here Now.
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