The scapegoat for inflation this month? Railroads

Trains are formed at Conway Yard of Norfolk and Southern Railroad in Conway, Pennsylvania on April 2, 2021.


Gene J. Puskar/Associated Press

Americans face rising prices at nearly every turn, and the Biden administration has chosen a series of scapegoats to deflect responsibility. His latest target is the railroads, and his regulatory salvo could scramble logistics while doing little to lower prices.

The Surface Transportation Board (STB), which regulates freight railroads, voted in April to propose new rules to intervene more actively in schedules and traffic. “Rail service has become even less reliable,” the agency said in a statement, suggesting the delays have driven up producer prices.

Current emergency service rules allow the STB to force private railways to adapt, including opening up their facilities to competitor trains. The new rules would give the agency an immediate reason to interfere with those business judgments, letting it intervene within two days of a customer complaint, or even before a complaint has been filed.

The proposal is driven by the frustration of shippers, who face delays in addition to supply and labor shortages. The Department of Agriculture weighed in with a letter to the STB last month, saying railroad stops are keeping grain in silos. But the White House’s comments on the interprofessional feud show its eagerness to pinpoint a convenient culprit.

Press secretary Jen Psaki last week accused the railways of blocking the goods. She added that new rules would “address situations where a monopoly railway fails to provide adequate service”. The suggestion is that the rail delays stem from too little competition rather than logistical problems. This despite trains shipping record volumes of grain, chemicals and other goods as demand surged in 2021.

Sound familiar? The claim that the railroads are dropping express service is a repeat of the Biden administration’s attacks on other industries amid rising inflation. In November, the president accused oil companies of price gouging during a gas price spike and requested an antitrust review by the Federal Trade Commission. Two months later, he filed the same lawsuit against the meat packers, alleging the collusion was driving up grocery store prices.

These claims come with little evidence, in an economy where shortages drive higher prices and delayed deliveries across industries. The attacks should alarm consumers, as a misplaced “competitive boost” can cripple low-margin businesses.

In the case of railways, maintaining proprietary switching facilities streamlines logistics and strengthens incentives for improvement and maintenance. An investment in a track review looks a lot worse if you think the feds could grant your competitor access at any time. Freight shippers have long sought to force inter-railway switching as a way to cut costs, but the policy could not solve the labor problem that is dragging service down.

The comment period for the emergency service proposal runs until May 23, so the railways will have an opportunity to make their views known. Meanwhile, the Biden administration’s blame for inflation is simply not credible.

Review and Outlook: Following the leak of a Supreme Court majority opinion bill that would overturn Roe v. Wade, the Democratic Party sees an opportunity to divert public attention from the rising cost of living. Images: Bloomberg Composition: Mark Kelly

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