PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

SBE Council Celebrates 40th Anniversary of Rail Deregulation and Lessons Learned from “The Staggers Act”

By at 14 October, 2020, 8:20 am

NEWS

For Immediate Release

Washington, D.C. – Forty years ago today, President Jimmy Carter signed the Staggers Rail Act, which partially deregulated railroads in terms of setting prices for services and setting rail rates. The impact of the policy, which continues to allow freight railroads to make decisions based on market conditions, remains clear.  As Small Business & Entrepreneurship Council (SBE Council) noted in 2019 analysis, “freight railroads, their customers, consumers in general, and the small business community – including small businesses in the railroad sector, serving railroads, and as customers of freight rail – have benefited from moving away from intrusive, unwarranted and costly regulation.”

SBE Council president & CEO Karen Kerrigan today joined a large and diverse group of experts and organizations across the country in marking the 40-year success of the Staggers Act and urged federal policymakers to protect its core structure:

“Our nation’s railroads directly and indirectly benefit small businesses across the country. This has been especially evident amid the coronavirus pandemic as entrepreneurs and small businesses have relied even more so on e-commerce, which railroads support through steadily increasing ‘intermodal’ movements. SBE Council is proud to stand alongside so many others in applauding the regulatory system that facilitates the underappreciated railroads and the small businesses that dominate this sector, which play a key role in providing an important service and value to U.S. economy.”

In an October 14 Op-ed in Real Clear Markets, Kerrigan reviews the success of rail deregulation 40 years ago, and the lessons Congress and policymakers can learn from this critical effort that saved an industry. As Kerrigan noted in the piece, the Staggers Rail Act helped to revitalize and modernize railroads by freeing up the industry to make its own decisions on pricing, routes, and shipper contracts, for example, which was critical to investment and rejuvenation:

“For sectors like railroads, pipelines or even broadband that pay for their own infrastructure, possessing the freedom and flexibility on these types of decisions are essential to operations, resiliency and survival. Investors put their financial capital in companies and industries where there is a sound possibility of returns. When government limits activity and returns via intrusive regulation, an industry begins to crumble.

The Staggers Act helped to revitalize and modernize the railroad industry, which also drives economic activity for companies large and small. In the coronavirus era, railroads are playing an integral role in growing e-commerce, an increasingly vital lifeline for U.S. small businesses. As lawmakers continue to wrestle with big policy questions related to markets and competition across sectors, especially with regard to policy that will drive economic recovery and growth, they need to look at rail deregulation for important lessons.”

In a Small Business Insider blog post, SBE Council chief economist Raymond Keating also reviews the importance of the Staggers Act, and warns how a regulatory U-turn would erode competition, vibrancy and safety:

“The key lesson is clear: Lift or avoid heavy-handed, costly regulation; allow market dynamics, competition and incentives to work; and the results will be positive for industries, businesses, consumers, and the economy.

Therefore, it should be obvious that re-regulation in the area of railroads must be avoided, including various calls that seem to regularly pop up to re-impose price controls. The surest path to undermining America’s railroad industry would be to impose price controls. After all, the industry operates within a highly competitive market for transporting freight, with investment and technological changes pushing productivity gains and consumer benefits ever forward. Price controls explicitly work against such investments.

And the same goes for government stepping in to dictate how railroads open up their rail lines to competitors via forced access regulations. These kinds of regulatory intrusions would reduce the ability and incentive to invest in rail capacity, maintenance and innovation; generate additional costs; and undermine reliability, speed, efficiency and safety.”

Keating also notes the bipartisan lessons that must be remembered and emulated in the current era:

“Another lesson to take away from the Staggers Act is that sound deregulatory policymaking should not be the exclusive domain of one particular party. Consider that in recent times, Republicans generally have been viewed as being more open to regulatory restraint, while Democrats have succumbed to a ‘regulate first’ stance.

The Staggers Act should make clear that both parties need to be open to sound regulatory policies. After all, the Staggers Act was passed by a Congress in which Democrats had complete control, in both the House and Senate, and it was signed into law by a Democratic president, Jimmy Carter.”

The Staggers Act will be celebrated through a variety of virtual events and on social media today. Follow along on Twitter: #Staggers40.

CONTACT: Karen Kerrigan, kkerrigan@sbecouncil.org

SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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