The Railroad Competition and Service Improvement Act

Why Government-Enforced “Competition” Will Not Work

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The deregulation of freight railroads in the United States, which began in 1976 and culminated in 1980, has brought enormous benefits. The nation’s rail traffic has increased by 90 percent, while accidents have decreased by 68 percent, and rates have decreased throughout most of the country.

Deregulation has allowed economies of scale. Since 1980, the nation’s freight railroads have consolidated into fewer companies. In response, some shippers, especially those with access to only one railroad, seek to reregulate the rail industry to their favor. They claim that consolidated railroads have closed some lines, leading to reduced competition and higher rates. In response to this clamor, the Railroad Competition and Service Improvement Act (RCSIA, H.R. 2125/S. 953), sponsored by Rep. James Oberstar (D-Minn.), seeks to promote consumer advocacy and rate competition—at the cost of ownership rights and greater government involvement in rate setting. This paper looks at how the proposed RCSIA would affect U.S. freight service. It concludes that the RCSIA would hamper this vital industry.