All aboard for deregulation

OPINION:

Some of the greatest policy accomplishments of the Trump administration thus far have come in the regulatory sphere. The president, along with his political appointees, have more than followed through on his campaign promise to “drain the swamp” by repealing two regulations for every one put into effect. This has helped spur economic growth that has exceeded economists’ projection as well as sustained levels of job growth. This confirmed what many already knew about our economy: The market thrives perfectly fine on its own without the heavy hand of government interfering.

One such example of said swamp-draining was the scuttling of a Department of Transportation proposal from the Obama era, which would have mandated all freight rail operations have at least two members on board a locomotive at all times. This proposal reflected some of the worst instincts of federal regulators. Bureaucrats in Washington should not dictate supposed best practices to industry experts and professionals, especially when such policies would do nothing to improve safety.

Unfortunately, there are still some big government holdouts in Washington. In the early days of the Trump administration, Rep. Don Young, Alaska Republican, and Sen. Heidi Heitkamp, North Dakota Democrat, introduced the Safe Freight Act, a bill which would have codified the abandoned regulation. Despite the rejection of that bill, Mr. Young has tried his failed experiment again, this time with ultra-liberal Sen. Ed Markey, Massachusetts Democrat, as the Senate sponsor.

Government bureaucrats pretend to know more about this issue than industry professionals in all sectors of the economy. This focus on freight rail is no exception. Proponents of two-man crews — which are still the norm for some railroads even without this regulation in place — will say that they are necessary to maintain safety. This disregards, however, the large-scale technological investments the sector has made and the wide array of people and systems in place on every train to ensure safety. In fact, the Indiana Rail Road Co. outlined a good many number of cases where a one-man crew would be preferable because of the flexibility that offers.

There is no need for government involvement in this area. If a two-man crew is necessary to ensure the safety of all involved, surely the rail companies will make such a decision. Proponents of the Safe Freight Act make specious claims about corporate greed. Surely, a railway catastrophe has to be worse for business than having to send a second person on a freight run. There is no market incentive to take liberties with safety. A government regulation only ensures that resources are not allocated as efficiently as they could be when two men are not required to complete a run.

Sensing that all other arguments may have worn thin, John Risch — the national legislative director of the SMART union’s transportation division — actually floated the argument that two-man crews are necessary in case one crew member becomes drowsy. The term “nanny state” is often used idiomatically. However, if we have bills insinuating that it is the government’s role to make sure people don’t fall asleep on the job, perhaps it should be used more literally in the future. The U.S. Constitution was not put into place to protect people from themselves.

Further, greater reliance on one-man crews in the future could help normalize work hours and schedules such that “falling asleep on the job” becomes a far less prevalent issue. Needless to say, this is still not an issue for the federal government to adjudicate, but one for stakeholders in the industry and rail workers to address on their own without the thumb of the bureaucracy on the scales.

If politicians and bureaucrats are so intent on altering railroad policy, perhaps they should consider proposals that would actually build on President Trump’s promise to “drain the swamp” of burdensome regulations. Perhaps nowhere is there more of an opportunity to do this than to resist price controls or rate caps based on a convoluted system known as “revenue adequacy.”

Revenue adequacy is a measurement taken by the Surface Transportation Board (STB) to assess whether or not freight rail operations are generating enough money to be sustainable. However, in 1985, the Interstate Commerce Commission (ICC) decided that this measurement should be used to calculate reasonable rates for freight rail.

Prices are a signal both of what a producer is willing to sell his or her product or service for and what consumers are willing to pay. This is known as the equilibrium price. Government rate setting, even if it is based on the most painstaking calculations, will naturally cause deficiencies in the marketplace, as those prices are not a result of voluntary exchanges. Either the price will be higher than equilibrium and consumers will fall by the wayside, or the price will be lower and it will become less worthwhile for companies to provide their products and services.

Toward the end of the Obama administration, the STB started considering how to apply revenue adequacy in rate cases. Leaders in Congress and in the administration should state unequivocally that the only factor that should come into play in rate negotiations are the principles of the free market. Government regulators do not know what is best for consumers or producers in this space. Companies are already incentivized by the market to charge a price high enough to stay viable, but low enough to attract consumers. The government has nothing to add to this equation.

The free market has created so many new and exciting innovations in so many sectors of our economy without government restrictions. These heavy-handed regulations, while maybe well-intentioned, will only serve to decrease quality and efficiency. The market provides, if only the government would let it.

• Daniel Savickas is regulatory policy manager at FreedomWorks, where he runs FreedomWorks Foundation’s Regulatory Action Center.