WATCHING WASHINGTON, RAILWAY AGE OCTOBER 2024 ISSUE: As a Senator in 1938, “Give ‘em Hell” Harry Truman proclaimed, “Rail management can only see straight down the right-of-way as it was laid out in 1890,” and needed was “young blood with imagination.”
A haberdasher by trade, Truman should have better understood what most in government never do—the concept of creative destruction by which innovative business practices incinerate the old order to usher in greater efficiency, higher productivity, improved quality and long-term economic growth.
The culprit never was rail management, but government’s preference for command-and-control over respect for market forces—a disastrous micro-managing of railroads by an over-zealous Interstate Commerce Commission (ICC)—that signaled to “young blood with imagination” that better career choices lay elsewhere.
We need not rehash the troubled history of railroads when regulated as if monopolies while surrounded, intimidated and savaged by every form of competitive freight and passenger transportation. Had it not been for long-delayed partial economic deregulation in 1980, most every railroad would have followed the entire Northeast rail network and large portions of the Midwest network into bankruptcy.
In partially deregulating railroads—more out of desperation they would become a government ward than an understanding of economics—Congress retained protections for those few shippers (primarily chemicals, coal and grain) lacking effective transportation alternatives. The captive-shipper-protective machinery adopted post-1980 by a less hidebound ICC and its Surface Transportation Board (STB) successor was not perfect, but the flaws were and are under constant review and improvement.
No matter who chairs the STB in 2025, problems are overripe for solving but require a pragmatic chairperson pursuing consensus building over politics. Unless regulatory decisions respect market conditions, railroads will be returned to their pre-1980 infirmity—an outcome equally dismal for rail labor and shippers.
Partial economic deregulation better allowed railroads to adjust rapidly to fast-changing market forces and engineer the industry to be more fit, willing and able to provide service on demand while improving employee wages, benefits and working conditions. Remaining free of regulatory encumbrances is crucial to all stakeholders given the weighty decline in the industry’s most profitable traffic—coal.
Growing the rail business elsewhere, such as attracting more containers and trailers in a truck-saturated and price-ceilinged market, requires railroads remain free to choose the technology and operating strategies that best meet competitive challenges, which include already deployed driverless trucks. If railroads cannot earn a return on intermodal that compensates for the loss of coal, capital essential for growth and renewal will flow elsewhere.
Where Art Thou, Consensus Building?
Yet the STB’s Democrats of late—now retired Chairperson Martin J. Oberman, Robert E. Primus and Karen J. Hedlund—have been wedded to the past delusion that regulatory intervention is superior to Adam Smith’s invisible hand. They seem not to comprehend or accept that attempts at market-manipulating regulation motivate investors to demand higher returns or stock buybacks.
Oberman, once a consensus builder willing at times to compromise to gain the votes of the STB’s two Republicans—Patrick J. Fuchs and Michelle A. Schultz—transformed himself into a command-and-control regulator and fellow traveler with the Biden Administration’s pro-labor agenda, no matter that the STB is independent of the Executive Branch. Oberman thus lost the votes of Republican colleagues, such as in his rulemaking instituting Final Offer Rate Review that ultimately was struck down by a federal appellate court.
Since Primus was elevated by Biden in May to succeed the departed Oberman as chairperson, Primus has further divided Board members. This is quite unlike pragmatic former Democratic Chairperson Democrat Linda J. Morgan (1995-2002), who recognized the limits of government intervention.
Nowhere in the Board’s statutory authority are instructions to act as a union hiring hall, yet Primus, in a speech to rail labor, said, “Thank you for letting me serve you.” Nor does STB’s statute provide cover for the Oberman-Primus pivot from protecting captive shippers’ competitive options to attempting micro-management of railroad marketing, capital budgeting, hiring and operating strategies.
Since his 2021 arrival at the STB, Primus has criticized railroads for their embrace of productivity-enhancing technology and more efficient operating plans, citing reduced employee headcounts. His demeanor reflects a pre-STB career in the partisan House of Representatives—a noisy hall with a nightly brawl where rudeness is an art form. In recent months, Primus has lectured rail CEOs at public hearings and in telephone calls, and dispatched over his lone signature razor-sharp rebukes, such as to BNSF’s Katie Farmer (accessible on the STB website).
So preoccupied is Primus in scolding railroad CEOs that under his chairpersonship the STB missed statutory deadlines. Among them is a decision on the joint application of CPKC and CSX to acquire short line Meridian & Bigbee to create more efficient routing to and from the Southeast that promises increased rail traffic.
Much Ado About 2025
This brings us to the November elections and what railroads and their investors might expect.
Should Kamala Harris be elected, she likely will retain Primus as STB chairperson. But until the Oberman vacancy is filled, the STB will retain a 2-2 vote split. Barring an unlikely recess appointment by Biden of a Democrat during the Senate’s year-end adjournment, Harris will nominate a Democrat to give Primus his 3-2 majority. There could be a lengthy wait, however, as Republican Senators—heeding the wishes of railroads—will likely stall a confirmation vote.
Should Donald Trump be elected, he will quickly name Republican Fuchs or Republican Schultz chairperson, followed by nomination—again, assuming no Biden recess appointment of a Democrat—of a Republican to fill Oberman’s vacant seat and create for the STB a 3-2 Republican majority.
But Trump’s Republican nominee also could be stalled in the Senate, and with the demoted Primus still a Board member, the 2-2 vote deadlock remains, placing a new Republican chairperson in the same position as is Primus now.
Railroads silently wish Primus gone in a Trump Administration—and there being two means by which that might occur ahead of his Dec. 31, 2027, second-term expiration. His qualifications are not questioned. It is that zealots belong before decision-making bodies and not on them.
Upon demotion from chairperson to member, Primus might depart voluntarily and become a special-interest lobbyist as have many previous rail regulators.
Primus also might be removed as an STB member by a President Trump under legal theories of conservative scholars. They assert that, contrary to prior Supreme Court decisions by a more liberal judiciary than today, the President possesses power to alter the makeup of independent agencies such as the STB. The Constitution, they say, vests Executive Power in the President, yet independent agencies such as the STB are not politically accountable to the President or Congress—and thus the public. Only if the President has removal authority is accountability to the electorate restored, they say.
No matter who chairs the STB in 2025, problems are overripe for solving but require a pragmatic chairperson pursuing consensus building over politics. Unless regulatory decisions respect market conditions, railroads will be returned to their pre-1980 infirmity—an outcome equally dismal for rail labor and shippers.
Among STB tasks in 2025 are freight-rate reform, including an alternative to court-vacated Final Offer Rate Review; implementing rules on competitive access; and delivering solutions to a host of other shipper complaints.
Et Tu, FRA?
At the Executive Branch Federal Railroad Administration (FRA) Administrator Amit Bose has a high probability of being retained by Harris (if she wins the White House), but he might also be seeking a higher position within the Department of Transportation.
Bose has been a darling of the pro-labor Biden Administration for pursuing a rail labor agenda, such as blocking implementation of productivity-enhancing technology and ignoring his agency’s statute requiring rail safety rulemakings be based on benefit/cost analysis. Costs for FRA’s Dispatcher Certification rule exceed benefits by 7 to 1; and for Signal Maintainer Certification, costs exceed benefits by 3 to 1, meaning there is no safety case for either.
And with no objective evidence showing an improved safety outcome, Bose ordered preservation of two-person train crews—a decision now under review by a federal appellate court. He has impeded technological innovation for train braking and track inspection (with the 5th Circuit Court of Appeals twice overturning and remanding a proposed rule) and has sidetracked FRA’s collaboration with railroad scientists on safety research.
Ah, to recall toasts of George Washington and railroader (Florida East Coast) Edward Ball: “Confusion to the enemy.”
