Data Proves That Railroads Drive the American Economy

Every school age child learns that molecules are the basic building block of life. Without them, our world as we know it would not exist.

In much the same way, freight railroads provide the fundamental foundation that enables the world's top economy, allowing for the great sweep of economic activity to take place across the country. For manufacturers and consumers alike, for small and large businesses, for energy companies and farmers, freight rail is the basic building block. Without it, our economy would be vastly different.

"Freight rail is an integral part of the economy," says Brookings Institute's Clifford Winston in the new "State of the Industry Report" issued today from the Association of American Railroads. "Their extensive and improved network enables connectivity between buyers and sellers and facilitates trade within the U.S. and between the U.S. and other countries. Without an efficient rail network, U.S. industries would incur higher costs and those costs would raise the prices of a large share of consumer goods."

New research from Towson University's Regional Economic Studies Institute (RESI) - part of the industry report - has found that major U.S. railroads supported approximately 1.5 million jobs and $274 billion in annual economic activity in 2014 alone. It also found that the industry generated $88 billion in wages and $33 billion in total tax revenues. Twelve billion of those dollars were state and local, which outpaces tax revenues generated by 30 state economies in 2014.

Yet, as the report also makes clear, much of this would not exist if policymakers undermined the transformative measures enacted through partial deregulation. One constancy over numerous sessions of Congress and multiple presidential administrations for nearly 40 years has been the view that the global superiority of U.S. freight railroads is a direct result of smart economic regulations that rely on market-based competition, with a regulatory safety net available to rail customers who might need it.

The need for smart public policy that allows railroads to earn the revenues needed to invest back into rail infrastructure and meet demand in a changing marketplace is as important today as it has ever been. In fact, with the nation awaiting a new landscape in Washington, D.C. next year, there is perhaps no better time to reeducate America on freight railroads - one of the greatest deregulation stories in history - and explain how they positively impact the nation's economy.

Because, as the report shows, it is hardly a partisan or ideological issue. Free marketer Marc Scribner of the Competitive Enterprise Institute rightly asks in regard to policy, "Why 'fix' something that isn't broken?"

Clifford Winston of echoes the sentiment in his advice to a new Congress and administration: "I would urge any lawmaker considering additional regulations to take a long-term view. Realize that this industry is still evolving from an inefficient past, and while there may be some bumps along the way, overall, the path the industry is on right now has been much better for railroads and society writ large than when heavy regulations stifled the industry before 1980."

The first "State of the Industry Report" touted technological advances in the industry and explained that railroads are part of an integrated system involving railroads, trucks, barges and pipelines that moves 54 tons of freight per American per year. Together, they provide a transportation network second to none in the world, enhancing our quality of life and standard of living.

The second report helps put that into context, with data underscoring how critical the sector is to the economy. One job in the freight rail industry supports nine others in the U.S. economy, while total output is 1.6 percent of total U.S. output. These numbers are significant.

"Railroads maintain high paying jobs within its sector and create numerous jobs in related industries that collectively spur significant economic activity," says Dr. Daraius Irani, Chief Economist at RESI. "Railroad spending means job growth, funding to communities and global competitiveness."

The linchpin to all of this (as well as improved safety and delivery records and the immense environmental benefits of railroads), as the report finds, is sizeable investments supported by smart public policy.

As the nation deals with a lagging economy, now is not the time to disrupt the delicate regulatory balance overseeing this critical sector.