Two years ago Congress deregulated America's airlines, and the flying public and industry alike soon discovered they could survive remarkably well without government's heavy hand on every marketing and routing decision. Last week Congress decided to free up the trucking industry by enacting legislation that makes a start toward eliminating red tape and waste on the highways. Now, with the Railroad Act of 1980 coming up for a House vote this week, Congress has an opportunity to round out its efforts to bolster competition and let free enterprise work by deregulating the railroads.
Although the proposed railroad reforms do not go as far as they might toward complete deregulation, they would simplify the regulatory system, give individual railroads more flexibility in setting rates, and make it easier for rail lines to merge. They would allow railroads to negotiate long-term contracts with shippers, rather than be restricted to month-to-month ones as is currently the case. In short, they give the marketplace a bigger voice in determining freight rates and ticket prices, which is something the hard-pressed railroads say they need to survive.
Giving the rail companies greater freedom to set rates according to shippers' demands will help carries obtain a better rate of return on investments, which last year averaged 2.7 percent as compared with 10.6 percent for manufacturing in general.
The Senate already has passed a similar rail deregulation bill. Neither the House nor the Senate version is as sweeping as the Carter administration had hoped for. But the White House supports the compromise bills, recognizing they are the strongest measures likely to come out of the current Congress. Transportation Secretary Neil Goldschmidt says: "HR7235 would allow railroads to set rates without regulatory interference until rates reach the point which allows the railroad industry on average to cover its costs. Above that level, proposed rates would remain regulated to protect captive shippers."
This should answer the concerns of those members of Congress who want to maintain a rigid rate on coal shipments. Coal, the bread and butter operation of most freight lines, is expected to grow in demand. Some lawmakers fear that coal mines in the West could become "captives" of one railroad and that rates would soar unreasonably under deregulation. The proposed compromise retains some protection for all shippers. Rail companies would be limited to a 10 percent annual rate increases for three years after enactment. The Senate version requires that the impact of rate increases on US energy policy be taken into consideration as well.
With fewer government controls, the nation's railroads should be able to increase their income enough to allow them to begin improving age-worn tracks and expanding service to those new coal areas expected to open up as the US seeks to develop this energy alternative to oil. Deregulation could put new steam in the rail industry. Congress already seems headed down the right track.