Railroads need more money from the infrastructure bill...
Biden gives $80 billion to passenger rail. We need $50b just to maintain the current level & $300b to build next-gen. It's inadequate but also the best we've ever got, so what's Biden's mandate?
An “emergency” out-of-schedule quick note on President Biden’s announcement just now that he’s reached a tentative deal with a group of Democratic and Republican senators on a bipartisan, $579 billion infrastructure plan that would fulfill one of his top priorities. The infrastructure bill right now (and the negotiation process it’s going through) is basically turning out to be a “debacle,” as some in the Beltway might characterize.
Coincidentally, I happen to have just grabbed coffee this morning with Ian Jefferies & Chuck Baker, two guests who came on our show recently to talk about railroads. Ian is the President and CEO of the Association of American Railroads, and Chuck is the President of American Short Line and Regional Railroad Association. (You can consider short lines as “the United Express to United Airlines,” as Chuck would put it).
I thought it’d be nice to revisit that interview and also outline some quick reactions to Biden’s infrastructure announcement today. (Below are insights I’ve gathered from various people I spoke with that I won’t identify).
Railroads are pretty important
Just to set the scene – Ian & Chuck explained in our interview that railroads are kind of a quiet industry that, quite literally, moves the economy. In the U.S, 40% of ton miles move on rail of freight; 25% of rail traffic is import/export of goods; 75% of finished autos move on rail… Rails are the primary vehicle for most raw commodities that are used in the industrial economy. Intermodal, which is the kind of container traffic that can go between truck & rail, is now the biggest portion of all rail traffic and powers the consumer economy (Amazon orders go on them).
Not enough, but also the best we’ve seen
President Biden is talking about $80 billion funding for passenger rail (like Amtrak that dominates the Northeast and other regional rails). This is not enough: we need $50 billion just to maintain the current level of functioning, and $300 billion to actually build the high-speed, next-generation kind of railroads we see in Asia & Europe.
But $80 billion is also like the best anyone in the railroads industry has ever seen, and there are also additional funding for freight railways etc. So on one hand, you gotta realize this plan is highly inadequate, but on the other hand you gotta acknowledge this is the best deal you’ve got for a long time.
Why should it be a problem, then, if the railroads are getting more than they’ve ever gotten? Shouldn’t they be happy with this plan? The issue seems to be that others are getting more.
The thing about the railroads system is that they don’t need that much government funding to do fine. They do need a lot, however, to get to the next generation. So if you give the railroads system just some lukewarm package, but you also throw a lot of money at highways etc., that will actually put the railroads at a disadvantage relative to its competitors like the trucking industry.
Why not more funding? No consensus on details
There’s actually no consensus regarding what needs to be done. People have consensus that infrastructure is important, but when it gets to the nuances, things fall apart.
There is a 50-50 split in the Senate. But it’s honestly more like 50-48-2. It’s so hard to get Bernie and Joe Manchin on the same bill (Manchin and Kyrsten Sinema being the 2 often split off from the Dems’ 50). This is not 2009 when Obama had more than 60 Dem senators and an absolute legislative majority.
Within this split Senate, multiple factions exist:
There’s a moderate Republican wing that thinks any spending on passenger rail outside of Northeast (which is essentially Amtrak) is a waste of money.
There’s a progressive wing that wants “human infrastructure,” including more welfare-related investments (anti-poverty, climate change etc.). That’s also not helping the legislation pass.
Democrats originally wanted to put infrastructure within the Reconciliation Bill, but then later talked about taking it out. But if the infrastructure plan stands as its own bill, then it’d be hard to justify putting welfare stuff in it, so it’s become a tricky situation for the progressives.
All this is just the details of the plan; we’re not even getting to the “how to pay for it” part yet.
So the fact that some Repulican and Democratic Senators have reached an agreement with the WH on what happens next with infrastructure is really huge progress.
What do we make of Biden’s mandate?
The punchline might be “nothing paradigm shifting is happening; not even with Biden.”
It seems like we got something big and nice coming, but maybe not? At least industry & policy people in Washington appear to be less excited about this plan than I expected them to.
You could say Biden was elected because the passionate anti-Trump progressives (especially in urban areas) really turned out for him. Or you could say Biden was elected because he got the votes from moderate Democrats and even Republicans. So it’s not entirely clear what Biden’s mandate really is – progressive, broad Democratic coalition, bipartisan?
Some in Washington also say there is a small faction within the WH that is in fact very progressive and driving policies more left than Biden & moderate Democrats actually want. One example is how WH Press Secretary Jen Psaki has repeatedly subtlely contradicted and undermined the official WH/Dem Party policy stance.
So I don’t actually know what to make of Biden’s platform. It’s obviously very progressive: the stimulus checks, appointment of anti-big tech critic Lina Khan as the FTC Chairwoman to oversee antitrust, raising taxes, now this infrastructure plan… But it’s also… pretty moderate…?
Labor shortage is a big problem
Chuck told me he just came back from a 350-person railroads conference in Louisville, KY. His hotel had a sign at check-in: “Short staffing is the new pandemic.”
Labor shortage is the number one issue on everyone’s mind. Pay is not the problem – the railroad system pays better than pretty much anyone else in this same level/line of work. The issues seem to be:
Working for the railroads is hard work – you gotta be out there fixing stuff etc. and can’t work from home. So people might not want to do this after rethinking what they want in life. This is the same for Uber drivers, restaurant waitstaff, bartenders, etc.
Stimulus checks and unemployment insurance (UI) still kept things nice. Between working to make $50k and not working to make $40k, a lot of people might choose to not work, at least for now. This should be temporary, though. Now people are just gradually coming off this pandemic, and the hiring situation should hopefully be fine in a few months.
Learn more about the railroads system
In this interview, Ian & Chuck did an amazing job outlining the basic functions of the American railroad system, business outlook, how the railroad system thinks about the climate challenge, policymaking in the transportation sector and beyond. Highly encourage you to take a listen. They got tons of great jokes as well!
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