Economy Could Go Off The Rails
Along with the presidential pardon of a couple of turkeys (no, ones with feathers) this week, the nation’s largest rail union rejected a contract proposal brokered in September. That means a rail strike could begin in less than two weeks.
If that happens, the U.S. Economy could lose up to $2 billion a day. That could result in job losses and shortages of everything.— drinking water, food, gasoline, retail goods, and you name it.
Three other rail unions had rejected the contract recently. Although eight small unions had ratified the same deal. Despite that, it is doubtful those eight unions will cross picket lines if the larger four do not come to terms.
Riding the Rails to Recession
Estimates of a rail strike’s impact vary.
The Association of American Railroads (AAR) came up with the estimate of a $2 billion a day loss to the economy.
Another report by Anderson Economic Group in September says losses in the first week of a rail strike would be $1 billion. In the first three days, Anderson estimates the loss to consumers would be about $250,000,000.
The difference in the two estimates may be accounted for by the fact that the Anderson report does not emphasize indirect effects as much as the AAR estimate.
Any way you figure it, the economic impact of a rail strike adds up to bad news.
“A rail strike could shove the economy out of recovery mode and into a recession,” said Martha Moore, American Chemistry Council’s (ACC) chief economist. “A prolonged strike would have an exponential effect for each additional month and drag the country into a potential recession much faster.”
The ACC is concerned because chemical producers rely heavily on rail transportation to get their products to businesses and consumers. Those manufacturers ship other 33,000 rail carloads of product worth $2.8 billion a week, according to the ACC.
Without chemicals:
- Water treatment plants could not purify your water.
- Plastic manufacturers could not produce parts for a variety of products and packaging.
- Gas prices could spike because refineries would not have the ingredients to produce fuel. In addition, they would not be able to haul away by-products, such as sulfur.
“Freight rail transportation is vital for transporting chemicals critical to everyday life, including water treatment, energy production, and food production,” says ACC’s president and CEO Chris Jahn. “Shutting down chemical shipments by rail would quickly send shockwaves that would be felt through the entire economy and households across the country.”
Not Enough Trucks
Undoubtedly, some companies would try to shift to trucks to haul their freight. However, there are not enough trucks to take up the slack.
The American Trucking Associations (ATA) estimates 460,000 long-haul trucks would be needed to replace rail freight.
In a letter to congress, ATA president and CEO Chris Spear also noted that there is a driver shortage.
“Idling all 7,000 long-distance daily freight trains in the U.S. would require more than 460,000 additional long-haul trucks every day, which is not possible based on equipment availability and an existing shortage of 80,000 drivers,” wrote Spear. “As such, any rail service disruption will create havoc in the supply chain and fuel inflationary pressures across the board.”
It’s Not About Money
A strike was avoided last September when the Biden Administration stepped in to broker a deal. However, that proved to be temporary when the top four rail unions failed to ratify the agreement. As a result, a strike deadline has been set for Dec. 9.
The September agreement increased wages, but the sticking point between the unions and the railroads has to do with scheduling.
Rail workers spend a lot of time on the road and/or on call. That makes it difficult for them to attend to personal issues such as medical treatments or family events.
Rail carriers contend that employees can take vacation time to tend to personal needs. However, the unions counter that the tight and unpredictable schedules make that difficult to impossible.
Calls to Congress
Ronald Reagan, no friend of labor, once said, “Government is not the solution, government is the problem.”
However, virtually everyone outside the unions seems to disagree with the Gipper.
Secretary of Labor Martin J. Walsh, Jahn, Spear, and others have all called on congress to act to avoid a strike.
Congress could step in to stop or end a strike under the Railway Labor Act.
The act was last used in 1991. Less than 24 hours before a scheduled strike, the House voted 400 to 5 to stop it. The Senate quickly followed suit and President George H. W. Bush signed the resolution in the middle of the night.
The Association of American Railroads said it is counting on Congress to act if new deals can’t be reached.
“No one wants a strike to happen, and everything we’ve done throughout this process has been focused on getting a deal done and avoiding even the threat of one,” said the group’s statement. “Should we be unable to reach ratified agreements, however, Congress has historically stepped in to avert a service interruption.”
Congress will have to act quickly. Both houses are in recess for Thanksgiving. The Senate returns Monday and the House of Representatives is out until Tuesday.
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