This month commemorates an important economic milestone for the nation — the 40th anniversary of the Staggers Act, the railroad deregulation legislation signed into law by then-President Jimmy CarterJimmy CarterBiden, Democrats see late opportunity in Texas Jimmy Carter celebrating 96th birthday at home in Georgia The Hill’s Morning Report – Pelosi, Mnuchin make last-ditch effort for COVID-19 relief deal MORE.
The law might not be widely known outside a small circle of transportation experts, but it is safe to say that all Americans continue to benefit from it daily. The remarkable success of the law enabled the market to accomplish what regulators could not. It spared the U.S. railroads from bankruptcy, increased competition, dramatically dropped shipping costs and saved consumers billions of dollars annually in lower priced goods.
To get a fuller appreciation of the success of these regulatory reforms, it is necessary to step back a half century to understand the stark conditions of the rail sector.
In the decades leading up to deregulation, the rail sector was largely controlled by the now defunct Interstate Commerce Commission. Back then, prices were established by regulators in ways that discriminated between who the rail operator was, the type of commerce being transported, the routes and final destination, and the length of the haul — all baking in subsidies for routes that would not be financially viable in a competitive marketplace.
After construction of the interstate highway system during the 1950s and 60s, the heavily regulated railroad industry found itself competing with a trucking industry. The trucking industry wisely cherry-picked the rails’ most profitable lines, which were set by regulators at higher prices in order to subsidize unprofitable lines. Because railroads were unable to change their calcified and government-mandated prices or abandon unprofitable rail lines, they were unable to complete