Government Micromanagement Hinders Economic Growth
For years, governmental oversight has stifled economic growth. A recent case in point is the Land Transportation Board’s handling of the merger application between Norfolk Southern and Union Pacific, which was deemed incomplete and subsequently rejected. This decision has postponed a significant project—the first uninterrupted transcontinental railroad in the U.S.—a venture that could bolster supply chains, stimulate growth, and enhance U.S. competitiveness without incurring any costs for taxpayers.
At this moment, that promising idea is, unfortunately, in limbo.
The board indicated that the 7,000-page application lacked essential components, such as a comprehensive market impact analysis with traffic predictions. Now, Norfolk Southern and Union Pacific will have to address these shortcomings and resubmit.
However, this temporary setback doesn’t solve the broader issue. Historically, railroad mergers often navigate initial regulatory challenges, and the STB’s ruling on this matter does not provide any definitive stance on the merger’s actual merits.
Take, for instance, the STB’s previous decision in May 2021, when it rejected CSX’s attempt to acquire Pan Am Railroad due to an incomplete application. CSX later resubmitted, and within two months, the board approved it. Such integrated railroads generally expand transportation choices, lower freight rates for shippers, and invigorate regional economies.
Still, critics of the current merger seem to view this incomplete ruling as a decisive win. It’s really not. This just represents a procedural delay—not a definitive rejection. History demonstrates that these kinds of mergers can lead to significant economic upsides.
Currently, transporting goods via rail involves maneuvering through a scattered web of freight lines, transfer points, and diverse carriers. Businesses often need to coordinate multiple operators to get products from one coast to another.
This fragmentation carries its own set of challenges. It creates delivery delays and uncertainty, compelling companies to maintain larger inventory reserves and broader shipping windows. Unfortunately, these extra costs don’t disappear. Businesses absorb some of it, but ultimately, consumers foot the bill.
The impact is especially severe for farmers, manufacturers, and other suppliers, many of whom are already tight on margins. When you factor in delivery delays and escalating freight charges, these businesses face tough choices: take losses, reduce investments, or increase prices.
That’s why the Norfolk Southern and Union Pacific merger is so critical.
Enhancing the rail network could stabilize supply chains while lowering costs for both producers and consumers. It would also mark the first instance of a company attempting to create a genuine transcontinental railroad without relying on taxpayer funding.
Then there’s the matter of competitiveness. A USDA study revealed that transporting 2022 wheat via rail to Western U.S. ports would cost more than sending it from Canada, despite similar distances. Canada, although producing less wheat, benefits from a more cohesive rail network, providing its exporters with a competitive edge. Meanwhile, U.S. farmers struggle due to a fragmented system that lacks continuity.
This competitive disadvantage has tangible effects. When functioning smoothly, railways can transport goods at a cost that can be up to 60% cheaper per ton than other transport methods. A well-integrated coast-to-coast rail network could help level the playing field between U.S. producers and their global competitors.
Opponents argue that this merger may reduce competition in shipping, but that argument seems somewhat shortsighted. Freight competition isn’t limited to railways. Shippers weigh options across rail, trucking, barges, pipelines, and air freight. A well-formed rail network won’t eliminate these choices; rather, it will enhance them. A robust supply chain requires diverse transportation options.
In fact, efficient rail systems can strengthen the overall freight market by offering shippers reliable and cost-effective means to get their products to market.
Ultimately, the path forward is straightforward. Norfolk Southern and Union Pacific need to complete the review process efficiently and responsibly. There’s historical precedent for successful resubmissions after initial rejections. If this framework can be successfully met, the U.S. could finally receive the privately funded infrastructure it desperately needs.
