Infrastructure bills like the “BUILD America 250 Act” typically build two things. One is physical: roads, bridges, ports, rail corridors, freight networks. The other is legal infrastructure that determines how safely, quickly, and affordably people and goods can move. For the latter, the act relies on the old political playbook — new layers of regulation without full regard for the old — and puts some of its goals at risk.
Having served as a senior economist at the Federal Railroad Administration, I do not view building infrastructure and improving efficiency and safety as competing goals. Far from it. But lawmakers must change the way they think.
Recommended Stories
Regulations must be focused specifically on improving outcomes rather than dictating exactly how things are done, and they must replace, rather than add, costly layers of compliance. That distinction is especially important in freight transportation.
Virtually every product we purchase spends time on a plane, train, ship, or truck. When regulation makes that trip more expensive, costs ripple throughout the economy, from manufacturer to retailer to consumer.
My research focuses on the tendency for the overall stock of rules to grow over time. Policymakers evaluate new rules as if they will operate in isolation. But Americans don’t experience rules one at a time; we experience the combined system. Unlike taxes, regulatory costs rarely appear on balance sheets or receipts, but some can be measured. They’re embedded in operating expenses, delayed or lost innovation and investment, reduced productivity, and higher prices.
In recent research on the freight transportation sector, my colleagues and I estimated that a 5% increase in federal rules raises unit costs and prices by roughly 0.8% to 2.3% and reduces quantities shipped by about 1.4% to 4.1% — the regulatory equivalent of paying more to move less.
These costs are not necessarily temporary. By altering investment, productivity, and the allocation of capital, the losses can persist and compound. New requirements also rarely replace existing ones. They’re generally piled on top of an already massive regulatory framework.
Poorly designed regulation is, therefore, a hidden tax on movement, and its largest cost may be the productivity that never materializes. The central question is how to achieve more safety per dollar of compliance, not how to micromanage operating practices.
The BUILD America 250 Act continues the old pattern. For example, the current version incorporates a two-person crew requirement for Class I freight trains, which may sound reasonable in isolation. But Congress has yet to show why codifying an operating practice is better than the alternative.
Performance-based regulations produce better long-term outcomes. Instead of freezing operating practices in place as conditions and technology change, they establish safety objectives and allow regulated firms to find the best way to meet the benchmark.
Legislative statutes are especially blunt. Agency rules can be reviewed and updated, but once Congress embeds an operating practice, change is difficult and subject to politics. The result is likely to freeze today’s assumptions into tomorrow’s transportation system.
Freight rail illustrates this point. It already operates under extensive federal oversight via more than a half-dozen agencies with meaningful authority. State and local environmental, labor, emergency management, and permitting agencies add additional layers. Each may factor for only its own rules. Railroads, shippers, workers, and consumers see them all.
History offers another reason for skepticism. In 1980, the Staggers Rail Act gave railroads greater flexibility to price services, rationalize networks, and invest in infrastructure and innovation. The results were nothing short of dramatic: productivity increased, private investment accelerated, shipping costs declined, and safety continued to improve.
The lesson is not that regulation should disappear, but that it can succeed across the board by giving firms room to operate, invest, and adapt.
Today, freight railroads continue to invest in infrastructure, equipment, and safety technologies. Automated inspection systems, predictive-maintenance tools, advanced signaling technologies, and other innovations are succeeding.
Statutory operational mandates are appropriate in rarer cases when the safety benefits are demonstrated, durable, and large enough to justify the costs quietly imposed on society. The appropriate standard is rigorous economic analysis, including weighing a requirement that appears modest alongside dozens of existing mandates.
Investing in roads, bridges, ports, and freight corridors has a much better track record at improving economic productivity and reducing costs. The act contains worthwhile investments, but ultimately, transportation policy should be judged by more than how much money it spends.
AMERICA IS HAVING THE WRONG DATA CENTER CONVERSATION — AND ITS SHOOTING US IN THE FOOT
It must also be judged by what kind of regulatory system it leaves behind. A bill can build bridges and still make transportation more expensive if it does not account for existing regulatory stock is already doing.
The next surface transportation bill must accommodate autonomous trucks, electric vehicles, automated inspections, predictive maintenance, and technologies that do not yet exist. That requires evidence-based, performance-oriented, and disciplined regulations. More does not automatically mean better.
Patrick A. McLaughlin is a research fellow at the Hoover Institution, a visiting research fellow at the Pacific Legal Foundation, and a former senior economist at the Federal Railroad Administration.
