Credit where credit is due

Credit where credit is due

Last year, Congress reauthorized the surface transportation program. The legislation was known mostly for the more than $24 billion in pork-barrel projects that just about every member of Congress will cite as reasons they should be re-elected.

Congress proved it doesn't understand basic economics or the importance of infrastructure when it slipped a knife between the ribs and into the backs of two public-private partnerships that might have contributed to the increasing need for more transportation infrastructure. Given a choice between an average of 11 pet projects for each of the 435 congressional districts, and funding the public portion of projects that would attract several hundred million dollars in private money, Congress opted for pork over infrastructure.

The paranoid refusal by the Bush administration to increase spending on infrastructure has reached the point where mainstream media are aware of the problem. Executives of major companies are even talking about the need for infrastructure.

Providing highway infrastructure is a government function. Until more is built, highway users cannot do much more than swelter and curse in the congestion that is rapidly taking over much of the country.

Railroads, though, can provide infrastructure. They own their own rights-of-way and commit their own or borrowed capital to fund it.

Meanwhile, various logistics interests do what they always do: Justified or not, they blame someone else for perceived shortcomings. Steamship executives warn that railroads will be a bottleneck in the intermodal system. Utility executives harangue anyone who will listen that railroads cannot deliver all the coal they want. Lack of capacity is the culprit, they say.

Studies show that half the vessels bringing containers to the West Coast are at least a day late. Railroads cannot plan and efficiently move containers off the docks and through their systems if they don't know when the containers will be there. But the criticism does deflect attention from the failings of those doing the criticizing.

Railroads now have a proposal to provide needed infrastructure at virtually no cost to taxpayers. They want a 25 percent tax credit for capital spending on projects that expand capacity. Capital spending to replace existing assets would not qualify for the credit. A tax credit obviously has a cost to the Treasury, but if the credit is restricted only to those projects that increase capacity, the economy will benefit by more than the cost.

Agriculture interests say they could support such a measure, but there has to be something in it for them. Utilities say they perhaps could support the tax credit, but only if there were something in it for them. There are suggestions that if railroads are going to live off the public dole - they aren't - they should open their systems to competitors.

If that's the price of a tax-credit program, railroads will drop the idea. Then it will be up to society to figure out how to fund essential infrastructure. Based on the government record of providing infrastructure funding, that doesn't give a warm feeling.

Meanwhile, the railroads are pouring capital into their plants. BNSF Railway plans to complete double-tracking of its Los Angeles-Chicago mainline by the end of 2007. Union Pacific is accelerating double-tracking of its Sunset Corridor between Los Angeles and El Paso, Texas. CSX and Norfolk Southern are spending tens of millions of dollars on expansion.

Railroads maintained excess capacity under regulation, and they paid dearly for it in high costs and a lack of pricing power in dealing with customers. Since deregulation in 1980, they have worked to balance capacity and demand. The recent surge in traffic caught everyone by surprise and exacerbated the need for new capacity.

This country has not hesitated in the past to use its economic resources to create transportation infrastructure - from canals in the early 19th century to railroad land grants to locks and dams that created navigable waterways to the massive interstate highway system that effectively created the trucking industry. Now there is a new need for infrastructure, but the government is under the control of people who do not believe government should play a role.

The railroads are part of the solution. Pay now or pay more later: Either the railroads will be encouraged to add needed capacity now at relatively low cost, or the economy will pay a much higher price later in congestion, rising inventory expense and eventual stagnation.