Free marketeers have reason to gloat. As Washington dithers over fixing our nation's creaking infrastructure, private money has been pouring into railroads. The opportunity is obvious. Major trucking corridors around the country are choked. The rising costs of fuel are forcing many independent truckers out of business. And with no help from Washington, states are passing higher fees to truckers for highway maintenance. These fees are likewise raising the costs of shipping by truck.
Suddenly, railroads look attractive. "The Wall Street Journal" reports that railroads have pumped some $10 billion since 2000 into upgrading tracks, buying locomotives and laying new track. Another $12 billion in upgrades are currently in the works. Meanwhile, profits are looking peachy.
But the industry is changing as well. Whereas railroads have traditionally been used to haul lumber, coal and other raw materials to manufacturing areas, they're increasingly being used to haul consumer goods from Asia. Even trucking companies are using them for cross-country hauls because it's often cheaper and more efficient. Railroads are also finding friends among environmentalists. Shipping by rail is three to four times as efficient as shipping by truck. This means fewer emissions.
Not surprisingly, state governments are climbing aboard--especially with eye-popping deficits in Washington on the horizon. Virginia created a $40 million rail-enhancement fund from car-rental fees to accelerate rail-corridor projects. Government officials argue that it eases congestion and air pollution and it reduces fuel consumption. Norfolk Southern is seeking public funding to improve a freight line in the state.
Sources: New York Times, Wall Street Journal, Bloomberg, Forbes, Associtaion of American Railroads
