We live in a country where the (currently) ruling political party and most of the national media have a symbiotic relationship. (Jen Psaki started work at NBC News this week.) One of the problems with this dynamic is that when the ruling class decides something is important — say, emphasizing the issue of abortion as the midterm elections approach — it tends to squeeze out everything that the ruling party doesn’t want emphasized. …
But there are a lot of other things going on in this world, and one issue that seems spectacularly under-covered — a ticking time bomb, if you will — is that starting at 12:01 a.m. Friday, about a day and a half from now, if there isn’t a new labor deal between freight-rail unions and employers, the U.S. economy will be . . . derailed.
Maybe there will be an eleventh-hour deal; I suspect many casual observers simply assume that a deal will get done because the consequences of even a brief work stoppage would be so far-reaching. But freight companies are already halting certain shipments in preparation for a potential strike, so in some ways, the consequences of a strike are already here.
The American Association of Railroads said this week that it’s begun taking steps to secure the shipments of hazardous and security-sensitive materials, such as chlorine used to purify drinking water and chemicals used in fertilizer. It also warned that “other freight customers may also start to experience delayed or suspended service over the course of [this] week, as the railroads prepare for the possibility that current labor negotiations do not result in a resolution and are required to safely and securely reduce operations.”
At noon [Wednesday], Norfolk Southern will close all gates to intermodal traffic — that means anything using multiple modes of transportation such as rail, ship, aircraft, and truck. BSNF Railway, one of the largest freight railroads in North America, stopped accepting intermodal traffic as of 12:01 a.m. this morning.
Amtrak has already suspended most cross-country routes and announced that, “It will only operate trains that can reach their final destination by 12:01 a.m. on Friday, when a freight rail strike or lockout could begin.” Without a deal, most Amtrak operations in California will be suspending operations starting on Thursday.
A freight-rail strike will also bring commuter-rail services to a halt in some areas: “Virginia Railway Express said if there is a strike it would immediately stop all of its commuter train service because Norfolk Southern owns the tracks for VRE’s Manassas Line, and CSX owns the tracks for its Fredericksburg Line.” Across the Potomac in Maryland, “Since CSX owns and maintains the Camden and Brunswick lines in addition to dispatching MARC trains, any labor strike would result in the immediate suspension of all MARC Camden and Brunswick Line service until a resolution is reached.” It’s the same story for Metra, the commuter-rail system serving the city of Chicago and its surrounding suburbs, and Metrolink, the commuter-rail service that serves southern California.
The U.S. Department of Transportation estimated that a freight-rail strike would cost the economy about $2 billion a day, but that’s just a big, abstract figure in most people’s minds. What Americans will notice is all kinds of products getting scarcer and more expensive (again). As our Dominic Pino notes, crude oil, natural-gas liquids, refined products, petrochemicals, and plastics are transported by rail, meaning that a disruption in freight-rail service is likely to spur a gas-price increase (again). The average price for a gallon of regular unleaded gas nationwide is currently $3.70, which is better than the $5 per gallon price of mid June, but it’s still high by historical standards.
Once again, if you read local press or trade publications, you realize how many things in this country grind to a halt if there’s a freight-rail strike. From EnergyWire:
Chemicals make up the second-largest category of rail freight after coal — 55,000 carloads a week — and there aren’t enough trucks and barges to handle the volume, said Jason Miller, a professor in the department of supply chain management at Michigan State University.
A prolonged strike would have a bigger impact on the economy than the shutdowns during the Covid-19 pandemic, Miller said.
“At least during Covid, you able to keep [chemical] production going, oil production going,” he said. “You can’t do that with a rail strike.”
Farmers have a limited window to get their harvested crops to buyers before the food spoils, and for many crops, this is harvest time; farmers are now wondering if the usual rail options will be available after Friday:
A painful example of supply chain concern can be found in soybean farming. Hungry markets in Asia and elsewhere count on soybeans to make the ships in the Gulf of Mexico and the west coast.
“It’s gonna be devastating because just about all of the soybeans that are produced here go to a crush plant, and that crush plant is in Hastings, and they send two unit trains of soybean meal per week to the Pacific Northwest,” Greving said. He sits on the USDA United Soybean Board. “That is loaded on bulk vessels there and shipped to Southeast Asia.”
The price of oil affects everybody, farmers included. A rail shutdown would also stop the delivery of corn to most ethanol plants.
Remember, many of the world’s food markets are still reeling from the effects of the Russian invasion of Ukraine and the near-complete shutdown of Ukraine’s food exports.
Because the fuel is so heavy and takes up so much space, rail is the only economical way to transport it from mines to power plants: The average coal train consists of 140 cars that each hold about as much coal as could fit on ten trucks. Even if coal could be shifted onto trucks, the trucking industry itself has also been experiencing labor shortages, and there’s not much excess truck capacity to absorb rail freight. . . .
“Coal stockpiles are already at historic lows in the United States,” said [John Ward, the executive director of the National Coal Transportation Association, a trade group representing coal shippers and buyers]. “Any further interruptions could be disastrous for power generation.
In the good old days, it wasn’t uncommon for utilities to have a 60- or 90-day supply of fuel, but I don’t know anybody who has that luxury now. If it became an extended strike, the consequences could be dire.” Should utilities burn through their stockpiles, they’ll have to slow down generation to save supply, which could lead to power shortages during times of peak demand. Prices would jump for as long as the supply backlog lasted.
The worst-affected places would be states like West Virginia and Missouri, which generate around 90 percent of their electricity from coal and don’t have the opportunity to switch to natural gas on short notice. Even states with large gas supplies will struggle, though, since gas markets are also tight as producers export large quantities of gas to Europe.
In case you’re wondering, no, trucks cannot pick up the slack. The American Trucking Association says it simply doesn’t have the spare trucks or manpower. “Idling all 7,000 long distance daily freight trains in the U.S. would require more than 460,000 additional long-haul trucks every day, which is not possible based on equipment availability and an existing shortage of 80,000 drivers,” ATA president and CEO Chris Spear wrote in a letter to Congress. “As such, any rail service disruption will create havoc in the supply chain and fuel inflationary pressures across the board.”
In other words, the strike scheduled to begin in, what, 36 to 40 hours after you read this, would be a far-reaching economic calamity.
And, in the eyes of some analysts, the country is in this spot because of the Biden administration’s decision-making, which aimed to maximize the leverage of its union allies:
“That this might occur right before the midterm elections is entirely self-inflicted by the Biden administration, where two of President Biden’s National Mediation Board [NMB] members took the bizarre step in June of terminating board-guided mediation two months early and starting the 90-day countdown to a possible rail strike,” Scribner told FOX Business, calling the move “unprecedented.”
If the NMB had stuck to the original schedule, Scribner says, the cooling-off period would have ended in mid-November. But instead, the board decided to cut things short.
If this was indeed some deliberate Biden administration strategy, you must wonder how well it thought this through, or whether the administration’s plan counted on a deal being reached by now. Because if there’s anything we know Joe Biden is loath to do, it’s suspending Amtrak service.
By the way, the potential railroad strike is mentioned in the 29th paragraph of today’s newsletter over at Politico. Today’s Axios newsletter does not mention the potential strike at all.
Here’s how we got to the precipice of a nationwide freight-rail strike: These negotiations began in November 2019. The Railway Labor Act is a special set of rules, separate from the National Labor Relations Act that most industries operate under, which applies to railroads and airlines. Contracts under the RLA do not have set deadlines, and negotiations are open-ended.
There are, however, mechanisms within the RLA that can be used to force deadlines. After over two years of negotiations, the unions requested that the National Mediation Board, an independent federal agency, get involved to help settle the dispute earlier this year. They got what they wanted — the NMB got involved — but it was still unable to yield a resolution. The NMB offered arbitration as an option, which the carriers accepted, but the unions rejected.
On June 17, the NMB, which has a 2–1 Democratic majority, released the parties from mediation without an agreement after only two months. The NMB’s two Democrats are a former flight-attendants-union president and a former Teamsters attorney, respectively. (Two of the twelve unions covered by national freight-rail bargaining are Teamsters affiliates.) The board’s lone Republican voted against releasing the parties from mediation.
Once the parties were released, which is what the unions wanted, deadlines under the RLA started to come into effect. There’s a 30-day cooling-off period after mediation, during which strikes and lockouts are illegal. The president then has the power to appoint a presidential emergency board (PEB) to help resolve the dispute. President Biden did that on July 18. Both the unions and the carriers thought Biden’s appointees were fair and experienced.
The PEB, on August 17, issued a report containing non-binding independent recommendations, which started another 30-day cooling-off period for parties to negotiate a deal. Carriers wanted a 17 percent raise, unions wanted a 31.3 percent raise, and the PEB recommended a 24 percent raise. Carriers wanted to significantly restructure health benefits, which are very generous for rail workers; the PEB recommended largely keeping the benefits status quo. Unions requested three additional holidays; the PEB recommended against them, though it did recommend on additional personal day of paid leave.
The day after the report came out, carriers said they would accept deals that followed the PEB report’s recommendations. They have kept their word, and they have made agreements with nine of the twelve unions.
The agreements include the 24 percent pay increase (the largest in the history of national bargaining), maintaining the status quo on health benefits, the additional day of paid leave, and, in the case of maintenance-of-way workers, a more generous travel-expenses policy that the union president praised in glowing terms. Even unions that had previously voted to approve strikes, such as the American Train Dispatchers Association, saw the PEB’s recommendations as reasonable and made deals with the carriers based on them.
But SMART-TD and the Brotherhood of Locomotive Engineers and Trainmen (BLET), the two largest unions, are still unsatisfied. The cooling-off period that started when the PEB report was released has almost expired, and strikes and lockouts are permitted beginning at 12:01 a.m. on Friday.
SMART-TD and the BLET say they are more concerned about working-conditions issues, not wages. But the unions have essentially asked for concessions from carriers through national bargaining that are not typically part of national bargaining. The PEB addressed this multiple times in its report.
Unions asked for a minimum of 15 days of paid sick leave. The PEB said that would be “best resolved in the grievance and arbitration process, not by an overly broad and very costly proposal.”
SMART-TD and the BLET asked for changes to attendance policies and meal allowances. The PEB said, “We agree that updating is needed, but the submissions do not clearly indicate the particular update that we should recommend.” It remanded the issue back to the parties to negotiate.
SMART-TD and the BLET asked for changes to rules pertaining to scheduling. The PEB found merit both in their arguments and the carriers’ arguments to the contrary, and it did not make a recommendation. Instead, the members of the board said, “We believe that a six-month period for bargaining, beyond which time any Party may invoke arbitration, is sensible.”
Some issues are negotiated locally, not at the national level. The PEB said the issue of crew size, for example, should be negotiated at the local level. Local unions can negotiate with individual carriers to secure concessions for their members regardless of what the PEB says about national bargaining.
In other words, accepting the recommendations from the PEB report would not preclude the unions from getting what they want in further negotiations and possible arbitration. What it would do, however, is avoid a crippling rail strike.
The recommendations can’t be all that bad for labor since nine of the twelve unions have already made deals based on them. Remember: It was the unions that wanted to be released from mediation; it was the unions that rejected arbitration; and it was the unions that wanted the PEB.
Also remember: It was the two Democrats on the NMB who released the parties from mediation after only two months; it was President Biden who appointed the PEB, with his appointments praised by unions and carriers alike; and it was Secretary of Labor Marty Walsh who was supposed to have a handle on this situation and coax the unions to an agreement.
If there’s a nationwide freight-rail work stoppage on Friday and the economy grinds to a halt, sending gas prices up and stranding cargo all over the country, remember that the ball has been in labor’s court to accept independent recommendations from a board appointed by President Biden.
That board recommended a 24 percent pay increase over five years, which would be the largest such increase ever. It recommended the preservation of platinum health benefits. It recommended an additional day of paid leave and the preservation of eleven paid holidays, which is two more than the average union-represented worker receives and four more than the average transportation-sector worker receives. And it allowed parties to continue to negotiate or go to arbitration on other issues that were still outstanding.
Congress can step in and prevent a strike. Senator Roger Wicker (R., Miss.), the ranking member of the Commerce, Science, and Transportation Committee, has been calling for the adoption of the PEB’s recommendations. Senator Richard Burr (R., N.C.) has introduced a joint resolution that would adopt the recommendations of the PEB as binding and avert a strike. All Congress has to do is pass it.
Democrats control both houses of Congress and the White House. An eleventh-hour deal is still possible, and parties could elect to extend the cooling-off period again, but if unions and carriers are unable to make a deal, and Congress doesn’t step in to prevent a strike, the economic consequences that follow will be on the Democrats and their union allies.
Curious, isn’t it, that labor unions misbehave while Democrats in charge. (Except for the air traffic controllers strike, which Ronald Reagan ended by firing the strikers, and the Act 10 protests, which Gov. Scott Walker should have responded to by firing state employees.)