President Joe Biden signed legislation to head off a large-scale rail strike Friday. This came a week before the Dec. 9 deadline when the agreement of several rail labor unions not to strike against the freight railroads would have expired.
Before the president signed the bill forcing the 4 holdouts of 12 rail unions to accept the deal hammered out between union negotiators and the railroads, corporate planners had been scrambling to find workarounds in the event of a strike. They found that supply chain problems of the last several years had made contingencies much harder to come by.
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“There is zero elasticity in transportation at the moment,” said Corey Rosenbusch, CEO of the Fertilizer Institute, on a call on Nov. 29. “We continue struggling with enough trucks, drivers, and most recently, barges. Low water levels have severely curtailed barge movements along the Mississippi River and have affected grain and fertilizer shipments. We’re operating without a backstop, and ultimately, consumers are going to be the ones paying for inaction.”
He added, “Rail is so critical to fertilizer and moves such a significant volume that there really aren’t any alternatives.”
Fertilizer shortages would, of course, have knock-on effects on farming, crop yields, and food prices next year, driving up the cost of sustenance that was already on the rise.
Railroads would have pulled fertilizers and other chemicals off the tracks early, meaning some disruption would have happened even if a strike was averted at the last minute.
One estimate being tossed around for a rail strike to the whole economy is about $2 billion per day. That’s in normal economic times. With the post-COVID tightened supply chains, the costs could be higher.
Biden recognized this danger to a soft economy and thus urged Congress to order four of 12 rail unions back to work with legislation. He further asked that that legislation not contain any “poison pills,” which are provisions that are so unpalatable that they would effectively derail things anyway.
Lame-duck Democratic House Speaker Nancy Pelosi, at first, seemed likely to go along with this approach. She issued a Nov. 28 statement with boilerplate language about how “railroads have been selling out to Wall Street to boost their bottom lines, making obscene profits.” But Pelosi, a California Democrat, then quickly moved on to focus on the catastrophic costs of a strike.
Such a strike would “grind our economy to a halt,” Pelosi warned. “Our entire nation would suffer: More than 750,000 workers, including many union members, would lose their jobs in just the first two weeks. Millions of families wouldn’t be able to get groceries, medications, and other goods, and our economy would be paralyzed as it continues to recover.”
And thus, Madame Speaker announced, the House would “take up a bill adopting the tentative agreement, with no poison pills or changes to the negotiated terms, and send it to the Senate.”
The House proceeded to do that, sort of. It passed one resolution with no poison pills to send to the Senate. It also passed another resolution that might as well have been marked “great big cyanide tablet.” This separate legislation would add more compensated sick days, the purported sticking point of the few holdout rail unions in rejecting their contracts. This drew the ire of the rail lobby.
“Now is not the time for Congress to put its thumb on the scale and selectively add to labor contracts, including agreements already ratified by employees, created through a multiyear process,” warned Association of American Railroads President Ian Jefferies in a statement. “It is in direct conflict with the President’s statement, and the Speaker and Congress must think of the long-term implications of such actions.”
There is significant precedent for Congress inserting itself into rail labor relations, though it hadn’t done so lately. The U.S. Chamber of Commerce, in a fact sheet, lists 18 times since the Railway Labor Act’s passage in 1926 that Congress has intervened. The last congressional action, on one line only, was in 1994.
It’s also not clear who these interventions tend to benefit. Of course, the railroads wanted Congress to force the four of the 12 rail unions that had held out to take the deal but were not at all happy when the Senate considered imposing terms over and above those reached through collective bargaining on employers. The Senate ultimately rejected imposing terms that weren’t bargained for and sent President Biden a clean bill a week to sign, and did so early to avoid the sort of early supply chain disruptions the fertilizer lobby warned about.
A few analysts of both progressive and free market bents are unhappy with how the process played out.
“If Biden and [Transportation Secretary Pete] Buttigieg had prepared an attack on the financiers behind the railroad problems, they would be able to threaten them and force some sort of concession,” wrote Matt Stoller, director of research at the American Economic Liberties Project. “But they didn’t, so they have to eat what the hedge fund guys are serving.”
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Sean Higgins, a research fellow at the Competitive Enterprise Institute who specializes in labor, wanted to let the process play out longer and see if negotiations could do the trick.
“The House lawmakers’ vote today to avert a potential rail workers strike was premature,” he said in a statement on Nov. 30. “Contract negotiations between the unions and the industry were ongoing with the drop-dead deadline still a week off. While the threat to the economy posed by a rail strike was real, lawmakers should have at least waited until workers officially walked off rather than short-circuiting the talks. Most deals are, after all, made at the eleventh hour.”
