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The Rail Impasse: Your Questions Answered

By Admin

Reported by Harold Meyerson for The American Prospect.

So, what’s at the root of the conflict at the railroads?

In their very successful effort to raise their profits and payouts to investors, the seven major freight railroads have all but eliminated their competition, downsized their workforces to reduce the share of revenues going to wages, shifted to just-in-time (or sometimes late) delivery, reduced the number of trips (and personnel) by increasing the number of freight cars that the engines haul, and wrapped all of this into a business model called precision scheduled railroading, or PSR. This reduction of operating expenses was imposed on them (not that they resisted) by such Wall Street financiers as hedge fund operator Bill Ackman, who believe that you can never shower too much revenue on your shareholders.

Precision scheduled railroading, as applied, means no excess engines, no track not under constant use, no downtime in the yards, no employees not busy driving the trains or maintaining the tracks, and never have three one-mile-long trains when one three-mile-long train can be assembled. As Matthew Jinoo Buck documented in his dissection of the industry in last February’s Prospect, the big freight rail companies cut the miles of track they owned from 164,822 in 1980 to 92,282 in 2019. The number of their employees dwindled from roughly 500,000 to 135,000 during this time, while their profits and their rewards to investors swelled. From 2010 to 2020, the companies sent a cool $196 billion to their shareholders via buybacks and dividends, while spending significantly less ($150 billion) on maintaining their tracks and trains.

The biggest rail companies—just four of them control the lion’s share of the industry, with CSX and Norfolk Southern having a duopoly east of Chicago and Union Pacific and BNSF having a duopoly to Chicago’s west—don’t really face any serious competition and are accordingly free to set their rates as they wish. Not surprisingly, they’re faring just splendidly. Union Pacific reported $6.5 billion in after-tax profits last year (its best year ever, the company boasted); BNSF came in with $6 billion last year, and CSX with $3.7 billion.

Rather than cut into those profits, they insist that their employees be on call nearly all the time. BNSF requires workers to be on call 75 percent of the time; last winter, it raised that to 90 percent, upon which 700 of its workers up and quit. (The company scaled back that percentage to the mere 75 percent in June.)

If the industry demands its employees be perpetually at its beck and call, that’s not because it can’t afford to give them more time off. It can easily afford it. It’s just that the PSR business model guarantees nice payouts to big-time investors like Ackman and company executives. Any tampering with that model by, say, giving workers a little more time off, threatens those payouts, and Wall Street’s love affair with the companies, and perhaps even the continued tenure of their CEOs.

OK, what about the current contract negotiations?

Workers at the 12 rail unions want paid sick days that they can actually use without the threat of being fired. The major rail companies currently offer them none, and generously proposed to offer them one (per year). The companies said they couldn’t afford any more, adding that the workers could simply take vacation days when they got sick. They estimated the yearly cost to the industry of two weeks of paid sick days at $688 million.

Let’s do the math. Just three of the big seven companies had profits of $16.2 billion last year, and all seven seem on track to have 2022s as lucrative as 2021. This suggests that they can damn well afford the paid sick days, especially after the two weeks the unions initially proposed came down to the one week for which they’d almost surely settle.

So the impasse between workers and management isn’t about what the companies can afford to pay; it’s about the companies’ insistence on preserving their current business model, lest the Ackmans of the world (and the Warren Buffetts of the world; his Berkshire Hathaway owns BNSF) have to make do with several hundred million dollars less. And yes, it’s also about workers’ ability to see their doctors or go to the hospital when they or their family members get sick, without losing a day or a week’s pay, or their job.

You hear from the industry that 8 of the 12 unions accepted the contract with one sick day. You don’t hear that the unions which rejected the contract represent a majority of workers in the industry.

So where are the Democrats, in the wake of Biden’s asking Congress to impose a settlement?

Bernie Sanders and House progressives insisted that the vote to impose a settlement be accompanied by legislation requiring the railroads to grant their workers a week of paid medical leave. Once that deal was reached in the House and the entire Democratic caucus united in support of the medical leave measure, nearly all the House progressives—Alexandria Ocasio-Cortez, Cori Bush, Ilhan Omar, Jamaal Bowman, Pramila Jayapal et al.—voted to impose that settlement. Of the eight Democrats who voted against the settlement, some came from the left (Rashida Tlaib, Mark Pocan, Judy Chu, the newly elected Mary Peltola) and at least one from the right (Jared Golden).

The problem is that there’s no way to institute such a deal in the Senate without support from at least ten Republicans. Some ostensibly worker-friendly Republican senators (Josh Hawley and Marco Rubio) say they support legislation requiring the rail companies to provide paid medical leave, but oppose an imposed settlement. This position is not easy to construe, but it’s perhaps best understood as a form of performative self-negation.

House Democrats split the two votes, allowing the Senate to pass the imposed settlement while rejecting the additional medical leave and send that on to the president. The imposed settlement got 290 votes in the House, including 79 Republicans, so progressives would have needed 75 more votes on their own to block it. Still, charges that the medical leave vote, by being made separate, was designed to fail, or at least that there was no way for it to succeed, are hard to rebut.

In the Senate, the paid sick leave amendment got 52 votes, including from six Republicans. But in the topsy-turvy world of the filibuster, majority support isn’t good enough, so it was defeated. The Senate then easily passed the bill imposing the tentative agreement by 80 to 15, and sent it to the president on Thursday. Once the measure had cleared the 60-vote threshold, at which point Bernie Sanders was the only Democrat (well, not officially, but effectively) to have voted no, it enabled Democrats who hadn’t yet voted to cast, as it were, a “free” no vote, which New York’s Kirsten Gillibrand did. That merely underscores the absurdity of using the votes in either house on this measure to determine which Democrats are bound for Paradise and which for the Inferno. Gillibrand is not a Hero of the Proletariat, nor AOC a betrayer. (Well, Joe Manchin was the only Democrat in either house to vote against the bill adding paid sick days to the settlement, but he’s already ensconced in Dante’s ninth circle.)

Congressional interventions in railroad labor disputes are hardly novel; the Chamber of Commerce tallies 18 such actions since 1960. The Railway Labor Act of 1926 clearly affords Congress and the president the ability to intervene to prevent the stalling of commerce nationwide from transportation labor disputes, effectively taking away from workers in transportation industries the one tool they have in collective bargaining to gain leverage: the legal right to strike.

What makes the current episode so exceptional is that it comes at the behest of Joe Biden, a president who terms himself the most union-friendly in the nation’s history, and at a time when the Democratic Party is generally more pro-labor than at any time since the Truman administration.

So has Biden shattered his pro-labor reputation?

I don’t think either current politics or the long view of history will sustain that view.

First, it’s notable that no major unions outside the rail unions have actually condemned Biden: not the AFL-CIO, not even its Transportation Trades Department. Both issued statements that supported the workers but made no mention of Biden and his settlement at all. You can argue that this merely shows labor’s subservience to the Democratic Party, but I’d say that it shows something more than that. Most unions fear that a rail strike could damage the economy and cause unemployment to significantly rise. The more sentient unions also fear that a rail strike that causes genuine economic dislocations could cause unions’ popularity, now at its highest point in the past 60 years, to go into a tailspin. Finally, they fear that if another moratorium is imposed and it falls to the next Congress to impose a settlement, the fact that Republicans will control the House means that the settlement will be significantly less worker-friendly than the flawed one now on the table.

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