The Success of the Staggers Rail Act of 1980

October 15, 2005

Executive Summary

The Staggers Rail Act of 1980 marked a dramatic change in the evolution of the U.S. railroad industry by eliminating or greatly reducing federal regulatory control over virtually every aspect of rail freight operations. The stakes in the new policy environment were huge because many industry observers feared that if the industry could not substantially increase its rate of return, it faced a real possibility of becoming nationalized. The purpose of this paper is to assess how railroads and shippers have fared after 25 years of deregulation. The evidence strongly indicates that rail deregulation has accomplished its primary goal of putting the U.S. rail freight industry on a more secure financial footing. Surprisingly, deregulation has also turned out to be a great boon for shippers as rail carriers have passed on some of their cost savings to them in lower rates and significantly improved service times and reliability. I conclude that a fully deregulated environment, which would entail elimination of residual regulation by the Surface Transportation Board, will preserve this rare win-win outcome and yield even further benefits to railroads and shippers.