As the nation tries reboot portions of the economy from the coronavirus pandemic, policymakers in the nation’s capital will have to steel themselves against a natural tendency to overregulate and thus blunt any recovery.

The potential economic ripple effect of federal regulation was certainly on the mind of Sen. Ron Johnson when he recently warned the leaders of a small federal agency to tread lightly when it comes to regulating freight railroads in Wisconsin and across the nation crucial to consumers and reducing carbon emissions.

At issue is the extent to which federal regulators at the U.S. Surface Transportation Board (STB) – an independent regulatory body that oversees economic regulation of freight railroads – should manage the financials of private carriers. Just before the pandemic took over the national psyche, the agency was mulling a scheme whereby regulators determine how much money a railroad should earn in a year, and when that threshold is met, the government would begin imposing across-the-board utility-style rate regulation.

As one of few industries to rebuff a federal bailout, it is even clearer now that the nation’s railroads must continue to be treated like their competitors in the trucking sector, not like a full-blown public service. Their ability to fund their own networks is a net positive for U.S. consumers.

Yet as recent analysis by the National Taxpayers Union argued, earnings regulation for railroads “would result in a de facto price control set by a regulator over a private market business. Businesses should be able to charge prices based on competitive pressures through supply and demand.”

In opposing such a system, Sen. Johnson urged the federal government to tread very lightly.

“If the STB does not take a balanced approach on this matter, it could unintentionally curb investment in freight rail infrastructure maintenance and expansion. Reductions in freight rail system infrastructure investment could in tum result in the disruption of freight rail service that rail customers depend upon. For these reasons, it is imperative that the STB perform a careful and comprehensive review of this issue that analyzes all of the potential effects.”

Indeed, railroads are privately held companies and must invest billions of dollars annually to sustain the network. Unlike highways, they receive no federal infrastructure assistance. Agriculture products, lumber, consumer goods and hosts of goods crucial to Wisconsin’s wellbeing – much of it is sent to markets on rail lines that are privately funded.

But if railroads are subjected to onerous economic regulation in the future – either by a regulatory body or the Congress – then it stands to reason that investment in the rail network would fall, and quite likely so would its dependability and efficiency. For Wisconsin businesses and consumers that depend on freight rail, that would be a huge problem. What’s more, a less well-funded and efficient rail network in the state would result in shippers shifting their products to transport on trucks that tear up state roads and bridges.

Look no further than a February 2020 feature story in the New York Times to understand why this is increasingly dangerous. Roads are crumbling and need funding – no guarantee as gas tax revenues remain down.

Light-touch regulation in the rail sector has long benefited consumers and the economy at large, something that Sen. Johnson understands. The government now and in the future should steer clear of broad regulations that would hinder this private infrastructure mode.

Published in and available at WisPolitics.Com.