Most Americans associate innovation with new technologies. But modernization is equally important in the industries that move goods, power factories, and connect markets. An economy cannot remain dynamic if its infrastructure is trapped in the past.
That reality is at the center of a consequential decision now facing federal regulators: whether to approve the nation’s first transcontinental freight railroad.
Announced last summer, the $71 billion merger between Union Pacific and Norfolk Southern would create a single rail network spanning 50,000 route miles, connecting 43 states and more than 100 ports.
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The proposal moved one step closer to reality last month when the Surface Transportation Board accepted the companies’ revised application and requested supplemental information to be filed this summer.
At its core, the merger is an effort to upgrade critical infrastructure designed for a different era.
Unlike Canada and Mexico, the United States lacks a coast-to-coast freight rail service. A series of 20th-century regulatory decisions left the nation’s freight rail network divided between eastern and western carriers, preventing the emergence of a true transcontinental service. More than a century later, that fragmentation remains.
The consequences are significant. Producers moving goods across the country must deal with more than one railroad to complete a single shipment.
The result is slower service, higher prices, and congestion at interchange points. A widely cited 2015 study of metropolitan Chicago, which handles nearly one-quarter of the nation’s rail freight traffic, found that failing to address the region’s rail bottleneck would delay freight nearly 100 minutes per 100 freight train-miles by 2040.
The merger responds to a clear market demand for more efficient freight service. Data submitted to federal regulators show that rail gains market share from trucking when customers have access to single-line service. Where they don’t, trucking dominates.
Critics argue that combining Union Pacific and Norfolk Southern would reduce competition within the rail industry. But as I pointed out at the The Future of Freight Rail in America event recently hosted by the Washington Examiner, that objection ignores the broader marketplace.
Railroads do not compete only with one another. They compete with trucks. And trucking remains the dominant force in domestic freight transportation, transporting nearly 10 times more freight than rail in 2019 and steadily increasing its share of the market over time.
While trucks play an indispensable role in the final leg of delivery, consumers pay for the convenience. Rail costs anywhere from 10% to 40% less than trucking. It’s also much safer. Trucking is associated with 15 times as many accidents and nearly 5 times the number of fatalities as rail shipping.
The real question, then, is whether rail should be allowed to compete more effectively with trucking. A transcontinental railroad would create that competition. It would give shippers a viable end-to-end alternative to long-haul trucking, reducing costs and speeding delivery times.
Unlike other infrastructure projects that rely on taxpayer funding, the proposed merger would upgrade America’s supply chain through private investment. The railroads estimate that the merger will unlock $2 billion in capital investment in the first three years, including $1 billion in technology improvements to support the expected increase in shipments on the new transcontinental line.
The benefits would be especially pronounced in markets along the Mississippi River, where the historic divide between eastern and western rail systems forces many shippers to navigate multiple carriers even for relatively short rail movements. Worse, moving freight from one rail service to another at the interchange hubs can add days to the shipment time.
A unified network would remove those barriers. Union Pacific and Norfolk Southern calculate that the merger would shift more than 2 million truckloads annually from highways to rail, saving customers approximately $3.5 billion annually and generating more than $6 billion in total benefits yearly.
The merger comes down to a choice between two economic visions. One shields incumbents and preserves legacy arrangements over consumer welfare. The other rewards risk, embraces disruption, and treats innovation as the engine of growth.
The first model brings rising prices, stagnant productivity, and a slow drift toward irrelevance.
This second one is what transformed the U.S. into the world’s dominant market, home to the firms that set the pace of global demand in technology, energy, and finance.
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America did not become the world’s most dynamic economy by freezing industries in place. It succeeded by allowing markets to evolve, technologies to advance, and infrastructure to adapt to changing conditions.
The same principle that transformed communications, energy production, and space exploration can also modernize freight transportation. The Surface Transportation Board should embrace it.
Michael Toth is director of research at the Civitas Institute at the University of Texas at Austin.