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New report finds freight railroads greatly impact national, local economies

The Association of American Railroads (AAR) released its second "State of the Industry Report" of 2016, featuring new research from Towson University's Regional Economic Studies Institute (RESI) that finds spending by the seven largest U.S. railroads created $274 billion in economic activity, generated nearly $33 billion in state and federal tax revenues and supported nearly 1.5 million jobs nationally in 2014 alone.

The report is the first of its kind to quantify the sweeping impact of investments by Class I railroads with U.S. operations on the overall economy.  

"Railroads maintain high paying jobs within its sector and create numerous jobs in related industries that collectively spur significant economic activity," said Dr. Daraius Irani, lead researcher and Chief Economist at RESI. "Significant capital investments by railroads and the steady presence of a coast-to-coast network that can reliably deliver goods at a cost effective rate generates a ripple effect seen in this study. Railroad spending means job growth, dollars to communities and global competitiveness."  

The AAR adds context to the data in the report with several key points, including:  

  • Spending: $28 billion in investments by freight railroads in 2014 is more than half of all federal spending on transit formula grants, federal highway construction programs and airport improvement programs combined.
  • Output: $274 billion in output - or goods and services produced - is nearly the GDP of Finland, according to International Monetary Fund data. This amount of money could build 24,909 miles of six-lane urban interstate highway, fund Medicare for nearly 25 million Americans or pay for the four-year college education of 2.2 million students.
  • Jobs: One job in the freight rail industry supports nine others touched by the industry, including retail, manufacturing and transportation and warehousing.
  • Taxes: Therail industry's state and local tax generation is greater than the taxescollected by 30 individual states in 2014; The nearly $21 billion in federal taxes is nearly three times the amount allocated for the National Science Foundation in 2014.

"Railroads provide the foundation that enables the world's top economy to thrive," writes AAR President and CEO Edward R. Hamberger in the report. "For manufacturers and consumers, small and large businesses, energy companies and farmers, freight rail is the basic building block that allows a great sweep of economic activity to take place across the country. Without railroads our economy would be vastly different."  

Hamberger and economists make clear, however, the strong economic impact requires smart public policy that does not impede day-to-day operations or diminish continued private capital investment.  

"Any lawmaker considering additional regulations should take a long-term view," said Clifford Winston, an applied microeconomist at the Brookings Institution.  

"Realize that this industry is still evolving from an inefficient past," he stated, "and while there may be some bumps along the way, overall, the path the industry is on today has been much better for railroads and American society compared with the industry's evolution when it was stifled by excessive regulations before regulatory reform began in the 1970s."  

Similar to AAR's first State of the Industry Report, this edition features a mix of content across multiple chapters. Articles support the foundational research from RESI, analyzing impact across four areas: national economy, customers, consumers and public policy. This includes how:

  • Railroad industrial development teams catalyze economic growth in communities.
  • Freight railroads help make Americans' lifestyle possible, including in moving automobiles for customers and providing track for commuter and passenger rail.
  • Smart public policy continues to improve safety performance.

The second State of the Industry Report also features insight from experts and organizations like the aforementioned Brookings Institution, as well as Competitive Enterprise Institute, the University of Oregon and R Street, who provide context and unique perspectives.  

AAR invites interested parties to learn more about the State of the Industry Report and see how the industry's continued investments help drive the economy by visiting AAR.org.
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