Congress to Intervene in Railroad Strike Negotiations
November 28, 2022, President Biden released a statement calling on Congress to immediately pass legislation to adopt the Tentative Agreement between workers and operators “to avert a potentially crippling national rail shutdown.”
Additionally, the President Tweeted, “A rail shutdown would devastate our economy. Railroads and unions extended negotiations from the September 16 deadline to avoid a shutdown. Despite multiple federal agencies assisting in negotiations, the parties disagree on terms, and another shutdown is possible next week. The negotiation deadline is December 9. Speaker of the House, Nancy Pelosi, stated the House would vote this week to extend the Tentative Deal agreed to in September.
Very Different Responses
Railroads were quick to praise Biden for his call for legislation. “No one benefits from a rail work stoppage-not our customers, not rail employees, and not the American economy. Now is the appropriate time for Congress to pass legislation,” stated Ian Jefferies, the Association of American Railroads CEO. The Association of American Railroads represents most major carriers in the negotiations.
In contrast, union leaders responded angrily toward the President. “Unfortunately, the “most labor-friendly president” has opted to side with Big Business and call for a thwarting of railroad workers’ right to strike,” reads the first sentence of a press release from the Railroad Workers United (RWU) union. Most of the press release is filled with outraged comments and scathing vitriol toward the President and Democrats.
Gabe Christenson, the Co-Chair, and Conductor of RWU stated, “The tentative agreements that the majority of union members had voted down are now being touted by President Biden, despite that none of them contain any sick time whatsoever. The ‘most labor-friendly President in history’ has proven that he and the Democratic Party are not the friends of labor they have touted themselves to be. These wolves in sheep’s clothing have for decades been in bed with corporate America and have allowed them to continue chipping away at the American middle class and organized labor.” The RWU treasurer, Hugh Sawyer, had a similar comment. “Joe Biden blew it. He had the opportunity to prove his labor-friendly pedigree to millions of workers by simply asking Congress for legislation to end the threat of a national strike on terms more favorable to workers. Sadly, he could not bring himself to advocate for a lousy handful of sick days.”
What Do the Unions Want?
The primary issue is better working conditions. The railroad business model systematically tries to save money on labor which leads to chronic understaffing. Most rail workers are on call seven days per week. A point system punishes the workers for taking sick days. Four of the twelve railroad unions, representing more than 100,000 workers, voted against the tentative deal in September because the deal did not address the issue of sick days.
What is in the Tentative Agreement?
A special mediation unit called the Presidential Advisory Board constructed the Tentative Agreement. The Agreement would begin with a 14.1% pay increase effective immediately and subsequent pay increases totaling 24% by 2024. The immediate pay increase would backdate to 2020, and a $5,000 bonus would pay $1,000 annually and improved health care benefits. Also, workers could attend unpaid medical appointments or hospitalized without punishment.
How Would a Shutdown Affect the Economy?
The President stated that a shutdown would cause 765,000 Americans to lose their jobs within the first two weeks of a strike. President Biden also stated that communities would lose access to chemicals necessary for clean drinking water. Farmers would not be able to feed their livestock. The Association of American Railroads said a shut down would cost the U.S. economy about $2 billion per day. Fox News reported a shut down would increase PPI by 4%. For a breakdown of some of the industries affected most, click here.
What Does It Mean?
When the railroads and unions signed the Tentative Agreement in September, President Biden assured the American people that they had solved the problem. However, despite his assurances, the problem was not solved. Again, we stare down the same economic crisis, only this time, it will potentially manifest two weeks before Christmas. Suppose Congress intervenes and forces the railroads and unions to take the tentative deal for a few months. We make it to Christmas. Then what? Unless the offer changes, the unions will continue to reject being on call 24/7 with no sick days. Congress may intervene again and force a few extra months to submit to the Agreement. How long can a government intervene before it stops being a free market or a freewill working agreement? Kicking the problem down the road doesn’t solve the problem. It allows it to snowball.
Kicking the can down the road again on the railroad strike is a moot point. It doesn’t matter whether it is a railroad shutdown, China’s recent Covid-19 outbreak and protests, record inflation, government debt, a housing collapse, further stock market correction, rapidly rising interest rates, Europe’s energy crisis, mass layoffs, Ukraine, or some other crisis. It will hurt when there isn't any place else to kick the can. The system is already stressed and sprouting leaks. Supply disruption in the winter cold during the height of holiday shopping will only add more pressure to the already unstable economy and force more water out of the bucket. What matters is plugging the leaks, reducing the pressure, and making sure your portfolio is protected, whatever happens. Precious metals are designed for times like this.
Stop procrastinating. Stop kicking the can down the road. The economic problems aren’t going to go away on their own. Protect yourself before it’s too late.