Council Comments on General Freight rate Increase

by Council on Wage and Price Stability on October 31, 1977
by Council on Wage and Price Stability


The Council on Wage and Price Stability has expressed concern over a request by the nation’s railroads for a 5 percent across-the-board freight rate increase to recover nearly $1 billion in increased costs. The Council maintained that the Interstate Commerce Commission should not permit an automatic across-the-board increase because this method of raising revenue diminishes managerial incentives to hold down costs and to develop efficient rate structures which take into account the demand for railroad service. As an alternative, the Council urged the railroads to employ selective rate increases in accordance with the so-called “rate flexibility” provisions of the recently enacted Railroad Revitalization and Regulatory Reform Act. This would be less inflationary, would improve managerial incentives, and would be more responsive to Congressional intent. The Council recommend that the ICC minimize across-the-board increases by examining geographic differences and evaluating the railroad proposal on as specific and detail a basis as possible. A more selective approach would minimize the disincentive and inefficiences that the “easy” 5 percent increase sought by the railroads might create.


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