Expert Warns Railroad Strike Would Cause ‘Real Damage in the US Economy’

Lines of oil tanker cars sit in the busy Mandan railroad yard in Mandan, N.D., on Nov. 6, 2015. Tom Stromme/The Bismarck Tribune via AP

A Harvard professor warned that a looming railroad strike could cause significant disruption to U.S. supply chains that most Americans would notice.

“I cannot imagine a larger and more rapid hit to supply chains than a rail strike,” said Jason Furman, a Harvard economics professor and a top adviser who served in former President Barack Obama’s White House, according to a recent interview with Politico.

“It would be faster and more immediate than any of the supply chain problems we’ve seen in the last year and a half and a large majority of Americans would notice it, whether it’s delays in packages arriving, higher prices, more traffic, and the like. It would be about as big, rapid, and negative as you can get,” he said.

And those impacts are being felt right away. Passenger railroad Amtrak announced Wednesday afternoon will cancel all of its long-distance trains starting on Thursday due to the potential work stoppage.

“While we are hopeful that parties will reach a resolution, Amtrak has now begun phased adjustments to our service in preparation for a possible freight rail service interruption later this week,” Amtrak told news outlets in a statement on Wednesday.

Amtrak is not involved in the labor dispute and it explained that a significant portion of its long routes use railroad tracks that are owned by freight railroads involved in discussions with labor unions.

Political and Economic Damage

Other economists suggested that the strike would torpedo any momentum that’s currently being enjoyed by President Joe Biden and Democrats.

“A railroad strike would constitute yet another stagflationary shock to an economy that is struggling with the burden of high inflation, a Federal Reserve lacking policy credibility and growth dynamics that, while outperforming most other countries, are far from guaranteed,” Mohamed A. El-Erian, president of Queens’ College in Cambridge, told Politico.

Other experts say that even a short-lived railroad strike would trigger a major disruption in the country’s supply chains and would send prices even higher in the midst of soaring inflation.

“Rail-dependent facilities would be unable to receive materials and ingredients, and millions of Americans a day would be unable to receive the baked goods they rely on to feed themselves, their families, and communities,” Lee Sanders, senior vice president of government relations and public affairs at the American Bakers Association, has warned.

Patrick Anderson, of Anderson Economic Group, said that the full impact wouldn’t be felt right away. The damage would amount to about $2 billion per day, he predicted.

“The costs will grow geometrically the longer the strike lasts,” he told CNN. “After a week, you’d see real damage in the U.S. economy.”

Railroads are trying to reach an agreement with all their other unions to avert a strike before Friday’s deadline. The unions aren’t allowed to strike before Friday under the federal law that governs railroad contract talks.

Members of one union rejected a tentative deal with the largest U.S. freight railroads Wednesday, while two ratified agreements and three others remained at the bargaining table just days ahead of the strike deadline.

About 4,900 members of the International Association of Machinists and Aerospace Workers District 19 voted to reject the tentative agreement negotiated by IAM leadership with the railroads, the union said Wednesday. But the IAM agreed to delay any strike by its members until Sept. 29 to allow more time for negotiations and to allow other unions to vote.

As for Amtrak, the trains that are to be canceled starting on Thursday include the Auto Train (Washington, D.C. to Sanford, Florida), Capitol Limited (Washington, D.C. to Pittsburgh), Cardinal (Washington, D.C. to Chicago), and the Palmetto (south of Washington, D.C. to Savannah, Georgia), the company told news outlets.

White House officials have expressed public concerns about the possibility of a strike, with President Joe Biden personally calling unions and railroad companies on Monday, according to White House press secretary Karine Jean-Pierre.

The Associated Press contributed to this report.