Image for Congress Acts to Avert Pre-Holiday Rail Strike
Congress will consider legislation today to impose a new contract on rail workers in an effort to avert a rail strike starting December 9, which economists say could cost the US economy as much as $2billion per day and disrupt holiday shopping. Hard feelings by union members may be eased by the addition of seven paid sick leave days to the contract terms negotiated in the fall by President Biden.

Legislation Expected to Pass with Bipartisan Support

Responding to a request from President Biden, Congress is expected to act swiftly on legislation to avert a nationwide rail strike next month. Speaker Nancy Pelosi announced she will bring a bill to the House floor as early as today. Democratic and Republican congressional leaders predicted it will pass.

Biden headed off a rail strike earlier this year by negotiating directly with leaders of freight rail companies and their 12 labor unions. Eight of the unions approved the negotiated contract and four rejected it, which set the stage for a rail strike on December 9.

Biden met on Tuesday with a bipartisan group of congressional leaders to call for legislation. Congress has the powerto legislate under the Railway Labor Act, as it did in 1986 and 1992, on grounds that a rail strike “threatens substantially to interrupt interstate commerce to a degree such as to deprive any section of the country of essential transportation service.” Some estimate the cost of a nationwide rail strike as up to $2 billion per day, affecting a huge range of products.

Pelosi indicated the House legislation will include the labor deal Biden negotiated, with a potentially separate up or down vote on adding seven paid sick leave days. The other option is to approve a less-generous settlement recommended by a presidential board last summer.

The Biden-negotiated deal provides a 24 percent pay increase with back pay, but some union members feel the compromise falls short on paid sick leave and punitive attendance policies. Rail lines were under intense pressure to help unsnarl supply chain disruptions resulting from coronavirus pandemic lockdowns. Rail workers were considered essential workers and often pressed into overtime. Union members said when rail workers got sick or had families sick, they were punished if they took time off.

Pelosi’s decision to allow a vote on adding paid sick leave days is partially in response to a handful of senators, ranging from Bernie Sanders to Marco Rubio, who signaled they would oppose the legislation without paid sick leave provisions.

More Work for Lame Duck Session
Congress is in a lame-duck session, with Democrats in control of both the House and Senate. In January, Republicans regain control of the House with a margin slimmer than the current Democratic margin of control.

The must-pass legislation during the lame-duck session is an omnibus Fiscal Year 2023 spending bill. A continuing resolution expires December 16. Failure to approve spending by then would lead to a partial federal government shutdown before the holidays. The rail strike legislation faces similar pressure with a looming strike December 9.

Unions usually support Biden and Democrats and the President’s call for congressional intervention has upset union leaders. Biden has expressed sympathy, but insisted the potential economic damage from a rail strike is too great. Including paid sick leave days as part of the deal may soothe any hard feelings.

Unions usually support Biden and Democrats and the President’s call for congressional intervention has upset union leaders. Biden has expressed sympathy, but insisted the potential economic damage from a rail strike is too great. Quietly, some union leaders are relieved Biden’s call came when Democrats still control Congress.

Major business groups demanded federal action to prevent a pre-holiday rail strike, which they said could have further disrupted supply chains and led to barren store shelves for holiday shoppers. Economists warned the strike could ensure a recession next year and more inflationary pressure the remainder of this year.

“No one benefits from a rail work stoppage – not our customers, not rail employees and not the American economy,” says Ian Jefferies, chief executive of the Association of American Railroads. “Now is the appropriate time for Congress to pass legislation.”

Truckers also weighed in saying a rail strike would require 450,000 additional trucks and drivers to carry stranded loads. They added those added vehicles and certified drivers don’t exist.

China, Supply Chain Disruptions and Inflation
Avoiding economic disruption from a rail strike may be extra important because of China’s aggressive Zero COVID policy that has led to severe lockdowns and, in turn, growing protests against the policy and the Chinese Communist Party. Chinese President Xi Jinping reportedly remains committed to enforcing the strict policy.

Lockdowns have shrunk China’s economic growth rate from 8.1 percent in 2021 to 2.8 percent this year. The last time the Chinese economy grew that little was in 1990. Since then, China has rocketed to become the second largest global economy, with huge cash reserves to apply to domestic and foreign infrastructure investments.

While Chinese lockdowns have contributed to chronic supply chain disruptions and consumer good shortages such as iPhones, there is a silver cloud in China’s economic slowdown. As Chinese plants close or operate on reduced schedules, they consume less material and use less fuel, which alleviates demand-induced inflation in the United States and elsewhere in the world.

If the inflation rate recedes, there will be less pressure on the Federal Reserve to keep raising interest rates, which in turn could enable the United States to skate by with only a mild recession in 2023.