OPINION: Canadian National and EJ&E rail deal is a good deal

By Morton J. Marcus, an economist formerly with the Kelley School of Business at Indiana University

Let's get burrito-gate out of the way and proceed to more substantive, if less spicy, matters.  Yes, a guy who works for the Canadian National Railway paid for a burrito and a beer that I consumed.  He did not know then that I wrote this column and hence commanded a vast, influential audience.  I did not know then that he had a project to represent.

But CN (as the rail line is called) has a most significant project going.  They propose buying the EJ&E (Elgin, Joliet and Eastern) Railroad that forms an outer loop through Chicago's Illinois and Indiana suburbs.  This acquisition will allow CN to bypass Chicago's most congested rail linkages and numerous congested streets. 

"So what do I care?" you say, living in Jeffersonville or Evansville.  "What's it to me?" you ask, waiting at a rail crossing in Terre Haute, Logansport, or Vincennes.  That's easy.  What's good for America is usually good for Indiana and what's good for Chicago is usually good for Indiana.  Yes, all of Indiana.

The EJ&E acquisition will allow CN to move freight through Chicago faster, cutting costs to the railroad and to its customers. Reduced traffic from CN will make other Chicago rail lines more efficient and reduce the congestion at many rail crossing in the Chicago area.

Efficient rail carriers are one of the answers to our nation's energy and environmental problems.  Rail lines, working with trucks, generally use less energy, cause fewer accidents, and reduce both pollution and congestion far better than shipments by truck alone.  And Chicago is the hub of freight traffic in America, with one-third of all goods produced or marketed in the U.S. passing through that neighboring metropolis.

The benefits to Chicago make that city a more attractive place to live and do business.  The desirability of living and conducting business in Northwest Indiana is strongly related to the drawing power, the economic and cultural magnetism of Chicago.  Hence the second largest tax base in Indiana depends on the success of Chicago.  And, if you didn't know it, the taxes supporting schools in Portland, Winchester, Columbus, Crothersville, and Princeton come, in part, from Northwest Indiana.   

Naturally moving more traffic on the EJ&E line will bring changes in communities along that route.  While fewer freight cars will go through Chicago proper, more will be passing through Illinois and Indiana suburbs. That is disturbing to folks who live in Munster, Griffith and others along the line. 

This is classic economics.  A project with benefits to the nation, one with strong appeal to certain commuters and residents, may have undesirable consequences for others. The railroad and the communities will be able to reach some accommodation. But what settlement will compensate the citizen who feels that his/her quality of life is being sacrificed for the benefit of unknown others? 

The local governments and CN will negotiate safer rail crossings and other attempts to mitigate increased freight movement on the EJ&E tracks.  They could even agree, if the law allows, for CN to finance reduced property taxes in the "burdened" communities for the next few years.  But then we get into more "equity" problems.

Should all citizens in Griffith get the same payout from such a scheme? Should those adjacent to the tracks get more than those one block away?  And how much should I, the random traveler through Griffith, be compensated for a longer wait at the rail crossing on Broad Street?

From my reading of the deal (CN's purchase of the EJ&E), the benefits are great and the disadvantages are few and limited.  Sometimes we say that "in a perfect world" we could provide an offsetting benefit for those facing the adverse consequences of a socially beneficial decision.  But we cannot live in a perfect world until we have perfect data.  Until we can quantify the benefits and reallocate them from the winners to the losers, we are restricted to listening to that lonesome whistle blow, knowing it brings joy to many and wakefulness to a few.