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With all the record 3rd quarter profits why not give tax credits to the railroads for capital improvemnets
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<p>An investor owned business has to weigh carefully the pros and cons of expansion. If it expands capacity, will it be able to earn a sustaining return on the incremental increase in plant, equipment, and labor? This is the question that the CEO and CFO for each of the railroads must address.</p> <p>As I understand it two of the major contributors to the current backlog are the bumper grain crop, which was held-up in part by bad weather last year, and the increased shipments of oil. </p> <p>What happens to the capacity constraints once the grain backlog has been cleared? Also, what happens to shale oil demand if the bottom falls out of the oil market. On Friday Bent Crude closed at $86.13 whilst West Texas Light Crude closed at $81.01. These are factors that management has to deal with in determining whether it makes economic sense to expand capacity. </p> <p>If there is a compelling case to expand capacity, the nation's freight railroads could turn to overseas suppliers for materials. They are not constrained by politics as is the case for Amtrak, commuter rail, at least in some cases, and transit systems. </p> <p> </p>
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