Remarks to Business Leaders During a White House Briefing on the Sale of Conrail

January 23, 1986

I'm delighted to meet with leaders who support our goal of getting the Government out of businesses that should be owned and run by the private sector. This is a test to see if Congress is serious about meeting the challenge of Gramm-Rudman-Hollings -- start scaling back the scope and size of government. If we're to bring down deficit spending, what a better place to start than by trimming away those costly activities like Conrail, which the Government should never have been involved with in the first place.

It's time to get serious about deficit spending, and it's time for responsible members in both parties to roll up their sleeves and get to work. We need the best ideas from American business to guide our efforts. And we need the full support of the business community to accomplish our objectives. I've often told a little example of the difference between government -- and certainly at the national level -- and some place at the community effort. And this was the little town that decided to raise their street traffic signs from 5 feet to 7 feet -- thought it would be safer and more visible for the motorists. Federal Government said, ``But we have a program to do that. We lower the pavement 2 feet.'' [Laughter]

But I'm happy to be here today with Secretary [of Transportation] Dole and Jack Albertine, Rich Fink, and Dirk Van Dongen to help promote the sale of Conrail and get the Federal Government out of the railroad business. There's a little poem that could describe what Elizabeth Dole has to put up with in all of this: ``I cannot toot the whistle. I cannot ring the bell. But let the darn thing jump the tracks and see who catches hell.'' [Laughter]

But over 10 years ago, the Federal Government entered the freight railroad business when several rail carriers went bankrupt. In 1981 I directed the Secretary of Transportation to draw up a plan to sell Conrail. It was clear then that the Government didn't need to be in the railroad business. And the case today for returning Conrail to the private sector is even stronger. Fortunately, the business community has proved it's both capable and eager to assume this responsibility. Many companies bid for the chance to buy Conrail, and we had tough negotiations to get the best deal. Our goals in selling have been that Conrail must remain financially strong so that the railroad will not, again, become a public ward. Service to shippers and communities must be preserved, and the Government must get a good financial return.

Well, nearly a year ago our efforts paid off when Elizabeth, the Secretary of Transportation, selected the Norfolk Southern Corporation to purchase Conrail from the Government. Since then, Congress has been reviewing the rail process. Shippers, State and local officials, other railroad companies, rail labor leaders, and a host of other persons interested in Conrail's future have been given a full opportunity to comment on the proposed sale. And after all that attention, there's no serious question but that Conrail should be returned to private ownership now.

Under the agreement reached, Norfolk Southern has given its approval to public interest covenants designed to preserve quality service, protect the Conrail shippers, and to ensure the financial strength of Conrail. The buyer is committed to investing hundreds of millions of dollars each year to keep Conrail in top condition. And the sale brings to Conrail the financial resources of a strong parent. Conrail has had to shed tens of thousands of employees and thousands of miles of track in order to become even marginally profitable. So, through the sale, Conrail's services will be integrated into a larger rail system. It'll bring new business to Conrail from the cheaper and faster north-south single-line service that the combined railroads can offer. The new owner will diversify Conrail's traffic base and lower its operating costs. It'll stimulate competition, not inhibit it. Major markets and rail gateways will be open to new competition. Shippers will benefit from these new alternatives, which translates directly into benefits for consumers. And Norfolk Southern will pay the Government over $1.2 billion in cash on the date of sale, once the Congress approves the necessary legislation. More importantly, the sale of the railroad to a strong buyer means that the already overburdened American taxpayer will never again be called upon to foot the bill. When the private sector can deliver better service for less money than the public sector, as it can with Conrail, then the Government must step aside.

British Prime Minister Margaret Thatcher has successfully privatized more than a dozen major nationalized industries, including British Aerospace, Jaguar, and British Telecom, generating over u 7 billion for the treasury. In this country, State and local governments have taken the lead in contracting out such public services as garbage collection, street cleaning, and even prison services to the private sector. Not surprisingly, the result has been reduced costs and better service.

I believe that the sale of Conrail is a good example of how our government can follow Britain's example and responsibly ask the private sector to do a better job. We've found a strong company that promises to promote Conrail's financial strength and service. We have bargained for tough protections to make sure that the buyer lives up to its promise. Government ownership is no way to run a railroad. Your hard-earned tax dollars shouldn't be used to own or operate a business out of a Federal office building. And I hope that you'll join Secretary Dole and me in our fight to get the Federal Government out of the railroad business.

Thank you all very much for being here. God bless you all.

Note: The President spoke at 10:47 a.m. in Room 450 of the Old Executive Office Building. In his remarks, the President referred to Jack M. Albertine, president, American Business Conference; Richard Fink, president, Citizens for a Sound Economy; and Dirk Van Dongen, president, National Association of Wholesaler-Distributors.