‘Failure wasn’t an option here’: How Biden navigated a political and economic minefield at a critical moment in rail negotiations

As the marathon meeting between rail industry and union representatives neared its 12th hour, the moment Biden administration officials viewed as equal parts inevitable and essential was set into motion.

It was time for President Joe Biden to call in and underscore the stakes. Biden’s message was consistent with the one he’d delivered in private calls over the course of the last several weeks, sources said, but an urgency framed around just how devastating a rail shutdown would be for the country was palpable.

It would be another eight hours before the White House hit send on the President’s statement announcing the tentative agreement, but Biden’s call at a critical moment was emblematic of an approach as carefully calibrated as it was high stakes.

“Failure wasn’t an option here,” one source with direct knowledge of the call said. “Everyone knew the stakes, but the President really hammered home how deep and catastrophic leaving without an agreement would be for the entire country.”

For administration officials, the tentative agreement to forestall a freight rail shutdown is a moment to exhale, after weeks of a dual-pronged sprint to encourage negotiations while ramping up an all-hands-on-deck effort to secure contingency options for a worst-case scenario that would cascade through the US economy.

In a celebratory White House speech Thursday morning, Biden said the agreement “can avert any significant damage” that a shutdown would have wrought. He thanked all of the negotiators for negotiating “in good faith,” calling it a win for the “dignity” of the work of rail workers.

“Together, you have reached an agreement that will keep our critical rail system working and avoid disruptions of our economy,” Biden told leaders in the Rose Garden.

He added, “This agreement is validation — validation in what I’ve always believed: unions and management can work together.”

But it also diffuses an acute political landmine that increasingly unsettled Democrats torn between close union allies and the fear of major economic disruption less than two months before the midterm elections.

“Nightmare,” one House Democrat told CNN when asked to assess the dynamics the day before a deal was reached.

Biden and his economic team have grappled with a series of major supply chain crises from his first weeks in office. None presented more complex dynamics — or a more dramatic threat to the US economy — than the one he faced this week.

Faced with an increasingly volatile mix of elements, administration officials have taken pains throughout the process to stick to the established legal framework and precedent. Biden’s economic team, battle tested by months of port and trucking supply chain crunches, has shifted its well-honed, cross-agency supply chain contingency planning into high gear.

Over the course of 20 hours on Wednesday, Labor Secretary Marty Walsh huddled with union and freight rail company representatives in an effort to break the logjam.

The closely guarded discussions left those outside the room, including some in the White House, attempting to divine whether the length, or perhaps the selection of Italian food for dinner, signaled meaningful progress. Biden was asking his team for near real-time updates as they weighed when to have him engage directly, sources said.

Administration struck delicate political balance

White House officials, who viewed an agreement as a necessity, had no misconception about the enormity of the stakes.

There was the threat to the broader economy, still contending with an uncertain and unpredictable post-pandemic world.

A flood of statements throughout Wednesday from industry groups across nearly every critical US economic sector sought to detail the potential for devastating consequences of a shutdown.

The clear and sustained effort to outline catastrophic damage should talks fail coincided with the union contentions that there would be no deal if their chief demand on attendance policies was not addressed.

Many of the consequences were outlined in letters to congressional leaders, where Democrats have been reticent to pursue their authority to impose a settlement to end the impasse out of concern it would undercut union allies in the middle of negotiations.

Administrations officials were keenly aware that the timing of the amped-up campaign across industry trade groups to highlight catastrophic consequences coincided with the most critical point of the negotiations.

“This is how any high-stakes negotiation goes,” the source familiar with the White House approach said. “All parties are always seeking leverage.”

But the necessity of maintaining economic stability at a time of high inflation had also run directly into Biden’s own pledge to be the most pro-union president in US history.

It’s an unequivocal, if bold, pledge backed both by his actions and with an array of key White House advisers who have close career ties to labor.

“I promised you I would be, and I commit to you: As long I have this job, I will remain that,” Biden said in June remarks to the AFL-CIO labor federation convention.

Looming over it all: the midterm elections. They now sit less than eight weeks away and at a moment when Democrats see a burst of unexpected momentum driven by several legislative victories and a base of voters motivated by the Supreme Court decision to strike down Roe v. Wade.

Senior White House staff, Cabinet officials and Biden himself had worked the phones for days to try and break the impasse. But they had also made clear in those discussions with industry and union representatives that their role is as a neutral arbiter, people familiar with the conversations said.

It’s the approach that guided Biden’s decision to appoint a three-member Presidential Emergency Board widely viewed as apolitical, whose recommendations triggered a 30-day window set to close at 12:01 a.m. ET Friday.

Officials had been “focused on following the law here and making sure that we’re providing that safe space for parties to come together,” one source familiar with the White House approach said.

Biden closely tracked negotiations

Biden had been closely watching the talks and had received regular updates through the last several days. That included updates during his Wednesday trip to Detroit and a briefing from advisers on the talks that were entering their 10th hour when he returned to the West Wing, an official said.

A few hours later he was patched directly into the room by phone.

But he had also said little publicly about the ongoing dispute, despite his close ties and regular public remarks about unions that border on outright reverence. It’s something that, intentionally or not, provided a window into the delicate legal, political and economic balancing act he faced.

Walsh had been at the center of the ongoing talks. A former union leader before his time as mayor of Boston, Walsh’s role was described by one official as “part mediator, part motivator, part guy who blocks the door if they try to leave without a deal.”

A regular travel partner as Biden hits union locations in his domestic travel, Walsh ingratiated himself with the President’s team at critical moments throughout the last year as officials grappled with other key supply chain problems.

In late-night meetings and blunt conversations, Walsh has become an indispensable point person for Biden, one whom one official described as “a guy who is going to roll up his sleeves and do the work. Period.”

The overarching message delivered, repeatedly, by Walsh and other top officials in recent weeks to freight-rail representatives had been clear cut: There’s no exit ramp or alternative in the works. The severity of consequences of a strike or lockout cuts across economic, public safety and public health.

“It’s just unacceptable for them to not come to a resolution,” the source said.

But despite two years of talks, the emergency board and its recommendations and the corresponding cooling off period, an increasingly heated dispute over engineer and conductor attendance policies had left talks at a virtual standstill between the two largest of 12 unions involved in the talks.

The engineers’ and conductors’ unions say the railroads are requiring their members to be “on call” and ready to report to work on short notice as often as seven days a week. Penalties, based on a points system, can be applied for missing work due to doctors’ appointments or family emergency, the unions say.

The emergency board’s recommendations called for workers to get an immediate 14% pay raise, plus back pay dating back to 2020. It also called for a 24% increase in pay during the five-year life of the contract from 2020 to 2024, and cash bonuses of $1,000 a year.

But it did not address the staffing shortages and scheduling rules that drove the impasse — the critical component of the agreement that Walsh would help the two sides reach Thursday morning.

Congress debated intervening

While Biden administration officials went out of their way to avoid weighing in on the specific elements of the talks, the issue had become a growing flashpoint on Capitol Hill, where lawmakers actually had the authority to vote to implement an agreement over the objections of either or both parties — but only if they chose to go down that path.

Republican lawmakers accelerated efforts to press Democratic leaders, who control the House and Senate majorities, to move forward on the option, but were met with resistance and clear signals action wasn’t imminent.

Republican Sens. Richard Burr of North Carolina and Roger Wicker of Mississippi attempted to move a resolution that would’ve imposed the emergency board’s recommendations to resolve the dispute.

But Sen. Bernie Sanders, the progressive Vermont independent, blocked the effort and in floor remarks detailed deep support for the union efforts.

“I wonder if the CEOs and top executives of the railroads would get fired if they got sick or had a medical emergency in their families,” Sanders said. “I doubt it very much.”

Several other key Democrats echoed those sentiments.

“No one wants the railroad industry to cease operations this week,” House Transportation and Infrastructure Committee Chairman Peter DeFazio said in a statement. “But it’s time for the railroads to treat railroaders, the heart and soul of the industry, with some dignity and compassion.”

Speaker Nancy Pelosi, noting the sick leave issue at the center of the dispute, said she’s been engaged in conversations about where the negotiations stand.

“We’d rather see negotiations prevail so there’s no need for any actions from Congress,” Pelosi told reporters. The White House had also refrained from calling for any congressional action.

Lessons gleaned from past crises

Still, the potential for the current deadline to come and go had escalated long-running White House efforts to plan for, and around, major supply chain disruptions.

The White House had been engaged in intensive discussions with key players in shipping, trucking and air freight to gauge the capacity to backfill freight rail disruptions. Officials have stressed in those conversations they are ready to deploy any tool at their disposal that would help.

That included the likely the use of emergency authorities, which multiple agencies have been tasked with identifying and presenting as options during the multiple intra-agency meetings happening each day.

What appeared from the outside to be a scramble, however, had a baseline in the extensive work the administration has done across the entire supply chain as the attempted to get in front of developing bottlenecks.

Biden named retired Gen. Stephen Lyons, the former head of US Transportation Command, as his port and supply chain envoy in June. The position was an expansion of the portfolio held by John Porcari, Biden’s port envoy who played a critical role in easing the crisis in shipping last year.

One of the first issues Lyons grappled with in his new role earlier this summer was establishing lines of communication between ocean liners and rail participants, officials said — something that deepened his relationships inside the industry, but also underscored the necessity of cooperation across supply chain components that are nearly entirely private-sector operated.

Lyons has been regular consultations with industry participants across economic sectors that own the cargo being shipped, has standing meetings with players in each mode of transportation and has regularly briefed — along with Walsh — on the status of the labor talks.

More than a year of outreach to key industry groups across the supply chain have created the administration’s own clear lines of communication, which one official views as exceedingly critical should the worst-case scenario come to pass.

“The government has excellent data, but in a real-time crisis you need to be able to pull real-time data,” the source said. “We already have a set of long relationships, and the industry knows how to work really well with us in these moments.”

That work had been underway for several weeks, as officials held real-time discussions with industry participants to identify potential disruptions to essential products like food, energy, and public-health-related products.

While there was no dispute about the far-ranging repercussions of a shutdown, White House officials found themselves weighing concerns that the fear of the potential fallout may create a consumer-driven crisis all on its own.

There would have been unquestionable near-term effects, with palpable White House concern tied to the treatment of hazardous chemicals. But the time horizon, particularly when it comes to what ends up on store shelves, was likely longer — something officials were continuing to nail down as they sought detailed information from the industry.

Still, as the last two years have shown, even minor ripples in the supply chain can create disruptions that take resources — and time — to untangle.

It’s a reality that made the focus on reaching an agreement in the waning hours before the deadline so acute and without any alternatives.

“They always had to understand that it was their responsibility to get this done,” the source familiar with the White House approach said.

This story has been updated with developments on Thursday.

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