3. Traffic handled over the inland waterways, excluding the Great Lakes.

4. Contributing factors to this decline in rail traffic are the pipe lines, highpower electric lines, and the newest development of the piping of natural gas from the wells to large centers, which is going to reduce still further the coal traffic.

In so far as any form of the above service is legitimate and a natural economic development, the railroads have no right to complain. The public is entitled to the best transportation at the lowest reasonable cost. However, where the rail carriers are prevented through legislation or regulation from fairly competing with new or old forms of transportation, or where the service rendered by the competitor is a subsidized one, such unfair handicaps should be removed.

It is suggested:

(a) That the present lack of adequate regulation of motor bus and truck operation should be remedied by the enactment of appropriate legislation, with no discriminatory provision against the railroads operating in the same field.

(b) That the restrictions on the railroads from competing with the Panama Canal by refusal to grant them fourth-section relief be removed.

(c) That the Government of the United States discontinue competing with the railroads or any other form of transportation either directly or by subsidy. (d) That pipe-line common carriers be subjected to the same restrictions in respect to the transportation of commodities in which they are interested, directly or indirectly, as the railroads now are.

The above refers to loss of traffic through competitive reasons.
Traffic that remains has produced the following results:

1. The average receipts per ton-mile have been as follows:

Figures for average receipts per ton mile, it is fair to say, represent many factors, such as changes in commodities, distances hauled, and other items, and can not be taken as a precise guide to rate reductions, but they are conclusive as showing the trend.

2. During this same period the operating expenses have indicated the application of great economy and efficiency, as shown by the following figures: Operating expenses and traffic units1 of class I steam roads of the United States

This has been accomplished largely through the expenditure for capital improvements in the 9-year period amounting to $6,855,416,000, which provided improved locomotives and equipment, improvement in the physical structure, improvement in methods, and done in conformity with the program of the railroads entered into in 1923 which, as announced at that time, was based "on an abiding faith in the fairness of the American people and reliance on the continuance of the policy announced in the transportation act, 1920, as a measure of reasonable protection to investment in railroad property."

During this same period the decline in the average receipts per ton-mile has shown an accumulative amount closely approximating what has been spent for capital expenditure-$5,769,835,000.

3. Notwithstanding this economy and efficiency, rates have never produced the return on property investment contemplated in the transportation act, viz, 54 per cent, for the railroads as a whole.

Rate of return on property investment of Class I steam roads of the United States

NOTE.-Rate based on property investment of carriers as shown by their books, including material and supplies and cash.

WHAT ARE THE REASONS?

Reductions in rates, beginning with the year 1921, have continued up to the present moment. These reductions were brought about

First. By action of the Interstate Commerce Commission.

Second. Through reductions made voluntarily by the carriers to meet competition including that of unregulated or subsidized transportation.

Third. Through reductions made voluntarily by the carriers for the development of industrial enterprise and communities.

DECLARATION OF POLICY DEEMED NECESSARY TO THE CONTINUANCE OF ADEQUATE TRANSPORTATION SERVICE TO THE PUBLIC

This is the situation in which the railroads of the country find themselves to-day.

What the railroads are asking is a new spirit and attitude on the part of legislative and regulative authorities (a) through a recognition that the railroads are engaged in a business subject as other business is to the operation of economic laws and should accordingly be permitted to adapt themselves quickly to changes in economic conditions which confront them, and (b) through a

recognition that railroad operation is a fundamental public necessity and that the maintaining at all times of an efficient national system of transportation, adequate to the business needs of the public, is necessary, if we are to progress as a nation.

The railroads at this time make the following recommendations:

First. A respite from rate reductions and suspensions by regulating bodies, both intra and interstate, and from action that will increase the expense of the carriers.

Second. A respite from legislative efforts of either the national or the State legislatures that would adversely affect rates or increase the expenses of the carriers.

Third. A withdrawal of governmental competition both through direct operation of transportation facilities, as well as indirectly through subsidies.

Fourth. A fairly comparable system of regulation for competing transportation service by water and on the highways, involving affirmative legislative action as follows:

As regards water transportation, legislation should cover:

A. Extending jurisdiction of the Interstate Commerce Commission over portto-port rates, to include

B. Determination of just and reasonable rates, and prohibition of discriminatory and unduly prejudicial rates.

C. Publication of and adherence to rate schedules.

D. Proper service requirements.

E. Certificates of public convenience and necessity after proper showing. F. An opportunity for the railroads to enter this field of transportation under proper supervision, but without handicap as compared with other transportation agencies. The Panama Canal act should be modified so as to permit railroad operation of waterway service in conjunction with rail service.

G. And, in addition to affirmative legislative action, the retention of the flexible character of section 4, interstate commerce act, sympathetically administered, with fair opportunity on the part of rail carriers to obtain relief after proper showing and including transcontinental traffic.

As regards commercial highway transportation, by bus or truck, legislation should cover:

A. Extending jurisdiction of the regulatory authorities over commerce carried by such agencies.

B. Certificates of public convenience and necessity, after proper showing. C. Proper protective requirements for financial responsibility and surety bonds or insurance.

D. Adequate requirements for just and reasonable rates, both maximum and minimum, with provision for publication thereof and adherence thereto, and proper inhibition against undue and unjust discrimination.

E. Proper service requirements.

F. Adequate authority for rail carriers to operate such facilities, without discrimination in favor of other transportation agencies in the same field.

G. Adequate provision for privilege or license fee imposed on all motor vehicles for hire or profit using highways, so as to properly participate in construction and maintenance costs of highways.

As regards pipe line transportation: That pipe line common carriers be subjected to the same restrictions as to the transportation of commodities in which they are interested, directly or indirectly, as the railroads now are. All basic figures given in this statement are derived from the reports of the Interstate Commerce Commission or from other Governmental sources and are open for inspection and verification.

For the policy recommended herein by the Association of Railway Executives they bespeak the earnest and thoughtful consideration of the public, from the standpoint of the national interest in maintaining in the highest degree adequate and efficient transportation in every modern form with equal opportunity for all.

BRIEF OF THE MISSISSIPPI VALLEY ASSOCIATION IN REPLY TO PLEAS OF THE ASSOCIATION OF RAILWAY EXECUTIVES

This memorandum addresses itself, first, to the statement of the railroads as to their participation in the expense of the Government (pp. 148-150). They show that in their fiscal year ended December 31, 1930, they paid to the Federal Government $40,985,890. According to the report of the Secretary of

the Treasury for the year ended June 30, 1931, the total ordinary receipts for the Government's fiscal year of 1930 amounted to $3,317,233,494.

Making due allowance for the fact that the fiscal years do not coincide, it will be seen that that railroads contributed toward the general alimony of the Federal Government for its fiscal year of 1930, 1.2 per cent. In 1929 they contributed 2.17 per cent of the total receipts of the Government.

Turning to page 38 of the same report of the Secretary of the Treasury, it will be noted that railroads in receivership, on November 1, 1931, owed the Federal Government $27,772,793 in money loaned to these railroads and in interest accrued and unpaid. A perusal of the collateral held by the Federal Government, as scheduled on page 39 of the report, amounting to $40,478,525, will convince Senators that if the Treasury can secure 10 per cent of the amount of the indebtedness out of this collateral it will be fortunate. This impression is strengthened and made definite by the fact that in his report for the year ended June 30, 1930, the Secretary of the Treasury felt then that the Government could realize 50 per cent on these railroad loans, while at page 37 of the report of June 30, 1931, the Secretary states specifically that "the Government can not expect to realize the full amount of indebtedness due," and he asks that he be given permission to write down the interest to 31⁄2 per cent and to be permitted "to take such action as may be considered necessary under the circumstances to enable the Government to realize the utmost amount obtainable on account of the railroad obligations."

It is no exaggeration to say that half of the amount of taxes paid by all the railroads of the country in the fiscal year 1930 will be absorbed in the losses which the Government has sustained upon the loans made to individual railroads under the provisions of the transportation act of 1920. These loans originally amounted to an aggregate of $230,000,000. The Reconstruction Finance Corporation is now making loans of new Government money raised by bonds, which the people must pay in taxes in very much larger sums, both directly to railroads and on the faith of their securities tendered by banks, trust companies, and those other institutions whose financial status has been weakened by their dealings in railroad securities.

Senators have a right to weigh carefully the pleas of an organization which carries on transportation for profit. upon the ground of their alleged financial interest in the Government policies when, as here, they place that interest definitely upon such ground. This is particularly appropriate when that policy pertains to the Government's effort to develop public highways in the public interest and not for profit, a perfectly legitimate function of the Government, as the railroads themselves concede.

The matters presented by the railroads' spokesman for consideration of the committee, which is considering the desirability of adopting a satisfactory financial program for the development of its ports and public water highways, are comprised in five propositions, presented on page 147 of the record. As they have reference to the propriety of the Government's policy of prosecuting valuable public improvements and not to the question of adequate and proper financing of these operations, we doubt their relevance or appropriateness as a matter to be considered by this committee on this record. Realizing, however, the disposition of the committee to listen attentively to all petitions which any element of the public may see fit to introduce and inasmuch as they are a part of the record, the committee is entitled to the views of the Mississippi Valley Association as to their merit. They are therefore taken up seriatim. (a) "There should be regulation of interstate water transportation under the Interstate Commerce Commission" (p. 147).

This demand for the commission's regulation of interstate transportation upon public highways is a matter which has been pressed actively, in season and out of season, by the Association of Railway Executives and the American Railroad Association since their public enunciation of policies in 1930. There has been no general public demand for such regulation. Wherever it has been considered, the shipping public has been openly hostile to the proposition, being convinced from long experience that the whole tendency of such regulation is to make transportation unduly expensive. The attitude of the Mississippi Valley Association on this matter has been clearly outlined in its resolutions and confirmed and strengthened from year to year in its expressions of policy. Regulation of railroads and other public services which enjoy the privileges of monopolies, as embodied in the interstate commerce act, as amended, was originally for the correction of abuses which could in no wise be restrained in the public interest except by the setting up of a congressional agency in the

person of the Interstate Commerce Commission. But the inclusion of section 15a in 1920 very materially changed the character of the law and necessarily the attitude of the commission toward the railroads, as it attempted to stabilize their revenue.

These are the two forms which regulation takes as applied to railroads, and when the railroads ask to have regulation applied to carriers on public highways, of which the waterways are an essential part-unless the railroads have an undisclosed objective-it must be for the purpose either of correcting abuse or of stabilizing the revenue of such carriers, as has been attempted in the interest of the railroads.

The railroad brief (p. 147) says:

* * the railroads hold that the inequitable condition now existing, in which their competitors are relieved from substantial operating costs, must be recognized by Government authorities."

The Mississippi Valley Association believes that the regulation of common. carriers engaged in interstate commerce on highways and waterways is unnecessary to correct abuses, as the public is not complaining that there is any abuse. It believes that an attempt to regulate common and contract carriers on public highways must drive out the common carriers and eventually the contract carriers if regulation is found to be legally applicable to them.

In an investigation by the Interstate Commerce Commission into the operation of trucks and busses on the public highways, it is recorded that in a survey recently concluded by the United States Bureau of Public Roads in conjunction with the highway departments of 11 Western States, of 180,000 trucks which were observed moving over these highways, 5.5 per cent were reported as common carriers, 8.7 per cent as contract carriers, and the remaining 85.8 per cent were owner operated. In such a situation it is difficult to see how regulation of the relatively small amount of traffic carried by commoncarrier trucks-regulation which would not be aimed to cure abuses, in the absence of abuse, but would have a tendency to increase costs and ratescould be beneficial to the railroads. It certainly would be destructive to the common carriers, and in the destruction of the common carriers the public would be ill served, for it would tend to center transportation in the hands of large corporations who could afford to own their fleets of trucks and cor respondingly narrow the opportunity of all smaller business units.

That these views are shared by some railroad executives is evidenced by the following recent statement of Ralph Budd, president of the Burlington road, before the Chamber of Commerce of Des Moines, Iowa: "It is foolhardy for railroads to demand artificial raising of rates of their competitors, truck and bus lines, in order successfully to compete. Such action is against public interest.'

Even conceding the constitutional right of restrictive regulation of public highways, the purpose from the standpoint of the railroads' expressions of policy, if it did not limit the public value of common carriers on the public highways, is obscure. Exactly these same conditions exist on all waterways, coastwise, intercoastal and inland. In order to apply regulation there must te a very definite attempt to limit and restrict the public use of public highways, a matter of doubtful constitutionality. This field of regulation of which the railroads talk is one entirely apart from the ordinary and proper exercise of the police power.

The Commerce Committee has before it at the present time a proposal to regulate common carriers in the intercoastal trade. At the recent hearings on this bill (S. 3643) it was shown that the legislation is not intended to correct abuses. In presenting to the Commerce Committee Senate bill 1963, for which S. 3643 is a substitute, the chairman of the Shipping Board stated clearly the purpose of this legislation. In his opening statement, the chairman said:

(Hearing pursuant to S. 1963, p. 7.) "We just put this bill up for the simple purpose and we hope it will attract the attention of the committee to this fact-of having the intercoastal service protected against themselves. That is what we are trying to do; we are trying to protect them against themselves." No charge of rebating or public abuse was made. The steamship companies engaged in the intercoastal trade simply showed that competition was so keen that their revenues were in danger.

Assuming, for the sake of argument, that it is a proper function of regulation to protect steamship companies against themselves, it is perfectly clear that no such condition exists on the inland waterways at the present time which makes