nated, because of the practical difficulties in publishing tariffs which it creates. The other changes he does not regard as important. Nor are his amendments intended to effect a change in the general policy of the Commission in administering the section. I see no reason, of course, why Congress should not give careful consideration to the proposed amendment of the fourth section. I have had a visit from representatives of the railroads, the railroad employees, and a group of shippers, and I have suggested to them that they should take the subject up with the committee. I have no doubt that the committee would also desire to confer with Commissioner Eastman, and with the Interstate Commerce Commission. Very sincerely yours, Hon. SAMUEL B. PETTENGILL, House of Representatives, Washington, D. C. F. D. R. I have not heard, Mr. Chairman, but I trust that this committee, before it acts on this legislation, will call upon both the Interstate Commerce Commission and Railroad Coordinator Eastman for advice, as the President has suggested to you. Mr. PETTENGILL. They have already been requested to do that. Mr. LYON. I understand they have been asked to appear? Mr. PETTENGILL. Not to appear; they have been asked to express their views, which have already gone into the record. At least that is my understanding of the situation. Mr. LYON. I would like to see that. Mr. CAMPBELL. If you will pardon me for just a moment, Mr. Chairman: Did I understand that the committee has asked for the views of Mr. Eastman and the Commission, and that they will be put in the record? I did not quite get that Mr. PETTENGILL. A letter was addressed to the Interstate Commerce Commission asking them to express their views on all of the bills, and a reply has been received, and I thought that it had already been placed in the record. If not, it will be put in. Mr. CAMPBELL. Thank you. Mr. FORD. As a matter of fact, as the members of this committee, of course, know, this bill of Congressman Pettengill has already been referred to the Interstate Commerce Commission for report. The Interstate Commerce Commission, in its reply to this committee, under date of March 12, 1934, says: H. R. 8100 does not propose to leave even a qualified prohibition in the law against maintaining the kind of discriminations prohibited by section 4, but proposes to repeal the prohibition entirely. We are unable to understand how the public interest would be served by enactment of such a bill. Experience has shown during the years before and since the enactment of the Act to Regulate Commerce in 1887 that special measures are necessary to prevent the peculiar form of undue prejudice and discrimination which may be created by the establishment of higher rates for shorter than for longer distances. Section 4 was designed to protect the public against this special kind of prejudice and discrimination. * * * We are of the opinion that the record of the carriers with respect to the establishment of higher rates for shorter than for longer distances during the nearly half a century since the enactment of the original act has fully demonstrated the need for futher protection of the shipping public against the kind of discrimination and prejudice resulting from the establishment of higher rates for shorter than for longer distances than that afforded generally by those sections of the act other than section 4, and it is our view that the long-and-short-haul provision of that section should be continued in force to insure this protection. Of course, the bill referred to in this letter, H. R. 8100, was the Pettengill bill of the previous session. It was similar to the bill which is now before this committee. The railroads before this committee have taken the pauper's oath. They have made their entire plea to you on the grounds of pauperism. Then they have said to you that the thing which has pauperized them is the long- and short-haul law. But they have not submitted evidence to prove it. They know that the Interstate Commerce Commission, time and again in these transcontinental cases, has found that if the railroads took the tonnage away from the Canal that they propose to take even if they took all the tonnage from the Canal, they would still lose more than they would gain. There are just two main issues in this case. First, the railroads want to be turned loose to destroy a competitor. Second, Chicago, as evidenced by the Chicago interests speaking through the National Industrial Traffic League, wants to drive the entire West into the Chicago market. They want to lock us out of the eastern market entirely. The railroads talk about getting the traffic that is going through the Canal. They are not after that traffic. They know they cannot get it. They want to destroy that traffic and supplant it with Chicago merchandise. In conclusion, Mr. Chairman, I want to thank you and the members of this committee for your courtesy and your attention, and I cannot help from expressing a most profound conviction that after your committee has studied this question carefully, our people in the Intermountain territory feel assured that our rights will be protected and that we will not again be thrown into another 30 years of litigation such as we have experienced in the past. The repeal of the long- and short-haul law will throw the tariffs of this country into such a turmoil as has never been experienced. Mr. PETTENGILL. What is your position as to the equidistant provision? Mr. FORD. As far as we in the Intermountain territory are concerned, Mr. Chairman, we have no position on that. It does not affect us. Mr. FORD. Just one word in conclusion, and that is this: All that we are asking for out there is exactly the same treatment that the East has had. There would have been no development in the East had they been subject to the same discriminations that we have been subjected to. How would Pittsburgh like it if tariffs coming east were all at a peak at Pittsburgh? How would Indianapolis like it, or how would Cincinnati? They would not stand for it for a minute. Mr. Chairman. If the rates on our western lumber; if the rates on our western apples, fruits and vegetables; if the rates on our canned salmon to Cincinnati were higher than they are to New York, what would be their position? Do you suppose that Cincinnati would stand for it? Would Indianapolis stand for it if her eastbound rates were higher than to Baltimore? Or would Pittsburgh stand for it if rates. were higher to Pittsburgh than to New York? Those communities would not stand for it. They have the population, the weight, and the influence, and they do not have to stand for it; but we will never have that population, and we will never have that development in the west as long as we are subjected to such discrimination. All we are asking for is just the same opportunity that this East has had to develop, and we will make the West. We will give Chicago a market. Mr. PETTENGILL. Mr. Ford, I think that the organizations which you are representing are to be congratulated for having such an able representative. Mr. FORD. Thank you, Mr. Chairman. STATEMENT OF EDWARD E. KENNEDY, SECRETARY NATIONAL FARMERS UNION Mr. KENNEDY. Mr. Chairman and gentlemen of the committee, my name is Edward E. Kennedy. My home is at Kankakee, Ill. In addition to being secretary of the National Farmers Union, I am also its legislative representative here in Washington, D. C. I particularly wish to express in my brief remarks to this committee our opposition to the passage of H. R. 3263, which in effect proposes the repeal of the vital provisions of section 4 of the Interstate Commerce Act, which is commonly known as the "Long-and-short-haul clause. The present act makes it unlawful for any common carrier, subject to the provisions of the Interstate Commerce Act, to charge and receive any greater compensation in the aggregate for the transportation of passengers, or, of like kind of property for a shorter than for a longer distance over the same line or out in the same direction, the shorter being included within the longer distance or to charge any greater compensation as a through rate than the aggregate of the intermediate rates. Section 4 of the present act places the burden upon the carrier to show cause in special cases, upon application to the Interstate Commerce Commission why they may be relieved and in most special cases the commission is not permitted to allow a rate that is not reasonably compensatory for the services performed. The ultimate and obvious effect of the repeal of these vital provisions of section 4 as embodied in H. R. 3263 is to permit common carriers to fix competitive rates between competitive points especially in cases where the railroads must compete with water transportation and fasten upon the farmers in the great interior of the Nation the burden of maintaining and paying the higher competitive rates from interior points. In this connection I will say, that if the railroads find it either advisable or necessary to operate on a basis of competition with other forms of transportation, they should be required to meet it under the provision of the existing long-and-short-haul clause. The further effect of this proposed legislation, known as H. R. 3263 is to transfer the obligation to show cause why rates should be changed from the carriers to the general public. It is common knowledge and an undisputed fact that the cost of transportation is deducted form the prices the farmer receives for his products, and is added to the price of everything he has to buy. There is, therefore, no single group in America that is as vitally concerned in the fairness and equitableness of transportation rates as the farmer. One of the chief reasons advanced by the advocates of this bill before this committee is that operating revenues of class 1 railroads have declined from $6,279,000,000 in 1929 to $3,271,000,000 in 1934 or a decline of $3,000,000,000 in a 5-year period. I wish to call to the attention of this committee that the operating revenue of American agriculture has declined from $8,254,000,000 in 1929 to $5,287,000,000 in 1934 which is a decline of $3,000,000,000 in a 5-year period, and, before a greater and especially before a more discriminatory rate structure is fastened upon the backs of the farmers of America, we must first consider the "ability to pay" of the farmers who pay the rates. I would also call to the attention of the committee that the Interstate Commerce Commission's findings of the value of the railroads of the United States, for rate-making purposes, was $24,431,083,269 in 1920. This figure has been increased by net additions and improvements since 1920 In the case of agriculture the value of all farm property has declined from $78,436,000,000 in 1920 to $37,027,000,000 in 1934. I want also to call it to the attention of the committee, that the farmers in the United States have lost more in annual revenue since 1934 as compared with 1919 than the total revenue of all the railroads in the United States in 1929. Whatever loss of revenue that the railroads may have sustained in these depression years is due to the loss of tonnage and not to the loss of investment values upon which rates are based. The loss of tonnage is only partially due to the diversion of tonnage from rail to other forms of transportation. The great loss of tonnage of the railroads since 1920 and especially since 1929 is due to the fact that farmers could not buy and manufacturers could not sell because farmers could not buy. That is the reason that railroads transported less goods and that competitive transport lines transported less. The proposed bill before this committee is a proposal to deal with an effect and not with a cause. It is in effect a proposal to deal with an emergency. To repeal the long- and short-haul clause of the Transportation Act will only create additional emergencies. It does not deal with the cause. The immediate problem of the railroads is the lack of buying power of the 32,000,000 people directly dependent upon the operating revenues from agricultural production. The lack of operating revenues and the actual operating losses sustained are the controlling factors which have cheated the railroads of America out of normal tonnage and therefore out of adequate revenues and profits. This is the reason why empty box cars are rattling on every railroad track in the United States from the terminal markets back to the point of production of farm products and why rolling stock is rusting and rotting in the freight yards all over the country. If the advocates of this bill and the Association of American Railroads were even intelligently selfish in their own interest and from the sole standpoint of profits, to say nothing about their responsibility as custodians of an industry essential to the public welfare, these advocates and the railroads would first directly seek the rehabilita tion of American agriculture and would not seek to punish and penal ize the industry from which the railroads themselves must derive their revenues and their profits, if any. These advocates and the railroads could well afford from an intelligent, selfish standpoint alone, to first use their good offices and influence to secure the immediate passage of the Frazier-Lemke Farm Refinanc ing bill H. R. 2066, now before this Congress, to refinance the existing farm indebtedness and make financially secure the custodians of the great basic industry and next to secure the passage of H. R. 4298, which is also before the Congress and which provides for securing to the American farmer cost of production prices for our farm commodities consumed within the United States. The passage of these two laws would increase the operating revenues of American farmers sufficiently to give them purchasing power enough to compel every railroad in the United States to operate its rolling stock, loaded to capacity to and from the market and manufacturing centers on a 24-hour schedule. The refinancing bill and the cost of production bill for Agriculture I have just referred to will do more to solve the problems of the railroads as they have been presented to this committee, than the proposals the railroads have here advocated. Therefore in presenting the position of the farmers to this committee, I want to make it clear that in opposing the repeal or modification of section 4 of the Interstate Commerce Act, we do so because the proposed modification or repeal of section 4 is not only not a remedy for the railroads that advocate it, but it would have the effect of imposing upon Agriculture a financial penalty in the way of ultimate discriminatory rates which agriculture is unable to bear. Mr. PETTENGILL. Are there any questions? Who is next? Mr. PETTENGILL. Mr. Ross is not present. (Mr. Frank Lyon submitted the following statement for Mr. Reginald G. Narelle:) I am appearing here in behalf of the Canal Carriers Association, New York, a voluntary association of practically all of the operators engaged in transportation from the North Atlantic ports to and from the Great Lakes via the New York State Canal system. Its membership includes common, contract, and private carriers. The members of this association wish to go on record as being emphatically opposed to bill H. R. 3263. This bill, known as the Pettengill bill, proposes to amend the fourth-section of the Interstate Commerce Act by relieving the railroad of the obligation of observing the rates at farther distant points as maximum at intermediate points, and substituting therefor the aggregate of intermediates at any intermediate points as maxima. The present provision of the act was incorporated as a result, primarily, of complaints from interior cities against the practice of rail carriers publishing low rates between competitive points, maintaining higher rates at intermediate points, however, the result of this practice, and a substantial reason for its existence, was to dispose of water competition. To avoid a recurrence of this situation the law was modified, and in 1920 was further amplified in the following respect: 66 * * * The Commission shall not permit the establishment of any charge to or from the more distant point that is not reasonably compensatory for the service performed." Congress evidently felt that the lower costs of water transportation would be a sufficient safeguard to the water lines under this provision as against the higher costs of the rail lines. However, this result has not been achieved as Congress had expected for the reason that various theories of the cost of hauling added rail traffic have grown up, the principal one being the "out-of-pocket" cost theory, in which certain relatively fixed costs are given no consideration in the determination of the cost of moving added rail traffic on the premise that they would have to be met whether the traffic moved or not. It is estimated that the out-of-pocket costs of handling added traffic is 45 to 50 percent of the average revenue derived from all traffic. Without taking direct exception to the theory of relating cost to revenue with the resulting vicious circle, the ratio of 50 percent is manifestly imposing a burden on other articles of commerce or the proportion |