The Washington times., 1911-02-24

Raise Not Justified.
Mr.. Lane finds that the primary argu-
mCnt of the carriers, that they needed
more revenue because the cost of ma
terials, wages, etc, has been increasing,
had been overstated by them. Likewise
he finds that the charge of the carriers
that they needed more revenue in -der
10 command public confidence in their
securities and enable them to raise
needed capital, was not justified. On
both these points the commission pre-
scnts analysis of the reports and testi-
mony. TO sustain its conclusion adverse
to the roads The commission con-
Cludes thar in attempting under the
circumstances to raise rates, the roads
were aCtuated less by need of the
money than by desire To ascertain
what was going TO be the policy of the
commission toward them in the future,
under the burden of proof" statute.
0'Spposing the claim that the credit of
the railroads is menaCed by the restric-
tion on their right to increase rates, the
decision finds that in the last ten years
the railroads of the country nave been
able to float s., 4,5Gu, ,0OO, 900 of bonds; six
~ pical Western roads are shown to
have borrowed $i5qOgO,O 600 In the same
period. The commission hnds thls con.
elusive refutatiOn of the argument that
credit has been impaired by any eX-
Cesses of regulation. .
80. Surpluses Healthy.
Again. the railroads had argued that
they mdst be allowed to accumulate
larger surpluses, in order to assure finan-
cfaI stability. The commission replied
with an analysis of the surplus showings
of six great Western systems-the Atchi-
son, Alton. Northwestern, Burlington.
St Paul, and Rock Island-and found
that in 1901 their aggregate surpluses
we're sos, 600, 600, and in 1910, S242,0OO,O0O.
The commission concludes that this is
quite enough for a healthy increase Of
surplus.
Nothing in the decision is of such far
reaching significance as the attitude of
the commission toward the capitalization
Of unearned increment. The Burlington
system insisted that its value was vastly
greater than its normal capitalization,
and that it was entitled to earn returns
on the value. The commission finds
that If a stoCkholder takes his money in
dividends and later stock is issued to
the same amount, then it is within the
power of the directors indefinitely to in
crease rates. The decision does not men
tiOn such an element as unearned in
Crement: but the doctrine is laid down
that uneaTned increment may not be
capitalized and made the basis of future
earnings and higher charges. This is
widely regarded as he most serious and
difficult question confronting the whole
policy IF railroad regulation under pri-
Vate ownership; and the decision thus
marks a departure in policy that will be, !
if finally established, Of the greatest
iuteres. to public and owners alike.
The commission finds, contrary to |
widely accepted understanding of the |
question, that the cost of materials and |
supplies has not increased. This is a |
highly significant finding against the !
roads, for they have predicated their |
claim for higher rates more strongly on |
the claim of such an advance. than on |
any other one ground except the in |
crease of wages. 1t is held that wages |
have increased considerably" and fuel |
somewhat"
Board to Make Rates.
Carried to its logical conclusion, the |
decision means that railroad rates in
future will be made by the commission. |
No advance may be undertaken without |
the commissions prior and affirmative |
consent after investigation. The COM |
mission may reduce rates; it alone may |
permit their advance. The entire rela- |
ton of the public to the question of |
rates is radically changed if this policy |
is finally sustained. Without doubt, |
the roads will appeal and carry the |
case to the last resort, unless they de-
eide that the future may present set |
of facts more satisfactory to their pur-
poses. To acquiesce in the present de-
cisiOn, even temporarily, may fairly be
regarded by them as calculated to |
weaken their case in a future appeal, |
and therefore it may safely be expected
that they will appeal with the least
possible delay.
A notable feature about the decision
is that the commission follows the rea-
sOning of such lawyers as Louis d.
Brandeis. Judge S H. Cowan, Frank
Lyon, and Clifford Thorne, all of whom
appeared against the railroads, and that
practically the entire line Of pro-rail-
road reasoning is rejected in toto.