The Tabor independent. [volume] (Tabor, S.D.) 1913-19??, 1918-01-10
THORNE'S LOGIC
BEAT RAILWAYS
Iowa Rate Expert Largely Re-
sponSibIe for Government
Taking Over Operation
of Roads.
QUESTION OF FINANCES
Argument Showed Inadvisabil-
ity of Raising Rates or At"
tempting to Sell New
Securities.

Washington, d. c., Jan. S.-The man
who precipitated government operation
OF the railroads was undoubtedly Cliff
ford Thorne, OF Iowa. His argument
before the Interstate Commerce COM
mission in the Is per cent case heard In
November. established that the rail-
roads were incapable Of escaping from
their own enmeshment. He showed
mat they were incapable of meeting the
physical demands upon them; that 1t
was impracticable for them to borrow
honey in competition with the federal
gov eminent, at least in any year when
the government might require, as 1T
probably will this year require $~2O,OO0,-
00O, 000.
As the annual income of all the citi-
zen5 Of this country is at
$40. 900. 900, 600, if the United States took
for itself $40, 900, 600, 900, half the full in
come Of every one of its citizens, then
ii did seem an impossibility to levy
such vast additional sums as the rail
road managers were seeking. me
Is per cent they were asking was equiv
alent 20 8 per cent interest of $S,000,-
000. Next year we may be paying in
ttrest on the $40. 900, 100000 of govern
ment debt, and it was proposed to add
$1,000, 000, 900 of railroad stocks and
bonds 10 paw interest on.
Mr.. Thorne went on To show that the
increases of income already allowed by
the Interstate Commerce commission
afforded a net operating income above
operating expenses of all kinds, accord
ing TO the railroads own exhibits in the
case, were $451, 900, 900 more in 1916 than
they had been in 1850 per cent
greater. 1t was 500, 00O, 900 greater
than any previous year in the history
OF the railroads, and he 1917 income
Fiscal year, net income was greater
thar any other year in the history OF
the railroads. except 1916.
Poor Time TO Raise Money.
President Rea of the Pennsylvania
railroad, in answer to a question by Mr..
Thorne, declared: The railroads should
not go into the markets to sell securi-
ties while the government was trying
to secure money to prosecute the war;
Mr.. Thorne: land that answer holds
whether this advance 05 per cent? is
granted or not granted
Mr.. Rea; 1T does
Having shown that the railroads
could not get capital by bond sales. Mr..
Thorne proceeded with a powerful ar
gunent against the policy and legality
of making additions and betterments
required by the railroads out OF earn
ings. Before that could be done, he
declared, every decision of the supreme
court Of the United States that had
ever been rendered when that issue has
arisen; must be overturned" Additions
and bettermentS must come out OF new
capital. "If you advance freight rates.
said Mr.. Thorne again, to the Interstate
Commerce commission, for the specific
purpose of building improvements out
of earnings, it will mean that the pub
Tic must not only pay all the operating
EXPENSES of the railroads, give them
enough funds in freight rates and pas
senger fares to maintain them up tC
100 per cent efficiency, to pay all the
interest on bands and debts, to a
them their regular usual dividends.
grant them a surplus for tiding them
over lean years. pay interest on nom
revenue producing construction before
it yields revenue. you will require the
public to build railroad properties for
private companies. and then pay a re-
turn everlastingly upon what we build"
Had to Go to Congress.
Having established in logic and in
law that the railroads could not Dor
row money and could not compel the
public to give them the money to make
the investment they want to make OF
hetterments, Mr.. Thorne proceeded to
suggest that the commission could not
afford. the relief: that the railroads
must go to the congress for it. And
he concluded that IF the government
loaned money to these companies with
which to build additions and better
mcnts, the people will get back every
wear in interest what the money costs
the government and at the maturity
of the loan the government will get
back the principal
This is almost the identical language
used in The Tribune ON several occa-
sions preceding the climax, but the diff
ference is that Mr.. ThOrne was making
his argument in he court Of last re-
sort for the railroads.
Mr.. Thorne made one additional
argument, to the effect that if the gov
takes over the operation of
the railroads for the period of the wa
and guarantees the dividends that were
paid during the pre-war period the gov
crnnlent would be entitled to the profits
earned over and above the dividends,
for it will be substituting a government
bond in effect for railroad stock. In
surplus his would mean net earnings
that would go to the government of APP
proximately 800, 000. 900 annually in Of
fetal Classification territory alone. "Of-
fetal classification territory" affords
only about half the possibilities for
profit suggested by Mr.. Thorne.
President Wilson has since adopted
this view of the surplus and in the draft
of a bill to carry out his plan it is pro-
posed, to take, as belonging to the gov
Crnment. whatever earnings the rail-
roads may make over and above the
average earnings for the thrce-year
period preceding the governments
operation OF them.