The citizen-Republican. (Scotland, Bon Homme County, S.D.) 1???-19??, 1918-01-10
1HORNE s LOGIC
BEAT RAIL WAYS.
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.
QUESTION OF FINANCES

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 it
was impracticable for them to borrow
money in competition with the federal
government, at least in any year when
the government might require, as it
probably will this year require $20,000,-
10000
AS the annual income of all the citi-
zens of this country is estimated at
$4,000, 100000, if the United States took
for itself $20,000,000,000 half the full in
come of every one of its citizens, then
it did seem an impossibility to levy
such vast additional sums as the rail
road managers were seeking. The
Is per cent they were asking was equiv
alen1 TO per cent interest of $S,000,
600. Next year we may be paying in
terest on the $4,000, 100000 of govern
ment debt. and it was proposed to add
100000 of railroad stocks and
bonds to paw interest on
Mr.. T}lorne went on to show that the
increases of income already allowed by
the Interstate Commerce commission
d
operating expenses Of all kinds, accord
ing to the railroads own exhibits in the
case, were $451.000,000 more in 1916 than
they had been in 1850 per cent
greater. 1t was 100000, 600 greater
than any previous year in the history
of the railroads, and the 1917 income
(fiscal Year, net income was greater
than any other year in the history of
the railroads. except 1916.
Poor Time to Raise Money.
- xr11 p,,ia
railroad, in answer to a question by MI
Thorne, declared: THE railroads should
not go into the markets to sell secur1-
ties while the government was trying
to secure money to prosecute pros the war; var
whether this advance % per cent? is
granted or not granted"
MIR. Rea: 1T does.
Having shown that the railroads
could not get capital by bond sales, Mr..
Thorne proceeded with powerful ar
gument against the policy and legality
of making additions and betterments
required by the railroads out OF earn
ings Before that could be done, he
court of the United States that had
ever been rendered when that issue has
arisen, must be overturned" Additions
and hetterments must come out OF new
capital eff 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
lie 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 pay
them their regular usual dividends
grant them a surplus for tldlng them
over lean years, pay interest on nom
Yrna11niYoo 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 on
betterments, 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
ments, 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 Inc lTlDulle OH several OCCa-
sions preceding the climax, but the diff
ference is that Mr. Thorne was making
his argument in the court Of lest re-
sort for the railroads.
Mr. Thorne made one additional
argument, to the effect that if the gov
ern1nent takes over the operation of
the railroads for the period of the war
and guarantees the dividends. that were
paid during the pre- war period the gov
eminent would be entitled to the profits
earned over and above the dividends,
for 1t will be substituting government
bond in effect for railroad stock. In
surplus this would mean net earnings
that would go to the government of ap-
proximately S10O,O00.O0O 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 q. bill to carry out his plan it is pro-
posed to take, as belonging to the gov
eminent, whatever earnings the rail-
roads may make over and above the
average earnings for the three-year
period preceding the governments
operation of them.
nnIrIcu nkclIhI TICc