New-York tribune., 1920-03-13
Rail Problem
Develops Into
Guessing Game
Future of Roads Depends
Solely Upon Exercise
of Judgment By Inter
state Commerce Board
No Guide for Rate Fixing
Earning Capacity, Valuation.
Cost of Material an d
Wages All Are Uncertain
BY Stanley Frost


Special Dispatch to The Tribune
WASHINGTON, March 1.-THE fu-
ture of the railroads in tho United
States, for some time at least, will de-
pend on what really will be a guessing
game by the Interstate Commerce Com
ferred to as the exercise Of judg-
ment." In fixing the new freight rates,
on which will hang the railroads sta
bility, credit and power of growth, as
we'll as efficient operation. the COM
mission will have to exercise judgment,
or guess as to almost all the important
factors involved.
1t will have to guess at the present
earning capacity Of the roads. at the
valuation on which they are entitled to
pay individens, at the wages they will
have to pay and at the prices of the
materials they will have to use. From
these four guesses it will have to figure
what rates will bring the average earn
ings Of the roads to 5la or per cent of
the value.
First Move Uncertain
1t Is uncertain 'under the new law,
ing the rates will come from the COM
mission or the roads. Previously it has
devolved upon the roads to ask for such
increases, and the burden of proof that
they were needed has rested on the ap-
plicants But the new law specifically
directs the commission to fix rates at
certain level, and seems to imply shat
it should take the initiative in doing so.
In general the new law gives the
commission a latitude Of action and in
itiative which is far wider than before,
leadership and helpfulness that, II TAX
en- advantage Of, will make it very diff
ferent from the semi-judicial body of
the past.
The commission can make or, break
the roads, and on the result will de-
pend whether they continue under pri-
vate control or whether the govern
ment ownership experiment will be
iorced upon the country after few
years. Undoubtedly the government
ownership advocates, who are anxious
20 see the present regime fail, will do
all that they can, and it is much. to
confuse the commission and put pres
sure upon it to hamper the roads
There are no figures which Will per,
nit scientific fixing of rates, In
estimates made in previous articles the
balance sheet for 1919 and the book
valuation of the roads have been used,
but neither is satisf factory and. both
will have to be amended by the judg
nent of the commission.
In 1919. there wereetwo heavy slumps
n traffic that added an unknown num-
her Of millions to the deficit. Also
there were wage increases that went
INTO effect during the year, and u
period of traffic that was close to the
record and will not be repeated every
ear.
Old Figures Valueless
There is little likelihood that the
conditions will be duplicated for many
Years. The figures of 1918 are Of no
value-that was the war year. And
almost every item of cost and income
mas changed since 1917. So there is no
way Of reaching an accurate statement
of the earning capacity of the roads.
Probably the 1919 figures will be used,
with notifications dictated by the
Judgment of the commission.
An attempt to fix the value of the
roads meets equal difficulties. Both de-
ductions and additions must be made
from and to the book valuation of
twenty billions. The attempt to have
an actual appraisal ef the roads has
pceH SoluE On IOr Years, DuC is lar
from complete. After it is finished the
commission will have to decide such
questions as how much to allow for the
investment necessary to get line in
running condition, build up the organi-
zation and establish business connec-
tions-all costly processes.
Credit n Vital Need
Credit, as has been shown. Is. the
most vital and immediate of the roads
needs. The restoration of competition
insures that they will do their best
both to get business and to hold it
Through improved service. The new
laws, and to some extent the changed
attitude Of those railway executives
who had been too engrossed in the
selfish interests of their roads, will
permit the advantages which have been
shown in centralized control to be
joined to the greater advantages of
private operation.
especially to bring the roads back to
condition where they are equal to the
needs OF the country, requires billions
OF dollars. Whether it is two billion
or SIX, they must be borrowed from
,he public. And the public will not
lend until 1T is assured that it will get
s.. l's money back with interest. This de-
their financial stability.
The decision of the commission on
rates, upon which all Of this will de-
pend, will almost certainly be handed
down some time in August, for unless
: the rates 60 up on September / the
roads will go into that month with
assured deficits and approaching bank
ruptcy.
1t probably will be four months NOR.
before the results Of the decision will
become apparent. So the date at
which, at the earliest, railroad credit