Webster City freeman. [volume] (Webster City, Hamilton County, Iowa) 1884-1946, 1920-05-24
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BROOKHART DECEIVES.
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I01UOhIIXXn Elv ELC,
Sioux City Journal: In the interest
of fair play and public truth attention
should be directed to the facts involved
in the senatorial candidate discussion
of the Cummins railroad law, now
under attack by Col. Smith w. Brook
hart. Whether he did so Intentionally
or inadvertently, Col. Brookhart left
his hearers at the public address he de-
liyered in Sioux City under the impress
sion that the government had perma-
nently guaranteed an income OF 5h or
6 per cent income TO the railroads. Ger
tainly that a the impression he left
from his private conversation. That is
not true. The law guarantees an in
come during the first six months the
roads are under private operation be-
ginning at the time they were turned
over by the government. That period
was fixed so as to give the interstate
commerce commission time to work out
rates which would be fair to the rail
roads and not more oppressive to the
public than necessary. Sections G6 and
u Of the act read:
Sec. &C, The United States hereby
guarantees
Sec. G7. With respect to any carrier
with which q contract = has
been made fixing the amount Of just
compensation under the federal control
act (the act taking Over the railroads
by the government) that the Operat-
ing income Of such carrier for the guar
antee period shall not be less than one
half the amount named in such con-
tract as annual compensation.
Sections GO and 62 read:
Sec. TO. When used in this section
Sec. G2. Tire term guarantee per-
iod' means six months beginning
March l, 1920.
The government guarantees for the
six months beginning March /, 1920,
the same percentage income that it had
paid the roads for their use during the
government operation period. 1t ex-
pressed it differently, by making the
lump income for six months One-lialf
that Of a year under the contract.
That is ell the guarantee there is in
the law.
Col. BroOkhart implies that the in
terstate commerce commission is an
powdered to allow an income OF 5h
or 6 per cen to the roads. The differ
ence Of X per cent comes from the fact
that out Of the total income OF the
roads that amount shall be taken over
by the commission to be used in what
Col. BrOOkhart calls "nOn-prOductive
improvement" Six per cent is the
maximum rate Of income that may be
earned by any road. SO far rs the
dividends are concerned, it is only 81
per cent. His statement of fact is cor
rect. but silence on this point may east
~ leave an entirely false impression.
Congress fixed the maximum rate of
income. but it neither guaranteed that
nor any other income after the guar
antee period Of six months. Whatever
the roads earn over the maximum in
come is forfeited to the government.
The next question to be determined
is whether the rate is fair and honest.
Five and one-half per zen income on
invested capital where there is as much
hazard MS in railroads is not consider
ed too high, even by such radical rail
road antagonists as Senator Robert NJ.
La Toilette. He holds that the actual
inv estment in railroad property should
have Il fair and just remuneration. II
there IL nc watered stock in the roads
the maximum income allowed under
the Cummins law would not be cOnsid-
cred unreasonable. But it is charged
that the law ignores the watered stock
and permits the income III the total
sum Of railroad stocks, bonds and other
evidences Of investment. The other
side of this argument, and the u
which opponents Of railroads urge, is
that the physical valuation Of the prop
critics OF the roads should be taken az
the basis Of the incomes rather than
the certificates Of investment. The in
terstate commission nearly
eight years ago began II physical valua-
ton Of the roads, and at the end OF
that time has about half completed its
task. 1t is conceded that it will re-
Quire. fifteen years to accomplish this
undertaking and that when completed
the valuation will be worthless because
Of the changed valuations at that time
of the first lines valued. and that this
difficulty would constantly repeat itself
should an attempt be made to deter
| mine that basis for income rate purs
poses. 1t is foolish and ~demagOgic to
argue in favor Of what is an impOsSi-
bility.
But there is another feature of the
capitalization of unearned increment
and watered stock. The estimated
value of the railroads OF the country
is sd OO,OOO,OOO. 1t is contended that
OF this amount $4,000, 100000 is water
ed stock. The last figures are deduc-
tons and different deducers reach diff
ferent results. The figures cited are
those Of Senator La Toilette, who natu-
rally would make them as high as
the facts would warrant. Permitting
income on this $4,000, 100000 is in
creasing the burden Of the public ap-
proximately one-sixth, OF II per cent.
During the government operation
period the wages Of railroad employees
we're increased 32.9 per cent, or almost
One-third. 1t is true the two have no
direct connection. as the maximum i'll
come permitted the roads is net: that
is, after paying operating expenses.
But when all the facts are disclosed
they show that the question is not one