The Washington times., 1922-11-18

o, anu ueclhflnS tnat many fOaus
are tacing financial starvation" I"
sne secretary In making public ex.
acts from his forthcoming annual
report, says:
IF the causes Of financial starva.
tion were solely a question Of war
and OF hard times, we could afford
70 wait for a natural solution. but
they. are not. The transportation
act or 1920 affirmatively declared
that the rates should yield a fair
return on the aggregate real value
OF the railway properties las de.
tsrmined by the Interstate Com
merce Commission) used in public
service and operated under honest.
efficient and economical manage
ment.
"It provided that the fair return
curing the first two years should
be 5h per cent on the railways as
q a'whole. or In each Of the major
groups In which the country mS Sht
be divided In the administration OF
the law. and that during this period
there might be added 1h per cent
Tor rehabilitation. At the expira-
ton OF this two-year period the
Interstate. Commerce Commission
placed the fair return at the rate
per cent less one-fourth per cent to
cover income taxation. The law,
however, further provided that any
particular carrier which earns IN
excess of 6 per cent per annum
shall hand over one-half of that ex-
cess into a contingent fund to be
administered by the Interstate Com
merce Commission ''in furtherance
of the public interest in railway
transportation" either by loans to
carriers or by the purchase OF trans
portation equipment and facilities
and the leasing of the same to the
carriers. The carriers have never
earned these amounts and the fail
ure of earnings without charge on
the Government is complete dis
proof of the current fiction that
earnings are guaranteed"
Government Responsibility.
Furthermore, the immediate eft.
feet Of this recapture provision
would be that whereas the strong
and fortunately situated railways
are able to earn in excess OF per
cent and are therefore able to Sc
cure finance for betterments. the
very fact that they did earn in
excess Of the average would mean
that the weaker roads were unable
to earn up to the average. 1t may
be accepted as 4 general PROPOSE
ton that carriers earning material
ly below the So per cent return are
not in q position to command the
confidence of investors which Is
necessary for expansion to meet
the public demand. The contingent
fund makes available money which
such carriers may borrow, provided.
however, that they are able to give
the necessary security for repay.
ment. 1t is easy to comprehend
that such q contingent fund may
serve the purpose Of bridging car
riers over temporary difficulties, but
it Is more difficult to understand
how a carrier which, though 1t
may be very essential to it's part
Of the country, is financially a
chronic weaklings, Is to be made
strong and capable by becoming
more deeply involved
II there Is any merit In this de-
vice, II seems not to extend to
those anaemic carriers that are
unable to give the Government the
color Of assurance OF repayment.
This device also carries q certain
liability to the Government in that
carriers that borrow from the fund
and fail to pay are likely to be-
come Government railways through
their financial difficulties. 1t would
seem that the first of the two uses
20 which moneys OF the CONTINGENT
fund may be put holds out better
promise OF furtherance Of the pub
6c welfare. However. the creation
N such q national reserve Of trans
nortation equipment has not been
seriously undertaken. It would
secn that our dire distress In. time
~ car shortage and, at times, mo-
tive-power shortage would strongly
argue for the creation of such re-
seryes. Rolling stock for limited
use during 60 to 30 days Is prob
shlv unprofitable to any railroad,
and certainly the stronger railroads
cannot, and should not, be expected
10 provide II for the weaker ones.
Remedy Imperative.
There can be no question that
action In some direction 10 i'm
nerative, II industry and commerce
Are not to he further strangied by
= shortage IN transportation. what.
aver may have been the siSs OF
galway finance In the last gener-
alton, We are not only SUFFERING
from them, but we have maintain
al an attitude of bitterness in our
nublic relationship to our railways
for which we pay thrice over In
nrevention Of their proper develop
we must have increased trans
cortation, X we are to maintain our
srowtng productivity. We must
therefore find way out OF the
Svcle OF systematic starvation of
isrre part of our mileage and the
Senudation Of our railway man.
rcrs OF their responsibilities and