The Republican journal., 1922-10-12
THE TRUTH ABOUT THE
RAILROADS
By Everett Sanders, Representative in Con.
ere,s from the Fifth District Of Indiana

1t is difficult to understand why there
is an insistent effort to lead the public to
believe that the government is guarantee
ejnp returns to the railroads We have it
untruthfully reiterated time and time
again that the government guarantees to
the railroads fixed return under the
transportation ac; of 1920, known as the
Esch- -Cummins Act. The only guaranty
in that act expired, September l. 1920.
over two wears ago. This was guaranty
of the return fixed by President Wilson
for period of six months after federal
control ended, the period necessary for the
Interstate Commerce Commission to es-
nbsh the new rate structure In other
words, we simply carried on federal CON
troll as to railroad revenues Tor period OF
six months. This WIS absolutely neces-
sary. for the freight-rate structure at the
time federal control terminated lacked
| over million dollarsa day paying operat-
| ine expenses in the hands of the govern
ment Not one penny has been paid by
the United States government for any
4 period after September 1, 1920, more than
"A two years ago. And the government is
not Obliged to pay one single penny for
any period since that date
Some of those who favored government
ownership of railroads or the continuance
of federal control in their disappointment
in not getting what they desire have
continued circulating the false statement
that the rule of rate making was gua-
ranty. | denounce this statement as an
unqualified fabrication. The Esch-Cum-
Minis Act required the Interstate Com
merce Commission to establish rates so
that the carriers as Whole-or as a whole
in each of such rate groups or territories
as the commission may from time to time
designate-will under honest, efficient,
and economical management and reason
able expenditures for maintenance of way,
structures, and equipment earn an ag
gregate annual net railway operating in
come equal as nearly as may be, to fair
return upon the aggregate value of the
railway property Of such carTiers."
For period ending March last, the
act specified that fair return was to be
per cent on the property value. This
period ended more than six months ago,
but it was never meant as a guaranty and
can not possibly be construed as gua-
ranty. For the first year after the estab-
hshment of the rate structure the rail-
roads earned less than 3 per cent on the
value of their property as fixed by the In
terstate Commerce Commission The
roads suffer the loss, however, and the
government has not agreed to and will
not make up the difference as would be
the case if there were a guaranty. The
Interstate Commerce Commisson at the
end OF the two year period fixed the rule
OF rate m king at 3-4 per cent return on
the property value.
There is an important provision coupled
with the rule of rate making, that where
any road earns more than per cent, one
half of the excess shall be paid to the
United States government.
Although freight rates have been great
" reduced they are still considerably
higher than the rates were before the war
The demagogue declares this is due to the
transportation act. The claim is wholly
without foundation.
Whatever may be said of the wisdom
OF these provisions. it can unquestiona-
oly be said that neither the guaranty for
the six months nor the rule of rate max
ing is responsible for high freight rates.
The obvious proof of this is that the six
months guaranty was not added to
freight rates, but was paid out of the
Treasury Just like the deficit under fed
eral control and the rule of rate making
did not yield per cent. but less than
per cent, on the property value of the
roads This rate of return would have
oeen commanded by the provision of the
FEDERAL and State Constitutions against
conhscation of private property.
There is Just one thing that is mainly
Iesponsible for high freight rates and
mat is the high operating expenses of
me roads. If the rates were reduced so
mat the roads would not receive any net
return on investment the reduction
would not be substantial one and would
ave but little relief.
from September /, 1920, to August 81,
.sNi' the year following the guaranty Pc
Ioo, the total operating revenues of the
c. lass ! railways, which represent 95 per
~. ~ OF the revenues, was Sc, O45, 1873, 10o.
Ha tiat, there was a net railway operat-
aUs aus Income of $3.50. .655. OPT. This is but
p; r.;, per cent on the property value of the
;hLoaos. ;noh'os. The total operating expenses,
i,aulhg is taxes, were S5, 5l4, 682, l73. 1t
hear That relief is not in providing less
r.a san the 80 per cent return, which is
sttaesented by the $500, 600, 600, but in
rsu.e rs,sckine the operating expenses which
nsia nsipa,esent s.. SOC. 600, 600 of the amount
t;m.i IN rates. The latter is about eleven
Ee greater than the former.
temh tne II months period from Sep
~, oer l. 1921. to July 81, 1922. the rate
year was 6.27 per cent. The short