The producers news. [volume] (Plentywood, Mont.) 1918-1937, 1928-03-02

value of all railroads in the United States
at So, 100000. Leading financial au-
thorities have estimated that the rallroaos
cannot be reproduced for less tn iae @oO,a
000,OOOOOO Here, then, is dli1erencee
of 1872 900 900 000 The principle that
governs the valuation of the OFalon road
must prevail with all other roads totanng
100000 miles. That principle is to be oe-
termined by decision of the supreme
court of the United States. Truly, the
stake is almost beyond comprehensl0n
The vital interest of the pubic
found IN law which requires the hteF
state commerce commission to fix freight
rates which will yield fair return upon
the aggregate value of the roads Ii the
reproduction cost theory of the r1 eao;oa -
accepted by the supreme court lITlsnC
rates calculated upon that basis VIII De
nearly doubled
"It would seem that the interstate COM
merce commission is fighting for the peo-
pie in a battle involving the hugest stake
ever known In a law suit"
If the United States Supreme Court holds that
the valuation of the railroads for rate purposes are
the cost value, namely what it cost to build them,
and that the railroads are only entitled to six per
cent dividends on that valuation, it will mean the
squeezing out of the water in railroad valuation
the stock will fall to where the earnings allowed
for dividends will pay six per cent on the cost of
this stock, and, providing the railroads are pro-
perly managed, will mean reduction of freight
rates-if the Interstate Commerce Commission and
the Courts would only hold that the cost of build
ing the railroads determined upon for dividend
purposes must be reduced by the amounts of
bonuses received from the Federal and State gov
ernments and from municipal sources, they
should, then the fright rates would come down
some more. The reduction of freight rates would
benefit every farmer, every industry in the nation
and would stimulate activities in every line. Many
business activities today are prohibited by exces
slve freight rates-every farmer, every consumer
pays tribute to the Gods of railroad generalization
On the other hand, if the Supreme Court of tht
nation holds that the replacement costs of th'
railroads are the true valuation thereof, and tina
the stockholders in these railroads entitled tt
six per cent on that valuation under the law, the
the nation by fiat, will have written a par valu
into the water that is in the railroad capitalize
ton, and means that the freight rates must be in
creased about three folds in order to pay it. whic
in turn will be more than the traffic will bear an
will mean that all short haul freight will be haue
by truck and that the railroads will go absolutel
into bankruptcy; that the government must soone
or later take them over
And if again, the courts hold to the origin;
cost theory the stockholders will want to get ri
of their half or third value railroad stock with il
small and precarious dividends and away from IL
agitation for lower freight rates and the repe
of the Esch-Cummins law, and the industrialis
into whose production costs must go freight cost
with its attendant handicap in world competitio
Will insist on lower rates along with the farm
and the consumer, then will come a nation wi
propaganda for the government ownership of ra
roads from the very sources that have alwa
heretofore opposed it.
same place governments ownership of the ra
roads and their operation at cost for the bene
of all of the people.
The railroad stockholders and bondholders wol
today gladly exchange their stocks and bonds
United States bonds with their tax exempt fl
lures and their sure interest, uninvolved with
ministration troubles in any way.
So the naturalization of the railroads is only
question of time-there are two horns to the
lemma and both have the same name.