Evening star., 1933-05-28
BY WILLIAM HARD.

1t becomes quite clear that all the
economies which are to be effected IN the
operation of the Federal Government
will be abundantly needed in order to
compensate the Government for the
debts to it, which apparently are not
going to be paid.
On the one side of this account are
the Governments employees, for in
stance, and the Governments ex-sol-
diers, whose compensations have been
and are to be-diminished. On the
other side of it are certain European
governments, for instance, and certain
American railroads. whose debts to the
Government seem likely to be similarly
diminished.
BY diminishing what is coming IN.
while at the same time diminishing
what is going out, the Government
Treasury will be able to run fast and
still stay in the same place.
Foreign governments on June Is Will
owe the United States Treasury some
S143, 100000. The best professional Eu-
ropean opinion is that on that date they
will pay approximately $l43 ,000,0 900 less
than that sum. This will neatly set off
all the savings made by that time In
the wages and other emoluments OF
Government employees and veterans.
X X
The railroads of the United States
will then take up the task of carrying
forward this development of fiscal SCI
ence They owe the Federal Treasury
some $3.50, 900 900 in consequence of the
existence of the so-called "recapture
clause" in the transportation act OF
1920.
The solution is simple. Let the re
capture clause" be repealed. And bill
to that effect is accordingly at once in
troduced into Congress, where it IS
merged into the administrations gen.
cral plan for railroad reform. and
stands an excellent chance of passage.
The argument for the passage of it is
formidable. 1t has been stated weight
lily by the eminent Joseph B. Eastman,
member of the Interstate Commerce
Commission, and by the almost equally
eminent Harold G. Moulton. director OF
that great economic research agency
called the Brookings Institution of
Washington.
The "recapture clause" involves a
vast amount of intricate bookkeeping.
You have to value" the railroads. This
requires engineers, and it requires law
yers. then you have to litigate with the
railroads regarding the accuracy of
their valuations" You have to hire
lawyers who will argue with the lawyers
Of the railroads all the way up to the
United States Supreme Court. You
must also employ, from start to finish.
a large staff of accountants. At the
end of this process you are ready to
put into actual practice that famous
clause of the transportation act which
is sometimes denominated by recap
plo nti m
familiarly cited as Fifteen A." 1t says:
IF any carrier received for any year
a net railway operating income in ex-
cess of per centum of the value OF
the railway property held by 1t in the
service of transportation, one-half OF
such excess shall be paid to the Inter-
state Commerce Commission for the
purpose of establishing and maintaining
a general railroad contingent fund"
X X X
That fund, according to the law. was
to be used for assisting the country's
weaker railroads through loans. The
stronger railroads were thus to contrib
ute to the welfare of the weaker rail-
roads
Another plan to that end has since
been devised. The Reconstruction FL
nance Corporation of the United States
Government now lends money to almost
every sort of railroad, weak and strong.
1t is upported-ultimate the tax
payers. Where. then, is the need OF the
railroad contingent fund" contem-
plated by the transportation act OF
1920?
If the taxpayers will help the rail-
roads in general, why should the
strong railroads help the weak rail-
roads? That is the basic question
which naturally occurs to Congress.
A subsidiary but less ironic and more
workaday question is stressed by Mr..
Eastman and Mr. Moulton. They both
think that the legal struggle with the
railroads on valuations" and recap
lures" is hardly worth the Pickering
and dubious candle of financial results
produced.
Mr. Eastman says: THE difficulties.
disadvantages and dangers OF recapture
far outweigh its possible advantages.
= . To my mind one of the most
important practical objections to 'valu-
alton is the endless litigation to which
it leads"
Mr.. Moulton says: aside from issues
OF principle, the 'recapture' plan is open
to numerous practical objections. The
first of these is the endless litigation
which is inevitably involved"
X X 4 x
In other words, the lawyers of the
railroads have just simply got the In
terstate Commerce Commission plumb
tired out. Some members of Congress,
it is true, are urging the Interstate
Commerce Commission to revive itself
and resume the struggle. Among them
is Representative May of Kentucky. He
says:
THE railroads owe the railroad con-
tingent fund of the United States Gov
ernment some $3.50 100000, and they
also owe the Reconstruction Finance
Corporation of the United States Gov
ernment some $3.50, 100000. Each sum
may be difficult to collect. Each sum
may at this instant moment be impos-
sible to collect The depression. however,
will presumably some day cease. No one
state of things has ever lasted forever.
Prosperity may recur. 1t may then be
feasible for the railroads, or for some
Of them, to pay all, or part, Of what