Evening star., 1938-06-07
RAILROADS FACE
BIC 1888 DEFICIT
$408, 900, 900 Loss Would
Far Exceed Worst of
1929-1933 Slump.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, June 7,-Conditions
prevailing at the present time indicate
that operating revenues OF the rail-
roads this year may show sufficient
curtailment to erase the entire gain
made during the last four years of
recovery from the bottom of the 1929
1888 depression, according to the Alex
ander Hamilton Institute.
During that depression revenues de-
elined from $6,280, 1000, 900 in 1929 to
s3,095, 100000 in 1888. In the subse-
quent four-year period of expansion,
revenues rose to S4,166, 100000 in 1897.
In the first quarter of 1888 revenues
declined to an annual rate of S3,253.-
000,000, a figure so close to the 1888
low that there is good possibility
that actual revenues this year will
drop back to that low in view of the
unfavorable state Of affairs at the
present time.
Even if actual revenues equal the
first quarter rate. the prospect is that
the railroads will end this year with
large deficit. On the basis of the first
quarter figures, railroad expenses will
be at such high level that operating
income will amount to only s77,000,- :
600. This will fall so far short of meet
ing such items as interest charges
that deficit of s40s, ,00o,0 is indi-
Gated. This will exceed by wide mar
gin the largest deficit of the 1929-1933
depression. That deficit, which oc-
Cured in 1882, amounted to $780,
100000.
Wage Cut Sought.
In an effort to alleviate their present
difficulties, the railroads have served
notice of Is per cent cut in wages,
effective July /. In response to this
move, railway labor then threatened a
strike. 1t is probable, therefore. that
matters will go before an arbitration
board. Although the board may de-
eide m favor of wage reduction, it is
question whether the full Is per cent
will be allowed. At any rate, the pros
pect is that the process of settling the
matter will postpone the actual cut
ting of wages beyond the date set by
the railroads. This means that the
railroads will receive little benefit from
lower wage scales this year.
The railroad problem. however,
would still be far from solved even if
the entire IS per cent wage cut were
put into effect Immediately. Such a
cut would merely lessen the deficit. 1t
would not permit reduction in
freight rates because freight rates, at
the present time, are at relatively
lower levels than wage rates.
Price Ratio Cited.
The railroad problem cannot be
solved without the establishment of
more favorable relationship between
freight rates and commodity prices
Under present conditions, this can be
accomplished only by a downward ad-
justment of freight rates. The current
index of freigh rates, on the basis of
1925 as 100, is 924, as nearly as it can
be estimated in advance of the issuance
Of official figures showing the effect
of the recent freight rate advance
granted by the Interstate Commerce
Commission. This freight rate index
compares with the latest weekly COM
modify price index of only 1872 and il
is apparent that the commodity price
trend is still downward.
Without lower freight rates, the in
creased volume of traffic which the
railroads need cannot be stimulated
The outlook for the railroads is con-
sequently very unfavorable since there
Is little prospect of a sufficient reduc-
ton in wage rates to permit lower
freight rates, and there is no indication
of an early recovery of commodity
prices to level that will support pres
ent freight rates.