Rivers, Roads & Rates

Fortnight ago the U. S. towboat General Ashburn paddled proudly up the Illinois River on a three-day trip from St. Louis. When it reached Peoria it pushed the big steel barge it had brought up to the city's new $400.000 wharf and warehouse. Whistles tooted, bands played, citizens cheered to celebrate the opening of one more link in the Government's vast mid-continent waterway system.*

Smartly erect on the Peoria dock stood Secretary of War Hurley to welcome this first cargo to the Illinois cornlands. Aboard the General Ashburn, Major General Thomas Quinn Ashburn, chairman of Inland Waterways Corp., the Government's barge line, saluted his superior. Behind the General Ashburn puffed the towboat Wynoka, with another steel barge and three empty lighters. The first freight--400 tons or about 16 carloads of sisal, sugar, coffee, soap, canned goods, shipped from St. Louis at a total saving of $1,100 under the rail freight rate/---was unloaded and General Ashburn insisted: ''The waterways bring more commerce to the railroads than they take from them. . . . I challenge the roads to produce one instance of a freight train taken off by water competition."

General Ashburn's waterway party at Peoria, nevertheless, stood for one of four major reasons why the railroads of the land, after a month of agitation, formally petitioned the Interstate Commerce Commission last week for a 15% freight rate increase. The three other reasons are: Depression, motor trucks, pipelines. At their Manhattan meeting fortnight ago (TIME, June 22) the carrier executives named three of their colleagues to approach the I. C. C. Representing the Eastern roads was big, breezy John Jeremiah Pelley, who rose from Illinois school-teaching to head New York, New Haven & Hartford. Henry Alexander Scandrett, whose long legal service with the Union Pacific trained him for the presidency of the reorganized Chicago, Milwaukee, St. Paul & Pacific, represented the Western and Mountain-Pacific group of roads. Whitefoord R. Cole, president of Louisville & Nashville, represented the Southern roads. An experienced, aggressive trio, Presidents Pelley, Scandrett & Cole in five days prepared a 5,500-word petition which was as much an appeal for public support as it was a formal application to the I. C. C. Into it they packed the roads' best arguments for rate-upping. Prime points made:

Policy. When Depression hit the roads they had a choice of two policies: 1) drastic retrenchment, including wage cuts; 2) normal operation. At President Hoover's suggestion they followed Policy No. 2 "as long as it could be justified." As the slump continued "it became evident that the policy above stated had failed" to restore prosperity. Hence adjustments were now imperative.

Fair Return. The Transportation Act of 1920 sets 5 1/4% as a "fair return" for the railroads. In nine years (1921-30) the carriers failed by $2,579,000,000 to earn what the law allowed on valuations set by the I. C. C. They earned 3 1/2% last year. This year's earnings would be at the rate of 2 1/4%. "If the carriers were permitted to participate in periods of prosperity equally with other business, they should equally sacrifice in periods of adversity. But they are denied such participation by law." Because they cannot accumulate reserves in good times, they need revenue adjustments in hard time's to keep going. A 15% rate increase will not raise their net return above 4%.

Efficiency. The roads have practiced every sort of economy to cut down operating costs. As proof of efficiency, they increased ton-miles per train-hour from 7,506 in 1921 to 10,839 in 1930. Freight locomotive miles per day were raised from 49.5 in 1921 to 58 in 1930, passenger locomotive miles from 103 to 116. Coal to move 1,000 tons one mile was cut from 162 Ib. in 1921 to 121 in 1930. A passenger car required 17 Ib. of coal to run a mile in 1921, 14 Ib. in 1930. Cited was Secretary of Commerce Hoover's praise in 1926 of the reorganization and efficient management of U. S. railroads since the War.

Securities. Declines in railroad stocks and bonds, due to reduced earnings, have jeopardized their status as legal investment for savings banks, insurance companies and trusts. Carrier credit must be maintained for future improvements. "All that is necessary to maintain an adequate national system of transportation is that the country should be willing to pay a reasonable price for it and that railway investors and railway managements should be able to act on that assurance."

Wages. The roads, though laying off "many thousands" of workers, have maintained basic wage scales, as promised President Hoover. Any move to reduce wages would require "the long procedure of conference and arbitration" under the Railway Labor Act. The results of such negotiations would be too belated to help the carriers in their present emergency.

Freight Rates. Only by a blanket percentage increase in all freight rates for all roads as was done in 1914, 1917 and 1920 can the carriers obtain the necessary relief, they said. Joint water-&-rail rates and existing differentials would be maintained. The Commission, however, was asked to approach the question not from the rate angle, necessitating protracted hearings on the "reasonableness" of each proposal, but from the broader revenue angle as an emergency step for financial relief.

Protests against rate-upping began to pour in upon President Hoover and the I. C. C. The U. S. Fisheries Association, the League for Independent Political Action, the Northwest Retail Coal Dealers Association, the Wyoming Stock Dealers Association and Senators Caraway, Brookhart, Shipstead were among the first protestants. The National League of Commission Merchants said that the roads last year got $268,000.000 for hauling 973.605 carloads of fresh fruit and vegetables that sold for $489.000.000, warned that 15% rate increase would raise fruit and vegetable prices by $40,000,000.

Investors. Meanwhile the holders of $19,500,000,000 in U. S. railroad securities moved to protect their interests. In Manhattan meetings were held of the National Association of Investors in Railroad and Public Utility Securities and the Emergency Committee on Railroad Investments of Life Insurance Companies and Mutual Savings Banks. Savings banks have $1,600,000,000 or 12% of their total assets in rail bonds. About 17% or $3,000,000,000 of life insurance capital is in carrier investments. There were 987,651 individual stockholders in 1929 with a stake in the railroads.

* The entire Gulf-to-Great Lakes route will be opened by 1933 when improvements between Starved Rock and Lockport are finished. The Missouri River will be ready for barge service to Kansas City before next year.

/-The first downstream shipment, made simultaneously, consisted of 40 carloads of cement.

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