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Form C 196
Railway Business Asiocia tí o n
CATECHISM ON RAILWAY
LEGISLATION
Citizens who concur in the need for action as
here set forth can aid by handing or sending this
catechism with approval to some Senator or Rep¬
resentative. The most impressive message is a
letter enclosing the leaflet. Next best is to write
and sign a phrase or two on the leaflet in the
space below. Address members of Congress
Senate or House, Washington, D. C.
(Signature)
Name and Title
Company
Street, Number, City
BEQUESTS POR COPIES
of this leaflet will be welcome from all those
desiring to place it in the hands of their
representatives or friends. Copies furnished
or sent direct to lists upon application to
Prank W. Noxon, Secretary Railway Busi¬
ness Association, 30 Church Street, New
York.
Railway Business Association
RESTORATIVE RAILWAY
LEGISLATION
Catechism on Some Provisions Needed in the Cummins and Esch
Bills to Make the Government Responsible for the Results
of its Own Regulation
QDOES the existing Interstate
Commerce Act provide that
• rates taken as a whole shall
be such as will yield revenue suf¬
ficient for necessary expenses and
for the credit basis of adequate fa¬
cilities? A. No. It merely pro¬
vides that each individual rate shall
be just and reasonable.
O. Has not the Interstate Com¬
merce Commission hitherto consid¬
ered rates as a whole in determin¬
ing readjustments for revenue? A.
Yes. Authority to do this was
inferred.
Q. Cannot the Commission, with¬
out any new legislation, infer such
authority in the future? A. No.
The House eliminated a rule of rate-
making from the Committee Bill.
Y'hat a legislative body has refused
to enact cannot be inferred.
O. Does not the Cummins Bill ex¬
tend jurisdiction to cover ascertain¬
ment of "adequacy of the rates for
revenue purposes for an}^ one dis¬
trict and the carriers therein as a
whole," and contain several provi¬
sions intended to define adequacy?
A. Yes. but nowhere does it say in
plain words that necessary expenses
and the credit basis for adequate fa¬
cilities are to be the legitimate pur¬
poses for which rates are to yield
sufficient revenue.
RATE OF RETURN
QDOES not the Cummins Bill
• prescribe an income equal to
5^2% upon the value of the prop¬
erty, and is not this fair? A. The
investor does not buy securities be¬
cause somebody else considers the
income fair, but because be himself
considers it attractive. Nobody
knows whether 5^2% will be attrac¬
tive in one or another condition of
the credit market. Nobody knows,
either, what changes successive
Congresses would make in such a
figure in the statute. The mere
threat of candidates that if elected
they would favor a reduction in the
rate would chill the investor. Ac¬
tion of an administrative agency,
charged by Congress with the duty
of ascertaining what is an attractive
return and with permitting such re¬
turn, would be much less exposed to
politics. This would promote stabil¬
ity in the sanctioning of adequate
income ; and nothing else will go so
far as this to inspire investors with
confidence.
Q. Would not this give income
even to roads poorly located and
badly financed or managed? A. Not
if revenue were prescribed to be
adequate only for the average road.
Q. If income is to be adequate for
the average road will not roads
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stronger than the average earn too
much? A. Earnings cannot be de¬
clared too much so long as they at¬
tract capital no more than sufficient
for normal national development.
Q. Is not some limit on earnings
desirable and are not the users of
weak roads entitled to service which
cannot be given on earnings ade¬
quate for the average road? A.
Permissive consolidation will go as
far as is wise in accomplishing both
these purposes. Mergers will bring
down the average need (which
should be the standard of rate reg¬
ulation). This will automatically
limit earnings. Mergers also will
tend to eliminate weak lines. Re¬
ceiverships are constantly operating
in the same general direction. No
direct limitation upon earnings can
bring benefits remotely compensat¬
ing for the abandonment of the tra¬
ditional American policy of rewards
for economy, efficiency and enter¬
prise on the one hand and depriva¬
tion for wastefulness, bad manage¬
ment and lack of enterprise on the
other.
ESTIMATED NEEDS
Q SINCE nobody can know how
* the volume of tonnage and
hence how the earnings will be af¬
fected by the rate readjustments
themselves or by business condi¬
tions, will it not be impracticable to
fix rates which will certainly pro¬
duce a specified estimate? A. Not
if rates are to produce the required
revenue "as near as may be" and if
in good years surpluses are to be
permitted for maintenance of an
average income through the decade.
Q. Will it not be impossible for
the government to estimate trans¬
portation needs and the cost of
meeting them in advance ? A. Every
individual railway has to make such
advance estimates, and for periods
of years, since many construction
projects consume years in comple¬
tion.
Q. Who is to judge what are the
transportation needs of the coun¬
try? A. The governmental agency
which sanctions security issues.
Such agency therefore must haVe
the power and the responsibility for
completing the transaction by sanc¬
tioning rates under which carriers
can sell the securities which have
been declared necessary.
SAFETY FIRST
QWILL not the Interstate Com-
• merce Commission estimate
transportation needs and the cost of
meeting them without being in¬
structed so to do by law? A. No¬
body knows. It never has. Safety
requires that this duty be made
obligatory.
O. Will it not be impracticable
for the Commission to ascertain the
rate of return necessary to allow in
order to attract capital? A. Indi¬
vidual roads must and do ascertain
this. One proposal is that the Fed¬
eral Reserve Board ascertain from
time to time the necessary rate of
return. If the government is to
sanction certain security issues as
being for purposes necessary to the
public it must sanction a credit ba¬
sis definitely ascertained.
REQUISITES FOR IMPROVED
SERVICE
QIS there any prospect that the
• resumption of corporate oper¬
ation will bring better service to the
public than under government con¬
trol? A. A considerable time will
be consumed in re-establishing
channels of traffic and spirit and
discipline of employees and in ad¬
justing executive officers to com¬
pany organizations disrupted under
government control. If in addition
the roads have empty treasuries and
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feeble credit, restoration of the
American-standard service will be
still more sluggish. Aspects other
than the rule of rate-making with
which Congress must deal may be
classified as transition provisions
and permanent provisions:
Transition Provisions
Extension of the standard re¬
turn for whatever period may
prove to be required for adjust¬
ment of revenue to costs.
Creation of a revolving fund
from which the roads may bor¬
row capital immediately needed
to serve the public in case in¬
vestment market conditions
continue unfavorable, the
amount to be equal to estimated
needs.
Refunding of carriers' capital
debts to the government into
long-time securities on equitable
terms.
Permanent Provisions
Prohibition, except by federal
authority, of stock and bond is¬
sues, construction of new lines
and consolidations.
Development of rvaterways
and their coordination with rail¬
ways, while the water facilities
heretofore acquired or created
by the government are con¬
tinued.
Establishment of federal jur¬
isdiction over minimum as well
as maximum rates except inso¬
far as they affect port-to-port
hauls of water carriers and over
all other rates of instrumental¬
ities of interstate commerce
which may be made subject to
the Act.
Establishment of such meth¬
ods for giving justice to em¬
ployees that strikes and threats
of strikes may be obviated.
But all these provisions will be futile without this—that Congress,
both for the transition period and permanently, shall prescribe the sys¬
tematic and continuous ascertainment of transportation needs and the
capital requirements thereof, periodically announced, and shall definitely
assign the duty of permitting revenues proportioned to the requirements
so announced. By such means only can the carriers be enabled to
re-establish, maintain and improve the American standard of service to
which our business and agriculture are accustomed.
ALBA B, JOHNSON, President.
FRANK W. NOXON, Secretary.
30 Church Street, New York.
Jan. 7, 1920.
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