3J
TOO MUCH GOVERNMENT
Address by
Simeon d. Fess
United States Senator from Ohio
Before the
RAILWAY BUSINESS ASSOCIATION
Nov. 18, 1926
TOO MUCH GOVERNMENT
By Simeon D. Fess
United States Senator from Ohio
Address delivered at the Annual Dinner of the Railway Business Association,
the Commodore, New York, Nov. 18, 1926
IN considering railroad measures
the legislator must recognize the
interest of the management, also
the interest of the owners, also
the interest of the employees, but in
addition to all that he must recognize
the interest of the larger party, which
is the public; and as a legislator upon
the committee that has sent to it hun¬
dreds of proposals for modifications of
the legislative status of the railroads,
I must respect the rights of the man¬
agement, as well as the rights of the
owner, because not always the man¬
agement and the owner are the same.
I also must recognize the rights of
the labor element. But if I should
recognize only the profits for which
the railroads are run from the stand¬
point of the owner, and not recognize
other rights, I would not be fit to be
in the Senate of the United States;
and if I should respect the interest of
the employee, and every vote that I
gave should be in that interest, without
regard to the rights of the owner, I
would also be unfit to be in the Senate
of the United States; and while I
would respect the rights of the owners
in the form of income or profit, and
while I would respect the rights of
wages, which is the thing for which
labor is making an effort, I must re¬
spect the rights of service for which
the railroads are run, and the public
paying the bills must have that service
in their interest.
I therefore must see this problem
from the standpoint of the public as
the major interest in the entire prob¬
lem ; otherwise I could not represent
the general welfare of the country as
a man who takes the oath of office, as
a member of either body, must do.
OPPOSES REPEAL OF PULLMAN
SURCHARGE
I know about the effort to repeal
the surcharge. I understand the
ground upon which it is put. I respect
those who are making the effort. But
I have never agreed with them. Until
we can find some other revenue to take
the place of the $40,000,000, I do not
see how the surcharge can be repealed,
and for that reason I have continued
to oppose it. (Applause). I respect
the people who insist upon regionaliz¬
ing the Interstate Commerce Commis¬
sion, on making it a body representa¬
tive of the various localities of the
country. Some men in the Senate
insist that the Interstate Commerce
Commission must represent the various
sections of the country, and we must
pass a law, requiring the President,
when he makes the appointments, to
make them from specific sections.
COMMISSION MUST BE NATIONAL
BODY
While I respect the judgment of
these men, I think one of the most
fatal things we could do would be to
plunge the Interstate Commerce Com¬
mission into something like a pork
barrel. (Applause). And I there¬
fore insist that the Interstate Com¬
merce Commission must be a national
body, in which its interests are for the
public at large, rather than for any
particular section.
OPPOSES LEGISLATIVE RATE
MAKING
There has been a tremendous agita¬
tion to deny to the Interstate Com¬
merce Commission its power over
Section 4, the long-and-short-haul
clause. I am perfectly familiar with
the argument, and it seems to me that
on the face of it, there should not be
a smaller charge for a long haul than
a short haul, but if that is to be done,
if it is to be prevented, it should not
be by the order of Congress. It should
be by the order of the Interstate
Commerce Commission, where it be¬
longs. (Applause).
The question that is before us now
in the form of a simple resolution is
a declaration that agriculture is a
staple article or a staple industry. Of
course it is, without saying so. Saying
so by legislation does not make it more
so than it is. The reason that resolu¬
tion was passed was to get relief for
agriculture. I recognize the tremen¬
dous basic importance of agriculture.
The basic occupations in America are
agriculture, transportation, mining and
manufacturing, banking in various
forms, managerial ability in directing
industry, and labor. What a wonderful
position America has, when we analyze
the strength of the country from those
elements. There is no such thing as
general prosperity if any one of these
basic industries is depressed. To have
the general prosperity for which all of
us are working there must not be any
one of these under the handicap of
depression if we can relieve it. There¬
fore, agriculture commends our atten¬
tion, and ought to, in a sympathetic
way.
THE FARMER'S PROBLEM
Some of the agitators hold that the
way to relieve it is the reduction of
the freight rates on agricultural pro¬
ducts. I have some sympathy with
that point of view, provided that the
necessary revenue of the roads can be
supplied without detriment to other
industries. I am of the opinion that
the rate structure can be revised. I
think that there is no difficulty in re¬
ducing freight rates upon certain arti¬
cles, if we can add the freight rate to
other articles in which there is much
value in little space. It has been sug¬
gested that that would be benefiting
one industry at the expense of another,
but I do not believe a revision of the
rates on things like silks and the like
would increase to the detriment of
the purchaser the price of the article.
We might reduce the freight rate upon
agriculture and increase the freight
rate upon other articles without hurt
to the public or to the railroads. But
the only way it could be done would
be under a system where the reduction
from one road, which might be alto¬
gether agricultural, might be made up
by the increase on another road, where
the road itself does not need the in¬
crease, and that would have to come
through a revision of the rate structure.
But nobody here would believe that I
think that the revision should be made
by Congress. Heaven forbid! It
should be made by the Interstate
Commerce Commission, if it is made
at all. (Applause).
UNSOUND REMEDIES
Let me announce a warning to you.
We have a problem before us, and that
problem hails from the agricultural
sections of the country. You cannot
blink at it. Most of us would agree
as to why we have the agricultural
problem. I know most of you would
recognize why we have the remedy
suggested. Whenever there is a de¬
pression in any industry or in any
section, there will always be numerous
remedies proposed, and they are always
legislative remedies. They always
come out of Washington. It used to
be the greenback. That was in '78.
That remedy was born out of a depres¬
sion in a certain section of the country.
Then came in 1892 and again in 1900
the populist remedy, and coming under
the same circumstances. Then came
the free silver remedy in 1896.
Whenever you have a depression,
whether it is general or limited to an
industry, there will always be some¬
body ready to propose a remedy, and it
is usually legislative. That is inevita¬
ble in a democracy. Today we have
the agricultural problem, and the rem¬
edy is for the government to fix the
prices of agricultural products. No
matter how much you raise, no matter
how great the service, the remedy is,
let the law at Washington state how
much a farmer shall get for his wheat,
and if you do it for wheat, it is for
corn, it is for live stock, it is for cot¬
ton ; it is for everything if it is for one
thing; and the moment that we enter
upon a legislative remedy by saying
that for what I produce I am going to
get a certain price, because the govern¬
ment says it, that moment you ignore
all the principles fundamentally in the
law of supply and demand, and take
the fiat of the government instead. That
is the most unsound thing I can im¬
agine, the most unsound thing for the
farmer; because if you fix the price by
legislative act on an article like wheat,
every election will be fought out on
how much wheat shall be sold for.
Where there is one producer of wheat,
there are six consumers of flour, and
let that thing be thrown into the elec¬
tion some time, and the flour eater will
fix the wheat farmer. (Applause).
PROBLEM MUST BE MET
A demand is made for the lowering
of freight rates on agriculture as a
remedy or relief for this depression.
On the whole this could not have a
great effect; but that does not change
the psychology of the situation.
Where a demand is being made in a
democracy like ours, a problem can¬
not be suppressed; it must be directed.
And I say to the men interested in
transportation here, that the problem
of transportation in products of the
farm is one that has got to be met. If
it can come through a revision of the
rate structure, and that revision be
made by the experts of the govern¬
ment, in consultation with railroad
men, then it may be safe, but it must
not be done by the politician at Wash¬
ington.
I believe that if we could let alone
any of these industries and allow them
to work themselves out, they would
find their safe solution, though it is
rather brutal to put it that way. The
operation of economic law in the na¬
ture of the case must be slow. And
we are going to have a demand upon
us in the next session of Congress—
or if not then, in the next—for legis-
lative relief on the farm problem. I
think that there is a legitimate field of
legislation that does not contravene the
operation of economic law. The
farmers are some well-to-do, many
others are not, and when it comes to
harvesting, many of them are not able
to hold their crops indefinitely. They
have got to convert them into money.
They may not have the wherewithal
to pay their taxes, some of them
rentals, some of them interest, fixed
charges. They throw their product on
the market. It all goes at once. The
result is that the price is beaten down.
In time the price may go up again,
but the farmer who produced the
article does not get the advantage of
that.
COOPERATIVE MARKETING
It is suggested, why does not the
farmer, like the rest, present a front
and demand what he ought to have?
He can do it if he can organize,
and that brings us to a suggestion
about marketing. I believe here is
a possible remedy: permit the farmer
to effect his various cooperative mar¬
keting associations, and then per¬
mit the government—this some of
you won't agree to, but I feel it is
sound—to use a revolving fund, up
to a certain amount, to loan, not to
the farmers, but to the farm organiza¬
tions, a sufficient amount with which
the cooperatives can buy the farmers'
product and hold it. They could pay
75% of what they think is a reason¬
able price, upon which they can agree,
and hold it off the market until the
market is in such a condition that it
can absorb the product without break¬
ing the price. Then when the crop is
off the market, pay the balance of the
25 per cent, to the farmer. If that
won't do it, I do not know of any way
it can be done. It does not violate any
economic law. It only contravenes in
a sense the Sherman Law, but we can
pass a law, permitting it, as we have in
the Cooperative Marketing Associa¬
tion Law. This it seems to me would
be a more rational method of relieving
the farm situation than undertaking
any of the fiat methods of price-fixing.
FALLACY OF "GUARANTEED
INCOME"
Everywhere it is stated that we
have guaranteed an income to the rail¬
roads. To me it is a surprising thing
that in the face of the fact that there
was only a guarantee for a short space
of time, following the return of the
railroads to the owners, we hear in
Congress every day from responsible
Senators that we guarantee a profit to
the railroads, therefore you must
guarantee it to the farmer, or you are
discriminating against the farmer.
It was that kind of an argument that
led me to suggest to some of the rail¬
way representatives that it might be
wise for us to repeal the 15a provision,
because in 15a there isn't a thing, out¬
side of the announcement of a policy,
and that is that there should be reason¬
able income upon the valuation of the
property. There is another thing in
15a that most people do not want, the
recapture clause, and that is the only
thing in the section that the Interstate
Commerce Commission could not do
without it. The only thing 15a says
about income is that it is the policy of
the government to permit a reasonable
income or return upon the valuation
of the property. It says nothing
about what income wpuld be reason¬
able. That is left wholly to the Com¬
mission, and the Commission could do
that thing without 15a if it wanted to.
The railway managers point out, how-
ever, that if we would repeal that, it
might be a repeal of the policy that a
reasonable return on their investment
should be permitted.
GOVERNMENT OWNERSHIP
There is a phase of legislation
which in my opinion ought to com¬
mand your sympathetic attention. You
may believe because of the unfor¬
tunate experience during the World
War with government ownership we
shall never again be forced with the
danger of government ownership. Bet¬
ter disabuse your mind of that idea.
It is not entirely eradicated from the
minds of the American people. There
is a feeling, not among the responsi¬
ble citizens, but pretty widespread,
that if we had government ownership,
and there were any profit, the govern¬
ment would get it, and if there wasn't
any profit, then the government could
stand the loss. "And why not?" they
say. There is a strong element in the
United States in favor of government
operation of railroads, and it will
grow. If we have a depression, there
is always a call upon the government
to pull us out of the depression.
A man said to me not long ago, "The
trouble in the West is not the farms,
it is the banks." "Well", I said,
"what you mean by that is that the
banks over-loaned to the farmer, and
the banks cannot now recover, and,
therefore, if they can get Uncle Sam,
out of the Treasury, to pull them out
of the mud, they will want him to do
it." In that degree it is a bankers'
movement. It is the universal law in
our democracy, that if there is depres¬
sion and suffering, the appeal is al¬
ways to the government, and when it
is backed by a strong, compact ele¬
ment of whatever name, there is al¬
ways danger. And in the case of gov¬
ernment ownership of railroads it is
not past by a good ways.
So far as I am concerned, I am
through with government ownership
for the balance of my life. We had
experience enough during the War.
The demand for it will never have any
effect on me. (Applause).
Transportation is absolutely essen¬
tial to maintain our present industrial
and social life. You can do without
some things, but not transportation.
The country would starve, the country
would freeze, if transportation should
stop. Transportation must go on. It
will go on. It does not make any
difference how much loss will be suf¬
fered, it will go on, and if private
enterprise cannot do it profitably and
without interruption, the government
will do it. If it ever comes to the
point where, from any reason, private
ownership cannot continue the running
of any essential line because it is paying
out more than it is taking in, that line
will run anyway, even if it has got to
be run by the government.
THE WEAK LINES
The basis on which government
ownership is going to be demanded is
the weak lines. There is before us
now the proposal to permit rail prop¬
erties to consolidate, so that the strong
line may have attached to it a weaker
line. The weaker line will be a feeder
of the strong line, and the weaker line
attached to the strong line might be
more profitable than when it is inde¬
pendent. That is easily conceivable.
I presume that is possible.
CONSOLIDATION
There is a bill on the Senate calen¬
dar to permit the railroads to consoli¬
date under a limited number of sys¬
tems. The only feature of that bill is
that it gives two years for the roads to
make the consolidation, and if they do
not do it within that time, then the gov¬
ernment is to step in with a penalty to
advance it or to expedite it. That is
the feature I do not like. I am of the
opinion that railway consolidation
would be advantageous, if it can be
done under natural evolution, but not
by Congress. (Applause).
Another bill will eliminate the com¬
pulsory feature, and I think we shall
have some chance—not in the short
session, but ultimately—of seeing it
become a law. Though railway people
do not like it generally, I am of the
opinion that it is a better substitute
than government ownership, which I
am afraid of, unless something of this
sort is carried out.
When I speak of these basic ele¬
ments that lie at the foundation of
our tremendous industrial ability, I do
not confine myself simply to agricul¬
ture and to transportation. It extends
as well to mining and to manufactur¬
ing, and to the financial ability of the
government. Would I be going afield
if I should say that the present stand¬
ing of the United States financially,
from the standpoint of government
financing, is one of the most remark¬
able achievements in the history of any
country, at any time in the history of
the world? (Applause).
GOVERNMENT FINANCING
I wonder whether you realize that
in 1923 the government faced maturi¬
ties of obligations to the amount of
7^4 billions of dollars; that much com¬
ing due; 3^4 billions of the unfunded
debt that was not put in the form of
Liberty Bonds, due at any time; three-
quarters of a billion in war savings
stamps and four billions, fifty millions,
in the Victory notes. The very fact
that we had not put the three billion
in the form of a long-time bond re¬
quired the banks of the country to
carry it, and as long as the banks were
required to carry three billions of the
government's obligation, that withdrew
from industry that it represented at
least seven billions of commercial
credit. If you withdraw seven billions
of commercial credit as the result of
a convulsion like the War, you will
starve industry for want of capital,
and industry will slow down. It may
close down.
The first problem following the
War was, "How can we realize seven
billions of credit for the indus¬
tries of the country ? They are suffer¬
ing; they want it." The Secretary of
the Treasury said the only way it could
be done was either to make it long¬
time bonds like the Liberty Bonds, or
else try to transfer it from the banks
to the people, provided that the people
have the buying power to absorb these
short term notes. He offered $500.-
000,000 of three year short term cer¬
tificates at 5H- They were over¬
subscribed overnight. He offered
another half billion. They were over¬
subscribed. He offered a third, a
fourth, a fifth and a sixth, which was
the last of the three billion. The sixth
was offered, not at 5}i, but at 4
a saving of 1 ^2% on the obligations
of the government. As quickly as
these obligations of the government
had been transferred from the banks
to the purchaser, which is the people,
the banks had their liquid assets real¬
ized. They loaned it to industry, and
industry at once revived. As it revived,
unemployment ceased. Not only that,
but the credit of the government, as
measured by the value of Liberty
Bonds, went to par, and very quickly.
When the Secretary of the Treasury
noted the remarkable buying power of
the people, he said "We will try the
Victory note of four billion, fifty
million." He offered a half billion.
They were taken at once. He continued
by the half billion block until the last
four hundred million of the four billion
was offered, and it was over-subscribed
almost one billion dollars. On the 15th
of last March, when maturities came,
for the first time we had revenue
enough guaranteed to pay without an
issue of a short term certificate. In
June, when the next payment came,
we could pay out of the current
revenues all but $300,000,000, which
were floated in short term certificates
at per cent. I challenge the record
of the world to show such buying
power of the people as here in America.
It indicates the soundness of American
institutions, and with that as a basis of
our business ability, the banking situa¬
tion is assured.
I might say as much about the con¬
dition of labor. I would like to say
a word, but I won't, about the remark¬
able ability our managerial power has
represented here. Some of these prob¬
lems that faced us growing out of the
World War were pretty acute. I agree,
as fully as any man can agree, that
the great danger than faces America
is that whenever there is an economic
ill that ought to be cured by an eco¬
nomic remedy people always rush to
Washington and ask us to cure it by
statutory enactment. That is the most
serious situation we have. The danger
is that when we attempt to do that, it
is political rather than economic, and
as certainly as an economic economy is
relieved by a governmental remedy.
We only defer the reckoning. We had
better take the liquidation at once and
stay on a sound foundation.
CONDITIONS SOUND
It strikes me that there isn't any
serious symptom upon the horizon of
business that would cause you to feel
pessimistic. It seems to me that every
indication is that we are fairly sound,
and it does not apply to anything more
than it does to transportation, for while
we suffered tremendously during the
War, in my judgment there has never
been a time when transportation has
been so effective, so rapid, so safe, with
such courtesy on the part of those
devoted to it, as at this very time. We
are back again to the old order, where
efficiency counts.
I heard a story the other day that is
not fair to the politician, but it is what
the people think. The father said to
the mother, "You know, I'm awfully
anxious about our twenty-year old
boy, what he is going to be when he
becomes of age. I am going to test
him when he comes home from school."
He put on the table in his room a ten
dollar bill, by it a Bible, next to it a
bottle of liquor. She said, "What are
you doing that for, father?" "Well,
if he takes the money, that means his
tendency is business, and we will be
pleased; if he takes the Bible, we know
that he is prompted by the right im¬
pulse, and he will make a good man ; if
he takes the liquor, we will just resign
ourselves, he is going to be a drunkard
and a disgrace to his family." They
hid behind the door to see what he
would do. When he came in he took
the ten dollar bill, then he reached for
the Bible and put it under his arm, then
he took the bottle of liquor, and the
father said, "My God, mother, he is
going to make a politician." (Laugh¬
ter).
ATTITUDE OF PUBLIC TOWARD
LEGISLATORS
That is the general attitude of the
public towards the public man. I think
it is quite general. It is far from being
fair. I do not believe there ever has
been a time when the public man has
tried harder to please the people that
he represents than he is doing today,
and if I have one criticism, it is that
he is too anxious to do what he thinks
the people back of him want him to do
rather than to do what he thinks is
right, in spite of what the people back
of him want him to do. (Applause).
Every time that a man says, "I am
sent to the Senate by the people of
my state," with the confidence that he
is not corrupt, that he is fairly intelli¬
gent, and that he won't be prejudiced
one way or the other, but that he will
study the problems of one side and
then the other, and then do what he
thinks is the best for the public, they
call him a "highbrow", or not a man
of the people, and they say, "If you
cannot represent your people, then be
man enough to resign and let some¬
body go that can."
I know that is very popular, but I
say again that the very quintessence
of representative government is to
have some confidence in the repre¬
sentatives and give them the freedom
to study the problem and then vote in
accordance with their best judgment.
If I would undertake to follow public
opinion, it would be a will-o'-the-wisp.
I would find myself going out, meet¬
ing myself coming back. What the
people want this year they do not want
next year. Railroading is a subject of
baiting. It is a football. The politi¬
cian who thinks that "My people want
this thing", is going to do what he
himself believes is unwise, simply be¬
cause he thinks it is a popular thing
to do. There is our danger. If we
believe that a growing country like
ours cannot continue unless we have
a sound transportation system, then
it seems to me that we ought not to
join every group that wants to bait
the railroads.
America is great because transporta¬
tion is great. All legislation should be
limited, not to baiting the railroads,
but to giving them a greater chance
to continue their expansions and their
improvements, to keep up with the
growing needs of a mighty country.
You can do it without being "a rail¬
road Senator"—you can do it because
you are a representative of the best in¬
terests of the people, and you cannot
represent them if you kill off the rail¬
roads by political baiting. (Applause).
REQUESTS FOR COPIES
of this pamphlet 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
Frank W. Noxon, Secretary Railway
Business Association, Packard Building,
Philadelphia.