'O r X
£U &§!/■ P-CFB^ILWM
GOVERNMENT OPERATION OF
RAILROADS
SPEECH
OF
HON. EVERETT SANDERS
OF INDIANA
IN THE
HOUSE OF REPRESENTATIVES
JUNE 1,« 1920
WASHINGTON
GOVERNMENT PRINTING OFFICE
1920
184003—20057
■i*
iy
HE Q75 7
I 4 2. 0
. > & lS~
SPEECH
OF
HON. EVERETT SANDERS,
OF INDIANA.
GOVERNMENT OPERATION OF RAILROADS.
Mr. SANDERS of Indiana. Mr. Chairman, it is frequently
assumed that after the declaration of war Congress, by legis¬
lative enactment, directed the President to take over the op¬
eration of the railroads. This is an error. In pursuance of a
provision in the national defense act of 1916 the President on
the 1st day of January, 1918, without legislative direction took
over the railroads, and it was not until March 21, 1918, almost
three months thereafter, that the act of Congress was ap¬
proved, which is commonly known as the Federal-control act.
This act recited the fact that the President had taken over the
operation of railroads, made provision for the compensation
for their use, and appropriated $500,000,000 as a revolving fund
to pay the expenses of Federal control.
The question is often raised as to the advisability of the act
of the President in taking over the railroads. It is urged with
much force that the same or better results so far as war service
was concerned could have easily been brought about by pro¬
viding by law that transportation for war purposes should
have preference and by suspending such restrictive laws as
hindered unified action by the carriers.
All the inherent evils of Government ownership and pa¬
ternalistic legislation accompanied governmental operation of
railroads, and these evils not only crippled the railroad service
but reached out into every other governmental activity. The
vast additional expense of Government operation is frequently
cited as proof of the error in taking over the roads. It must
be remembered, however, that the real purpose of taking over
the transportation facilities was to permit their unhindered
and unrestricted use as a part of the machinery of war, and
if this purpose was better served than it could have been
under private operation without accompanying evils that out¬
weighed the benefits the course was, of course, justified. A
discussion of this controverted question would now be academic.
One should form his opinion on the subject from a study of
the facts.
It is unfortunate, however, that there has been such an ex¬
tensive organized propaganda to create the impression that Gov¬
ernment operation of railroads was a financial success and that it
had no attending evils. It is much more in keeping with sound
statesmanship to frankly acknowledge the faults so that the
actual virtues, if any, may not also be discredited.
Power was conferred by Congress upon the President to dis¬
regard all laws which he might find in the way of the efficient
and economical operation of the railroads. He was given power
to increase rates without limit. He was given power to dis¬
regard the antitrust laws; to disregard the directions of shippers
2 184093—20957
3
as to the routing of traffic; to pool facilities, to coordinate and
unify operations; and, generally, without regard to existing
laws or legislative policies, to do all the things which were, in
his judgment, necessary to the most efficient and economical
operation.
He promptly, through the agencies he had created, proceeded
to the exercise of these powers. He increased wages, and he
increased rates.
The director general stated to the House Committee on Appro¬
priations on June 3, 1919, that employees' wages per hour had
increased 50 or 52 per cent since 1917, the year before Federal
control, and unit costs of materials and supplies from 20 to 35
per cent. Yet the operating expenses for the first six months
of 1919 showed an increase over the corresponding months of
1917 amounting to $735,000,000, or nearly 55 per cent.
The Railroad Administration reports that the total ton-miles
of roads in class 1 during the first six months of 1917 were
207,631 millions, while during the first six months of 1919 there
were only 178,083 millions, a decrease of 29,548 millions, or 14.2
per cent. Passenger traffic statistics for the same periods are
not available, but it is beyond doubt that any increase in pas¬
senger traffic was not sufficient to offset the decline in freight
traffic. Thus, with a reduced traffic in the first six months of
1919 as compared with the same period of 1917, increases in
unit costs of 20, 35, and 51 to 52 per cent produced an increase
in total cost amounting to 55 per cent.
Similarly, ton-miles for the whole of the year 1919 were
394,804 millions, as compared with 427,342 millions in 1917, which
was a decrease of 32,538 millions, or 7.6 per cent. Passenger
miles increased from 39,361 millions in 1917 to 46,145 millions
in 1919, the increase being 6,784 millions, or 17.2 per cent. This
increase of 6,784 millions passenger miles was not sufficient to
offset the decline of 32,538 millions ton-miles in freight traffic.
Yet with a smaller traffic in 1919 than in 1917, and with unit
costs of labor and material showing lower rates of increases
than the increase in operating expenses, the latter was greater
in 1919 than in 1917 by $1,519,000,000, or nearly 54 per cent.
The conclusion seems to be inevitable that the Government
plant was operated less efficiently and less economically than
was the same plant in private hands.
This doubtless is to a large degree explained by the weakness
in organization and the comparatively small output of labor
and wastage in materials, all of which are inseparable from the
transaction of all business of whatever kind by governmental
agencies.
Large amounts paid out to appointees of the administration
dispel the expectation that operation by the Government would
end large salaries. The report of the director general containing
a list of all officers and employees as of date, January 1, 1919,
shows, am-ong thousands of others under $10,000, that the fol¬
lowing salaries were paid, ranging from $10,000 to $50,000 per
year:
General office:
Assistant to director general _ $10, 000
Assistant director general 25, 000
Assistant to assistant director general 12, 000
Finance and purchases treasurer 10, 000
Capital expenditures director 25,000
Capital expenditures assistant to director 10, 000
Division of operation (proper) director 25, 000
184003—20057
4
Division of operation assistant director $15, 000
Division of operation assistant director . 14, 000
Division of operation assistant director _ 12, 000
Division of operation (two) assistant directors (each) 10,000
Division of operation (car service), manager 10, 000
Division of traffic, director _ 25, 000
Division of traffic :
Assistant director 15, 000
Assistant director 12, 500
Manager Pood Administration 20, 000
Manager War Industry Board 18, 500
Manager inland traffic, War Department 18, 000
Manager Fuel Administration 13, 200
Manager express and mail 12, 000
Division of labor, director 25, 000
Division of assistant directors (2), each 10,000
Division of law, general counsel 25, 000
Division of law, assistant general counsel (3), each 10,000
Division of inland waterways, director 25, 000
Board of railroad wages and working conditions, 6 members
of board (each) 10,000
Eastern region :
Regional director 50, 000
Assistant regional director 35, 000
District director 35, 000
District director 30, 000
Chairman budget committee 25, 000
Traffic assistant 20, 000
Mechanical assistant 20, 000
Resident traffic assistant 15, 000
Marine director 15, 000
Assistant mail and express 10, 000
Allegheny region :
Regional director , 50, 000
Assistant regional director 20, 000
Traffic assistant 20, 000
Operating assistant 20, 000
Mechanical assistant 10; 000
Transportation assistant 10, 000
Engineering assistant 10,000
Terminal manager (3), each 10,000
Pocahontas Region :
Regional director 40, 000
Traffic assistant 17, 500
Transportation assistant 10,800
Chairman regional purchasing committee 10, 000
Southern Region :
Regional director 40, 000
• Traffic assistant 15, 000
Operating assistant 10, 000
Northwestern Region :
Regional director 50, 000
Assistant regional director 20, 000
District director 25, 000
Traffic assistant 20, 000
District manager 10,000
Terminal manager 10, 000
Central Western Region :
Regional director 50, 000
Assistant regional director 20, 000
District director . 85,000
Traffic assistant 20, 000
Engineering assistant 12, 000
Soutliwestern Region :
Regional director 50, 000
Assistant regional director 15, 000
District director - 30, 000
Traffic assistant 20, 000
Engineering assistant 12, 000
In February, 1019, the director general submitted a statement
to the Senate Committee on Interstate Commerce (Hearings, pt.
32, p. 1719) showing that the total number of railroad employees
had increased l'rom 3,703,684 in December, 1917, to 1,843,530 in
January, 1910, an Increase of 139,846. A recent report issued by
the director general gives the number of employees in January,
184003—20057
5
1920, as 1,953,571, a further increase of 110,000 employees, or a
total increase of approximately 250,000 during the period of
Government operation.
The traffic handled was only slightly greater in January, 1920,
than in December, 1917, the freight traffic being greater by 8.8
per cent and the passenger traffic smaller by 6.5 per cent. Yet
Government operation in the latter month utilized 250,000 more
employees than did private operation in the former month.
Notwithstanding these facts this was a period of poorest
service from the standpoint of the public—shippers could not
get cars, people were suffering for lack of coal because it could
not be shipped, and many industrial plants had been closed
because of lack of transportation service.
Reference has been made to increases of wages made by the
Government; these increases aggregated about one thousand
millions of dollars per annum. It is also claimed that the rail¬
roads under private operation would have been obliged to have
put this same charge on the public. This latter statement has
something in it of conjecture, but there is one feature of the
situation that may be emphasized without fear of successful
contradiction.
To-day the railway employee in Maine or in Florida or in
California is given the same rate of wages as the employee
doing the same class of work in New York, Pennsylvania, or
Massachusetts, or Indiana, regardless of the differences in the
levels of living costs in different localities, in rural or urban
communities, or in conditions of labor as between different rail¬
ways.
This standardization of wages without regard to differences
in conditions between different communities, and without regard
to the scale of wages in other industries in these communities,
has tended to unsettle the industrial equilibrium.
It has also been a distressing thing to the employees to wit¬
ness the great injustice in the payment of wages. The amount
of wages paid has not been governed by the nature of the work,
the difficulty and responsibility of the task, and the skill re¬
quired in its performance. Workers of great skill and experi¬
ence, performing work for which they were thus peculiarly
fitted and which could not have been done except for such skill
and experience, have seen untrained and unskilled men work¬
ing near them rewarded by higher wages. Such discrimination
had a very depressing effect upon the employees and furnished
no incentive to the employee to excel in order that he might be
given more important duties.
If any student-of political economy had been asked prior to
Government operation of the railroads what danger he con¬
sidered the most likely, he probably would have given this an¬
swer: "The Executive of the Nation as the head of a political
party will probably be ready to make vast expenditures and deal
generously in paying out money, but because of the political
effect of the unpleasant task he may fail to collect sufficient
money in rates to pay the bill."
This administration failed at this point of greatest danger,
failed completely and miserably. Knowing that it was running
behind over $1,000,000 a day the administration lacked the
courage to put on the necessary freight and passenger rates to
pay the bill. When this point is made against the administra¬
tion they at once hurl back the answer, " Do you want to in-
184003-"-20057
6
crease freight rates?" There is but one answer to this ques¬
tion. The railroad business should pay its own way and 110
part of the freight rate should be paid by taxation. If a mil¬
liner in Kansas City wants Parisian hats that have been shipped
to the New York ports, she and her customers should pay the
freight and no part of it should be taxed upon the farmer in
Indiana and the cotton grower of Alabama. If a jockey club in
Maryland wants to ship race horses from Kentucky, those in¬
terested in that transfer should pay the freight and the grape
growers of California and the sheep growers of Montana should
not be taxed to help pay the bill. It is an easy and pleasant
task to advance wages, and I am glad to know that needed ad¬
vances were made; but if this made it necessary to initiate
greater freight rates and greater passenger rates, the mere fact
that the task was unpleasant should not have deterred the
administration.
This weakness of the administration accounts for our great
money loss. The cost in money of Government operation has
mounted higher and higher until the total stupendous sum has
gone far beyond the highest predictions from any source. The
grand total of the Government's obligations during the period
of operations reached the sum of $2,275,000,(XX), as estimated by
the Railroad Administration. Of this sum, it is expected that
the Government will in time be made whole for sums advanced,
investments made, and loans to the railroads to the amount of
$1,146,000,(XX). In detail the items are as follows:
Total expenditures and obligations of Railroad Admin¬
istration 1 $2,275, 000, 000
Indebtedness of railroads and other
properties, including express compa¬
nies, to Government at termination of
Federal control, estimated by director
general $801, 963, 932
Investment of Railroad Administration
in additions and betterments to in¬
land waterways 14, 581,126
New loans to railroads for period of 26
months following Federal control 270, 000, 000
Total 1, 14G, 000, 000
Net loss to the Government 1, 129, 000, 000
It is estimated by the chairman of the Appropriations Com¬
mittee in his report accompanying the deficiency appropriation
hill that there is a loss of something like $250,000,000 in decreased
value of railroad and Government securities which the Railroad
Administration took over. This amount can at best he only an
estimate, hut if it is an accurate estimate the irretrievable loss
for 26 months' operation is brought up to $1,379,000,000.
One could speak for hours and point out specific concrete in¬
stances of great and unnecessary waste by this Railroad Ad¬
ministration. For instance, everyone is familiar with the course
of personal publicity industriously pursued by Director. General
McAdoo from the time lie was made director general until he
resigned, lie sought in every conceivable way almost regard¬
less of cost to bring his own name before the public. Rubber
stamps for office use throughout the country were first
issued, marked "United States Railroad Administration."
When Mr. McAdoo got in full swing he had those rubber,
stamps piled iu the waste baskets, and new ones marked
" United States Railroad Administration, W. G. McAdoo, Direc¬
ts 1093—20957
7
tor General," were provided. He posted up conspicuously in
railroad cars, in stations, in shops, and other public places large
placards frequently containing information of little value, but
always at the top in bold letters was " W. G. McAdoo, Director
General"; and then, to make assurance doubly sure, you would
find at the bottom "W. G. McAdoo, Director General of Rail¬
roads." I hold in my hand a sample of one of many dozens
of bulletins printed and sent out. It contains but one page and
but a very small amount of reading matter. Nevertheless the
name " W. G. McAdoo, Director General," is near the top, and
again near the bottom I find " W. G. McAdoo, Director General
of Railroads." When the advance in wages was made by
Director General McAdoo he issued thousands upon thousands
of useless bulletins calling the attention of the employees to
the total amount of additional wages paid them by the Railroad
Administration. These announcements were usually coupled
with some other incidental appeal to furnish the body and ex¬
cuse for the advertisements, but to any observing man the
whole plan was a transparent publicity scheme. The total loss
of the Railroad Administration in operating the railroads was
approximately $50,000,000 per month during 26 months.
" Where ignorance is bliss 'tis folly to be wise." The hun¬
dred millions of our people during this squandering period were
lulled, Creeled, and McAdooed into a false sense of security
and trust. They watched with great contentment the glowing
sun as it set in the west day after day. They did not know
that every time the golden disk went down in the western
horizon this profligate Railroad Administration had taken from
their already flattened purses the enormous sum of $1,666,666.66.
It would not have added to their comfort to know that part
of this enormous sum was used as personal propaganda to ad¬
vance the personal political ambitions of the Director General
of Railroads, over whose head came the voice from the White
House saying, " This is my beloved son-in-law, in whom I am
well pleased." [Laughter.]
It is claimed in defense of the enormous amount of the deficit
that the amount paid to the railroads as compensation amounted
to a great sum, and that the Railroad Administration had no
responsibility, so far as the payment of rent to the raik*oads
was concerned, and that this was fixed by Congress. Without
meaning in the least to assert that the amounts paid the rail¬
roads for rental compensation was excessive, I want to dispel
the illusion that the amount was fixed by Congress.
The Federal control act passed by Congress contained this
unequivocal provision:
The President * * * is hereby authorized to agree with and
to guarantee to any such carrier making operating returns to the
Interstate Commerce Commission, that during the period of such
Federal control it shall receive as just compensation an annual sum,
payable from time to time in reasonable installments for each year and
pro rata for any fractional year of such Federal control, not exceed¬
ing a sum equivalent as nearly as may be to its average annual rail¬
way operating income for the three years ended June 30, 1917.
The nmount fixed by Congress was merely the maximum
over which the President could not go, and he went the full
limit allowed by Congress. I am merely calling attention to
this law so that It may he known that the entire responsibility
for the amount of the rental lies with the President and with
the Railroad Administration.
184093—30957
8
It is also claimed that a considerable part of the transporta¬
tion service was for the War and Navy Departments of the
Government, and hence that this furnished an excuse for the
deficit. The fallacy of that argument lies in the false assump¬
tion that this was performed without cost. As a matter of
fact this was paid for by these departments and was a most
profitable 'source of revenue. The carriage of immense num¬
bers of soldiers riding second class was done at great profit.
The Treasury Department's statement from January I, 1919,
to March 31, 1920, contains these illuminating items:
Transportation charges collected:
War Department—, $183, 530, 691. 92
Navy Department 10, 031, 241, 66
This is in addition to the immense amounts paid directly for
transportation by the soldiers and sailors themselves and takes
no account of the amounts received during 1918.
The freight and passenger rates were increased, and the first
schedule of freight rates, because of its great inequalities and
lack of notice, wrought havoc with the industries of the coun¬
try. In some cases there was a percentage increase of a little
over 25 per cent, and in other cases there was a flat increase of
so much per ton, which reached as high as 200 per cent. The
power over freight rates was used to prevent the movement of
certain commodities. For instance, rates on gravel and sand
were increased, and the reason given was that it was hoped to
cut down the amount of the shipment. Important differentials
for different shipping localities established on an equitable
basis, after careful hearings and in force for many years, were
destroyed almost without notice and the industries of important
industrial centers were completely shut down, and in some in¬
stances monopolies were thus permitted. The Illinois Traffic
League in a letter to me, dated July 30, referring to these rates,
said :
At the time of the passage of the Federal control act, in March, 1918,
the power was given to the President of the United States to initiate
rates on all railroads under Federal control, and the Interstate Com¬
merce Commission was by the same act deprived of its powers to pass
upon such rates, except in the way of review, after the rate should
become effective, For 30 years the shippers of this country had striven
to establish the authority of the Interstate Commerce Commission to
review, suspend, and otherwise pass upon the establishment of trans¬
portation rates before such rates became effective, this being neeessary
for the protection of the shipping interests of this country, and their
efforts were finally rewarded.
It was understood and clearly so stated at the time this power was
taken away from the commission and placed in the hands of the Presi¬
dent, that it would only be used in case of extreme emergency and as a
matter of war necessity, but as soon as the Railroad Administration
took bold of the situation these promises were disregarded and the
power thus given to the President was used indiscriminately by the
Director General of Railronda to change any and every rate he saw fit,
at his own pleasure, anywhere in the United States, sometimes on one
day's notice, thus leaving the shipping interests of the country entirely
at the mercy of the Railroad Administration and without adequate
recourse of any character. It is true that traffic committees wor®
formed aud consideration given to many rate changes, but in the ma¬
jority of cases this consideration was only perfunctory and very littl®
real benefit to the shippers.
The Illinois Sand & Gravel Co., in a resolution passed August
23, 1919, stated:
The general effect of this arbitrary action of the director general
has been more or less disastrous, former rate relationships having been
destroyed in many instances and undue burdens having been forced
upon many commodities, particularly basic materials used In building
aud construction.
184093—20957
9
1 Instance after instance could be cited to show how the rate-
making power was so abused and disadvantageously used that
the shippers were placed in desperate straits to carry on their
business.
As to the maintenance of railroad property, provided for by
the railroad-control act and by the standard contract with each
railway corporation, it is conceded by everyone who is familiar
with the situation that the facilities and equipment of the rail¬
roads were permitted to deteriorate to an alarming extent and
that numerous replacements imperatively required were not
authorized; even toward the end of Federal control, when ar¬
rangements to do so could have been made with considerably
less difficulty than during the war, practically no extensions or
new tracks were constructed; only sufficient maintenance to
enable continued operation was performed; less than 50 per
cent of the normal average wastage in freight cars and loco¬
motives was replaced, and practically no passenger cars were
purchased by the Government, although the railroads require
approximately 2,000 new units of such equipment each year in
order to render adequate service. To the argument that per¬
haps the railroad corporations could not have done better, the
reply is that prior to 1918 most of them gave maintenance and
replacements preferred attention and turned over to the Gov¬
ernment plants in comparatively up-to-date operating condition;
and the difficulties encountered by the Government during the
period of Federal control that followed the armistice, which
covered 16 of the 26 months that the railroads were operated
by the Government, are fairly comparable to those that had to
be contended with by the railroads when they had charge of
their properties, most of the differences being due to causes
resulting from the policies of the Government. The great body
of splendid Americans composing the railroad employees are
not resopnsihle for the disastrous results of Government opera-
-tion.
But, Mr. Speaker, these great disadvantages and these great
financial losses pale into insignificance when compared with the
disastrous effect upon the political life of our Republic. Politics
were not adjourned during the war nor after its close., ft was
found that some 2,000,000 of voters were directly and pecuni¬
arily interested in every important step taken by the Railroad
Administration. I have illustrated how the director general
advertised and emphasized the increases in wages by numerous
unnecessary bulletins; but it must be remembered that he had
been an active politician before securing this political plum,
and he soon saw in the dependency of this great class of voters
upon his every action the golden opportunity to capitalize for
political purposes the policies he pursued. He early issued his
statement that the policy under private operation bad been
" The public be damned," by which he sought to stir up senti¬
ment against private operation. He followed up his policy of
undertaking to take personal and political credit for advances
in railroad wages. I quote the following newspaper report of a
speech made by Director General McAdoo in El Paso, Tex., on
April 17, 19ia
He nskert the men not to become Impatient because of the delay of
the fixing ©f the new wage schedule, adding that if a raise waa grantee!
to the railroad men It would he retroactive, dud they would then be
able to buy Liberty bonds. " You are all my boys, and I don't intend to
184003—20057
10
Jet anyone kick you around, for I will defend you to the limit when you
are right, and you won't go wrong, I am sure," he said.
After the war a drive was determined upon to create senti¬
ment in favor of retaining the railroads and the administration
forces were prime movers in this drive. The first objective was
to secure an extension of the period of Government operation
for an additional five years, and, once agreed upon, a propa¬
ganda was started through railroad labor circles such as the
country has rarely ever before witnessed, and this was the signal
for renewing exaggerated claims of efficiency and economy in
the railroad administration and for new efforts to convince the
railroad employees that Government operation had been to their
benefit. This extension, of course, would have kept the railroads
beyond the presidential campaign.
On January 3, 1919, after the signing of the armistice and
when every consideration should have been looking toward the
ending of Government control, Mr. McAdoo appeared before the
Committee on Interstate Commerce of the Senate and urged the
passage of a law continuing the Government control for five
years longer. In his speech, which was given wide publicity, he
made great claims concerning economies and reforms under
Government control. He then laid the basis for an extension of
five years in the following language:
In view of the far-reaching importance of any solution of the rail¬
road question which may be adopted, the public is entitled to have,
before the present Federal control shall be terminated, a reasonably fair
test under peace conditions of the advantages to be derived from these
reforms. * * * This is why I have urged that Federal control be
extended until January 1, 1924.
Mr. McAdoo's successor, Director General Hines, an estimable
gentleman and able executive, also similarly urged Government
control of the railroads for a period of five years, and his argu¬
ment was so nearly like that of Mr. McAdoo that it suggested a
meeting of minds on the question. On February 3, 1919, before
the Senate committee, Director General Hines very strongly
urged the five-year extension. He said:
But I believe the five-year extension would be much better, because it
would give added stability. Of course, there can be no guaranty that
there will be a permanent solution in the three-year period, and the ad¬
ditional two years will give a margin of safety which will remove the
uncertainty which would arise if the end of the three-year period ap¬
proached and there appeared danger that no legislation would be accom¬
plished. ♦ * * We know that a large body of the people of this
country has a settled conviction that this question can not be success¬
fully disposed of except through Government ownership. The arguments
of the Government ownership advocates are temporarily at a discount by
reason of a reaction from all forms of Government control, this being a
perfectly natural aftermath of the war. Now, is it the part of states¬
manship for anyone to recommend a hasty settlement or this question-
in a period when the permanent convictions of a large part of the public
are for the time being suffering a partial eclipse by reason of a purely
temporary state of mind? (Hearings, pp. 893-895.)
Mr. BARKLEY. Will the gentleman yield?
Mr. SANDERS of Indinna. No; I decline to vield.
vlt is inconceivable that both of these gentlemen made these
urgent recommendations without the approval of the appoint¬
ing power. The end of the war, however, marked the begin¬
ning of the time when the public was heard. The people had
patriotically and very patiently borne what were thought to
be necessary evils during war time, but in peace times, through
the press over the country, through resolutions of thousands
of organizations, the public demanded that Government opera-
184093—20957
11
tion should cease. After the Republican organization in Con¬
gress had gone on record in. favor of their speedy return the
- President, reading his ouija board aright* yielded to this in¬
sistent public demand and in a message stated that the rail¬
roads should be returned. However* there had been set in
motion an organization among the railroad employees for the
retention Of the railroads, which did not terminate when the
President changed his mind. The amiable gentleman from
Tennessee, ranking Democratic member of the Interstate and
Foreign Commerce Committee of the House, which had charge
of railroad legislation, had caught the fever, and it never
abated with him. On May 19,1919, the gentleman from Tennes-
see [Mr. Sims] introduced a bill in this House to continue the
Federal control of railroads until January 1, 1924. On No¬
vember 5, 1919, he introduced a bill to continue Government
control and operation of railroads until December 31, 1921.
On December 2, 1919, he introduced an additional bill to con¬
tinue Government operation of railroads until December 31,
1921, and on August 2, 1919, by request, he introduced another
bill, known as the Plumb plan, which would require the Gov¬
ernment to purchase the railroads for all time to come and turn
them over to a corporation to be run on the soviet plan for
100 years.
And, Mr. Speaker, all of this clamor for extension of Gov¬
ernment operation of the railroads and for the Plumb ^plan
can be traced directly to the political effect of Government
operation of railroads, and the exaggerated claims that were
drummed into the employees' ears durkig that time that they
were receiving special favors from the administration in power.
The effect on our body politic of Government operation of
railroads was to accentuate the studied effort by the radicals of
to-day to bring about class consciousness.
Mr. Speaker, the claim that this Government is for one class
and against another is an infamous falsehood and an imposition.
Our Government is seeking to promote the welfare of the
Nation as a whole.
But if class shall be arrayed against class we may well
tremble for the future.
A republic differs essentially from other forms of govern¬
ment. The character of the government depends not alone
upon the high average of intelligence of the individual, but
upon the manner in which that intelligence is crystallized
through popular representation into the laws of the country.
If there shall develop strong conscious jealous classes, then
the member of the classes will more and more be guided by
selfish purposes. The part which he takes in shaping the
affairs of the nation will be to carry out his selfish ends and
the government shall no longer reflect the sum total of intelli¬
gent statesmanship of its people, but there will be reflected in
the country's government, in the turn of their respective ascend¬
ancies, the sum total of their efforts for class advancement*
[Applause.]
Let us hold to the fundamental triiths that have made us
great. This is the day for steady, unbiased, thoughtful action.
We must not indorse every fanciful scheme nor embrace every
novel proposal, but rather cling to those things which are tried
and true and march steadily on in our progress to the high
destiny which is within our reach.
184003—20057
12
The Republic at war and the Republic in peace require the
same sort of patriotism, but that does not mean that the gov¬
ernmental policy shall be the same. In fact, that policy should
just be reversed. The distinctive feature of the Government
of these United States has been freedom of action for the
individual; freedom*of action, to be sure, in an orderly way
with careful recognition of the rights of others. The great
industries of the country, the vast business of the Nation, the
phenomenal prosperity of our people, the wonderful happiness
in our land have all been brought about because of the recogni¬
tion of this principle. Whereas other countries united business
and the State, it has been the purpose of our statesmanship to
separate the two. Wc have been most happy and contented dur¬
ing the times when the Government least touched business
affairs. Take our transportation system, for instance, the Re¬
public of the United States, because of its vast contiguous terri¬
tory and its diversified industries has become a great trans¬
portation country. We have one-third of the railroads of the
entire world. We give the best rates and the best service of
any transportation system in the wide world, and it has all
been built up and developed by private initiative, by private
capital, by private ingenuity, and private genius. Our great
network of electric railways, our other great public utilities,
have all been developed in the same way.
During that time of great development the Government has
dealt*'with distinctly governmental affairs. It has not under¬
taken to carry on the business of the country. By legislation it
prevented evil practices in business, but that is a governmental
function. It provided proper rules of conduct and stayed the
hand of the transgressor, but that was a governmental function.
Now, when the war came on it required the united strength
of the Nation against a foreign foe and hence required an
entirely different governmental policy. The interest of industry
as industry, the interest of business as business, the interest of
the railroads as such, all became secondary to the necessary
use of all these elements of strength in assembling the might
of the Nation to strike effective blows against our foe. The
freedom of action 'of the individual had to give way to the
all-absorbing demand for the force of the individual's action as
a unit in our national force which we applied against the
enemy.
The marvelous way in which the American people submitted
to this change in governmental policy and the phenomenal re¬
sult of that achievement has taught the world that individual
freedom in peace time does not prevent the mastery of the
Nation in war time.
But now we have another problem—having made this radical
change in governmental policy during war time, will the genius
of our statesmanship be able to shift the gears and return us
to our normal status? The problem is a simple one so far as
rules are concerned. No deep study is required to know that the
Government must once more return to purely governmental func¬
tions. Rapid* strides have been made toward this end. We
have returned the telegraph and telephone wires to private
operation; we have returned'the cables to their private owners.
Some of our commissions and bureaus have been disbanded and
.all others which are* unnecessary should be abolished. Private
operation of railroads has been restored. We must continue
184003—20957
la
this covirse until there is a complete divorcement of business
and Government. [Applause.] And in keeping with this policy
the Congress passed the .Eseh-Cummins railroad hill* which the
President said in signing, " Marked a new era."
The one man who is entitled more than anyone else to the
credit for this great constructive measure is the chairman of the
Interstate and Foreign Commerce Committee of the House, the
gentleman from Wisconsin [Mr. Esch], [Applause.} He recog¬
nised the drafting of this railroad bill as a big task. He brought
to the accomplishment of the task his many years of experience
in legislation affecting transportation. He devoted practically
his entire time for many months to the work on the railroad bill.
His rich knowledge of railroad affairs did not hinder him. in
the least from studying ideas suggested by others. He recog¬
nized, as every practical legislator recognizes, that no impor¬
tant bill can meet the entire approval of all of the legislators
who must necessarily take part in its passage. Ready to yield
to convincing argument of others, yet firm in his own convic¬
tions, he easily became the master mind in the drafting of the
bill. He is entitled to the congratulations of his colleagues in
the House upon the passage of this hill, which hears his name.
[Applause.]
Let us examine the provisions of this act. After the enact¬
ment of certain provisions made necessary by Government
control, it so amends the former act to regulate commerce as
to give complete Federal regulation in every respect where the
public may have an interest and provides the machinery for the
voluntary adjustment of railway disputes. It then provides a
rule of rate making, so arranged as to provide sufficient revenue
to adequately sustain transportation and yet not produce un¬
conscionable returns to the strong roads.
The act proceeds upon the assumption that transportation is
a necessity; that it is a public function; that it is the duty of
the Government to see that it does properly function; that this
duty not only requires restrictive provisions by which the pub¬
lic is protected from any imposition on the part of the carriers
but also requires^j>rovisions which shall foster and encourage
the business of ttffiisportation by the quasi public corporations.
The restrictive futures fix the rates-that may be charged, con¬
trol the practices and regulations that may he made effective,
prescribe in great detail and with minute exaction how the
roads must be financed, the manner in which securities may
be issued, and the way in which the capital shall be expended
so that watering stock is made impossible. Consent of the
Interstate Commerce Commission must be obtained to construct
new lines of railroad, to extend the old lines, or to acquire or
operate any line. No line or part of line can be abandoned
without the consent of the commission. The railroad may be
required to furnish facilities for transportation, including cars,
locomotives, and other necessary equipment, and, if it does not
possess them, to provide itself with adequate facilities to prop¬
erly serve the public. , It must distribute cars in the manner
prescribed by the commission. It must permit other roads to
use its terminals,.under proper terms including reasonable com¬
pensation, when directed by the commission to do so. These
instances are merely illustrative of the restrictive regulations
by which complete control is given to the Government oyer
the instruments of transportation.
184093—20957
14:
Having given to the Interstate Commerce Commission the
fullest authority to supervise the charges that shall be made
and to determine the manner in which capital may be secured,
and-having granted to the commission the power to fix rates,
we have determined as a legislative policy that the roads in
any given rate group, considered as a whole, which are hon¬
estly, efficiently, and economically managed, shall have such
rates as will yield a fair return on the aggregate property value.
For a period of two years this return is to be fixed by the com¬
mission as nearly as may be at per cent, and wTith permission
for an additional one-half of 1 per cent under certain specified
conditions.
This function of the commission does not differ materially
from the function already exercised by the commission, except
that the bill adopts the 51 per cent for two years as a matter of
legislative policy rather than leaving it to the commission.
This is based upon property value and not one cent is to be
paid on " watered " stock. The story that the bill authorizes
freight rates upon $8,000,000,000 of watered stock is made out
of the whole cloth; the rates must be based upon the actual
value of the property and the amount of the stock does not enter
into it. j
The charge that the rule of rate making is a 6 per cent guar¬
anty is just as untrue. The Government does not make good
if the property does not yield 6 per cent. The loss is borne
entirely by the railroads.
The clearest illustration of meeting the railroad problem in
a constructive way is found in the provision for a recapture by
• the Government to be used for transportation purposes of one-
half the amount earned by any road above 6 per cent. Where
you have two competing "roads between two shipping points
these roads of necessity must charge the same rate, otherwise
the road charging the lesser rate would get all the traffic. Yet
a rate fixed for the carriage of freight and passengers between
those points might yield an unconscionably large return to one
road which by reason of a better route, roadbed, or other similar
causes was able to operate at less cost; and yet the yield for
the other road under this rate might not be large enough to
even approach a fair return. This is the problem of the strong
and the weak road, and that has been called by many students
of the subject the real railroad problem.
The greatest confusion has arisen over the labor provisions
of the act. The Senate bill contained an antistrike clause; the
House bill contained provisions for the voluntary adjustment
of railway disputes. The bill as it passed rejected the antistrike
features entirely and left merely the machinery for the volun¬
tary settlement of railway disputes, although with some modi¬
fications of the original provisions of the House bill. Many
railroad men and other union-labor men had written Members
to vote against the bill when it was thought it would contain
the antistrike provision, but since the bill has passed and a
clear study has been afforded the labor provisions have been
highly commended in many labor circles.
Title III embraces the labor provisions. It provides first
that the railroad companies and their officers on the one hand
and the employees and agents on the other hand shall hold con¬
ferences and try to make an amicable adjustment of their dis-
184093—20057
15
putes. This Is a roost wise provision. For many years' these
hundreds of thousands of employees have heen able, through
negotiations in most eases, to effect satisfactory settlements
with their employers. Yery seldom have they reached a dead¬
lock. When they sit down at a table together and frankly dis¬
cuss their differences the solution frequently can be easily found.
And this bill does not undertake to compel the men to litigate
their troubles before the boards; in fact, it is hoped and ex¬
pected that the majority of the disputes will be settled between
the parties themselves.
It is recognized, however, that it is extremely important to
avoid any interruption of our transportation system, and hence
there are to be organized ** railroad boards of labor adjustment/*
known as " adjustment boards," made up wholly of the repre¬
sentatives of the railroads interested and the employees inter¬
ested, in order that a dispute assuming discomforting propor¬
tions may be submitted in an orderly way to a tribunal ready
for its consideration. This board will decide disputes involving
"only grievances, rules, or working conditions."
There is also- established what is known as the- " labor board,w
composed of nine members appointed by the President and eon-
firmed by the Senate.
Three members representing the employees and subordinate
officials are appointed from a list of not less than six named by
the employees-
Three representing the management group are appointed from
a list of not less than six named by the railroads.
Three representing the public are named by the President
upon his own initiative.. Vacancies are filled in same manner
as the original appointment.
The members hold office for a term of five years, except that
shorter terms of varying length are provided in the first organ¬
ization so that only one-third of the board will leave in one- year.
This labor board has two functions. One to' hear disputes in¬
volving grievances, rules, or working conditions, where a deci¬
sion can not be reached by the adjustment board. The other
function is the original consideration of " all disputes with re¬
spect to the wages or salaries of employees or subordinate
officials of carriers," not amicably decided between the parties
themselves. Five of the nine members must concur and this
must include at least one of the public group,, in order for their
deliberation to amount to a decision.
The employees are not compelled to submit their grievances!
to the board, and there is no compulsory arbitration, and there
is nothing in the law making a strike unlawful.
In reaching their determination the board shall consider:
(1) The scales of wages paid for similar kinds of work in
other industries;
(2) The relation between wages and the cost- of living;,
(3) The hazards of the employment;
(4) The training and skill required;
(5) The degree of responsibility;
(G) The character and regularity of the employment; and
(7) Inequalities of increases in wages or of treatment, the
result o^previous wage orders or adjustments.
The main office of the labor board is in Chicago, but, if neces¬
sary, it may meet at other places. The board is given the usual
, 184093—20057
16
~t
powers granted to commissions for the issuance of subpoenas
and securing the attendance of witnesses. • ;
The act does not provide for the enforcement of the decisions,
but ample provision is made for giving notice to the parties
and publishing the decisions to acquaint the public with the
result. . V . -> .. ■ V ■ ,v
Thus the Congress rejected the antistrike provisions and sub¬
stituted in its place the machinery for the amicable adjustment of
disputes and a Government tribunal in which those interested, the
employees, the railroads, and the public, have representation. No
one claims that the millennium has come in the matter of rail¬
road labor disputes, but it is the firm belief of those who have
studied this perplexing problem that this will reduce friction to
the very minimum and assure to all interested the " even-handed
justice " and square deal to which every American is entitled.
The act is now effective. The Labor Board has been created,
consisting of the following personnel: , , , . •'*
FOR THE PUBLIC.
It. M. Barton, of Tennessee, for many years a member of the Tennessee
Court of Appeals. ' _
G. W. W. Hanger, of the District of Columbia, Assistant Commis¬
sioner of the United States Board of Mediation and Conciliation. , ,
Henry Hunt, formerly mayor of Cincinnati, Ohio.
sFOR THE RAILWAY EXECUTIVES. * " '
Horace Baker, of Ohio, former general manager of the Queen &
Crescent Lines. -
J. II. Elliott, of Texas, former general manager of the Texas &
Pacific. -
William L. Park, of Illinois, former vice president of the Chicago
Great Western.
^ FOR THE EMPLOYEES. ' ' " •»;
• Albert Phillips, of Ohio, vice president of the Brotherhood of Loco¬
motive Firemen and Enginemen.
A. C. Wharton, of Missouri, president of the railroad employees' de¬
partment of the American Federation of Labor. %
J. J. Forrester, president of the Brotherhood of Railway Clerks. c
. The board in an orderly way is now considering the railroad-
wage question, involving practically every employee of the rail¬
roads and a stupendous sum of money, and practically everyone
now agrees that the amount of money involved and the impor¬
tance of the question was too great to be settled in any way
except by the Government tribunal.
The Interstate Commerce Commission has provided the neces¬
sary groups, and is now holding hearings on the rate schedule.
The beneficent provisions of the bill, which gives complete con¬
trol by the commission in any emergency created by congestion,
have been invoked. , .
It will take many years, Mr. Chairman, for our transportation
system to return to normal, but this great measure has marked
the pathway to take us out of chaos into the realm of order,
and the menace to our well-ordered Government has been
removed. [Applause.]
184093—20057
• . o-