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AN EXAMINATION AND ANALYSIS OF THE Postmaster -Generars Proposals Concerning Railway Mail Pay BEING A STUDY OF HOUSE DOCUMENT No. 105, SIXTY-SECOND CONGRESS, FIRST SESSION, BASED UPON THE ORIGINAL DATA SUPPLIED BY THE RAILWAYS AND USED BY THE POST- MASTER-GENERAL AND UPON OFFICIAL STATISTICS. :: :: :: PREPARED UNDER THE SUPERVISION OF THE Committee on Railway Mail Pay BY H. T. Newcomb Statistician Published by the COMMITTEE ON RAILWAY MAIL PAY 1912 COMMITTEE ON RAILWAY MAIL PAY / NOVEMBER, 1909. J. KRUTTSCHNITT. (Chairman), Vice-President and Director of Maintenance and Operation, Union and Southern Pacific Systems. LUCIUS TUTTLE, President, Boston & Maine R. R. RALPH PETERS, President and General Manager, Long Island R. R. C. A. WICKERSHAM. President and General Manager, Atlanta & West Point R. R. and Western Railway of Alabama. W. W. BALDWIN. Vice-President, Chicago, Burlington & Quincy R. R. W. F. ALLEN, Secretary. DECEMBER, 1912. RALPH PETERS, (Chairman), President, Long Island R. R. C. A. WICKERSHAM. President and General Manager. Atlanta & West Point R. R. and Western Ry. of Alabama. W. W. BALDWIN, Vice-President, Chicago, Burlington & Quincy R. R. W. W. ATTERBURY, Vice-President, Pennsylvania R. R. GEO. T. NICHOLSON, Vice-President. Atchison, Topeka & Santa Fe Ry. E. J. PEARSON, First Vice-President, Missouri Pacific Ry. E. G. BUCKLAND, Vice-President, New York, New Haven & Hartford R. R. C. F. DALY, Vice-President, New York Central Lines. W. A. WORTHINGTON. Assistant Director of Maintenance and Operation, Union and Southern Pacific Systems. W. F. ALLEN, Secretary. SUB-COMMITTEE OF MAIL EXPERTS. E. T. POSTLETHWAITE. Assistant to President, Pennsylvania R. R. S. C. SCOTT, Assistant to the First Vice-President, Pennsylvania Lines West of Pittsburgh. A. H. ROWAN, Assistant to the Vice-President— Traffic Department, New York Central Lines. H. P. THRALL. Mail Traffic Manager, Union Pacific R. R. J. P. LINDSAY, Manager Mail Traffic, Santa Fe System. H. E. MACK, Manager Mail Traffic, Missouri Pacific Ry. V. J. BRADLEY, General Supervisor Mail Traffic, Pennsylvania R. R. W. W. SAFFORD, General Mail and Express Agent, Seaboard Air Line Ry. H. M. WADE, Supervisor of Mails, Erie R. R. 3\ SL^ ANALYTICAL TABLE OF CONTENTS PAGE Statement relative to the Modified Edition of Document No. lO-j V Introduction 1 I. The Postmaster-General's Remnunendation Briefly Stated 2 II. Analysis of the Postmaster-Geuerars Report 7 FIRST. Data submitted by the railroads at the request of the Post Office Department, which are essential to a complete understanding of the subject, have been withheld and sup- pressed. A. Station and Terminal Expenses Directly Incurred on Accoimt of Mail 9 \ B. Personal Transportation 16 . ' C. Relative Receipts from Passenger, Express and Mail Traffic 18 SECOND. The Postmaster-General has arbitrarily transferred to the passenger service much of the so-called "dead" space in mail cars, although this space could not be utilized as , '' passenger space, thus improperly increasing the apparent car-foot miles of passenger service, and correspondingly de- creasing the car-foot miles of mail service. jLc:7 A. Car-foot Mileage Defined 19 B. Dead Space Defined 21 C. Relation of "Dead Space" to cost of any Service 23 K D. What the Postmaster-General Did 23 Q E. Further Proof of Arbitrary Treatment of Space 28 F. The Effect of these Arbitrary Methods 32 =K^ G. Conclusion Necessary from these Facts 33 •^ THIRD. The Postmaster-General apportioned expenses incurred ^=^ for the joint purposes of the passenger and freight services I between these services, in accordance with a method which 3 understates the cost of the passenger train services but even P^ this method shows that the mail service is underpaid .33 _, FOURTH. The Postmaster-General has wholly overlooked the tr fact that a large part of the cost incurred by the railways ."'^ ■ in carrying the mails, consists of interest on the capital they l^ employ. By ignoring all capital expenses, confining his atten- tion to mere operating costs, and proposing to return to the railways only the amount of these operating costs, plus six per cent., he urges a method which, if applied generally to III all their business, woiild render every railroad at once bankrupt. A. Postmaster-General Admits that Some Items of Ex- pense were Omitted 35 B. The Postmaster-General Ignores the Fact after his Admission 35 C. The Factors in Cost of Production 37 D. Railway Investors are Constitutionally Protected in the Right to Reasonable Interest 38 E. Amounts of Expenses Ignored by the Postmaster- General 40 F. Even on the Basis of the Unfairly Low Estimates of Operating Costs Made by the Postmaster-Gen- eral. Allowance for the Omitted Expenses Would Make the Mail Pay Higher than it is now 42 I FIFTH. In confining his investigation to the month of Novem- ber, the Postmaster-General selected a month that is not a fair average or typical portion of the year but, in connection with the methods he employed, reduced the apparent cost of the passenger train services, resulting from his calculations. 43 III. Recent Reductions in Railway Mail Pay. A. Preliminary Survey and Comparisons 50 B. Reductions Due to Natural Operation of the Law of 1S73... 58 C. Effect of Competition stimulated by Post Office Department. 60 D. Reductions Made by the Act of March 2. 1907 61 E. Reduction by Administrative Order 62 F. Withdrawal of Payments for Special Facilities 64 G. Withdrawal of Envelopes. Postal Cards and Mail Equipment from ^Nlails 65 H. Forwarding Periodicals by Freight 65 I. Summary of Recent Reductions 66 J. Conclusion Drawn from These Reductions 72 IV. Reduced Railway Mail Pay is Now Below the Level of Just Com- pensation. A. Points Already Demonstrated in this Rejwrt 73 B. Railway Mail Pay not Excessive before Recent Series of Reductions Began 74 C. Changed Conditions since 1901 Would Justify Increased Rather than Reduced Railway Mail Pay 75 D. The Passenger Train Services are not Reasonably Remun- erative 77 E. Railway Gross Receipts from Mail Transportation Lower than from any other Passenger Train Services. 80 F. Railways should be paid for Apartment Cars 82 G. The Weight Basis of Railway Mail Pay Should be Ascer- tained Annually 84 H. Terminal Services on Light Routes Should be Paid For 85 V. Conclusion 85 Appendix A Sga IV THE MODIFIED EDITION OF DOCUMENT NO. 105. There are now extant two editions of Document No. 105. All the figures in tlie pamphlet to which these pages are annexed are from the first and all references are to the same edition. The second or modi- fied edition, published since this pamphlet was put in type, changes many of the figures in the original edition; hut contains no reference to the fact that it is a second edition or any intimation that any of the data have been modified. It is known, however, that the modifica- tions were made necessary by attention which had been directed to numerous and serious errors in the first edition. The appearance and paging of both editions are identical and the only way to distinguish one from the other, except by comparing the figures, is to note that, on the unnumbered page opposite the table of contents, the first edition contains the seal of the Government Print- ing Office, while in the second edition the corresiaonding space is occu- pied by a copy of the resolution of the House of Representatives of March 26, 1912, authorizing the printing of two thousand copies for the use of the House Committee on Post Offices and Post Roads. In order to avoid confusion, on account of the dissimilar figures in these publications which bear the same title and an appearance of identity, it is necessary to call attention to some of the more important changes and to their effect upon the calculations in the annexed pamphlet. As fully demonstrated in this pamphlet, the controlling figure in the Postmaster-General's calculations is that representing the percentage of the total car-foot mileage of passenger trains which he credited to the mail service. In the first edition this was stated as 7.16 per cent (Document No. 105, page 59) ; in the same place in the modified edition 7.18 per cent appears. Other changes on page 59 of Docu- ment No. 105 are as follows: Car-foot mileage Service First edition Second edition Increase Mail 926.164.458.83 1.379,315.759.65 10,634.749.746.71 9.32.371.285.37 1.379.396.873.05 10.676,112.464.36 6.206.826.54 81.113.40 41,362.717.65 Express Passengers Total 12,940,229,965.19 12,987,880.022.78 47,650,657.59 Examining the details of the table the totals of which were changed as above indicated (Table 3, pages 38-59) it is found tlmt the changes relate to but two systems and that the addition of 6,206,826.54 to car-foot mileage made in the mail service is the sum of 500,749.20 car- foot miles added to the Atchison, Topeka & Santa Fe System (Docu- ment N^o. 105, page 39) and of 5,706,0TT.34 miles added to the Penn- sylvania System (Document Xo. 105, pages 51-3). The latter item in- cludes additions to the car-foot mileage of four of the lines of the sys- tem, as follows: Pennsylvania Company, 1,075,046.85; Philadelphia, Baltimore & Washington, 58,512.60; Pittsburgh, Cincinnati, Chicago & St. Louis, 3,170,586.08; Yandalia, 1,401,931.81. The following changes, among others, appear in the totals of Table 7 '(Document Xo. 105, pp. 280-281) . Expenses for November, 1909 First I Second Edition Edition Increase Taxes $7,198,452.91 i $7,206,270.16 1 $7,817.25 Operating expenses charged to mail service 2.676.50.'5.75 2.682.707.92 6,294.17 A further scrutiny of this table (Document Xo. 105, pp. 272- 281) shows that the addition in taxes was to the amount stated for the Louisville & Xashville Railroad (page 274) and that the changes in the expenses assigned to the mail service included the efEect of this addition and of the changes in the car-foot mileage of the Atchison, Topeka & Santa Fe (page 272) and of the various companies of the Pennsylvania System (page 276). Whoever wishes to check all the changes made by the new edition will be able to do so by referring to the pages indicated below: Changes affecting Atchison, Topeka & Santa Fe Louisville & Nashville Pennsylvania Compan.v Pennsylvania Railroad Philadelphia, Baltimore & Washington Pittsburgh, Cincinnati. Chicago <& St. Louis. Vandalia Totals and averages Pages— Both editions 38, 39. 60, 177, 263. 272 ,273 274, 275 50, 51, 63, 191, 260, 261, 276, 277 191, 259. 276, 277 52, 53, 63, 191, 259, 276, 277 52. 53, 63, 191, 193, 261, 276, 277 52. 53, 63. 193. 263, 276, 277 58. 59, 65, 196, 197, 266, 267, 269. 270, 280, 281 The fact that the important changes which have thus necessitated a revision of Document Xo. 105 relate to only three systems suggests that an equally careful checking of the data reported for all other sys- tems would require still more numerous and radical modifications in the Postmaster-General's figures. This is especially evident when it is understood that the changes so far made have been in recognition VI of errors brought to the attention of the Post Office Department by the railways directly affected — few railways have attempted the arduous task of examining the long and complicated computations of the De- partment in order to detect specific errors. As already noted, the figures and quotations from Document No. 105, in this pamphlet are from the first edition. Some changes would be necessary in order to substitute the figures of the new edition and the result would not be wholly satisfactory as both editions are in circulation and, there being no plainly distinguishing mark on either, whoever uses a copy of either is likely to regard it as the authoritative and definitive issue. The following table indicates the more important changes that would be necessary to base the annexed pamphlet upon the second, instead of the first, edition of Document No. 105 : To agree with the Line (if in Column (if Instead second edition of Page text) in table) of Document No. 105, there should be: 9 10.13 $2,676,503.75 $2,682,797.92 9 13-14 $2,837,093.98 $2,g43,765.80 9 14,19 21.36 21.18 20 3 $2,676,503.75 $2,682,797.92 20 6 14.99 14.95 '29 2 10,634,749,747 10,676,112,464 29 2 1,.379,315,759 1,-379,396,873 29 2 926,164,459 932,371,285 29 2 12,940,229,965 12,987,880,622 29 3 82.18 82.20 29 .... 3 10.66 10.62 29 3 7.16 7.18 29 6 732,379,597 773,742,314 29 6 59,207,170 59,288,284 29 6 564,640,981 612,291,638 29 1 6.89 7.25 29 7 4.29 4..30 29 7 4.36 4.71 29 8 226,945,786 220,7.38,960 29 9 24.50 23.67 30 2 54.544 54,755 30 2 7,074 7.075 30 2 4,750 4.782 30 2 66,368 66,612 30 4 866 655 30 4 313 312 30 4 1,703 1,671 30 4 2,882 2,638 30 5 1.59 1.20 30 5 4.42 4.41 30 8,21 5 35.85 34.94 30 5 4.34 3.96 31 3 5.50,727,960 585,923,233 31 3 14,966,609 15,317,133 31 3 565.694,569 601,240,367 31 3 17.494,235 17.994.984 31 3 3.5,261,514 35,762.263 31 31 3 681,670,711 717,717,258 6 15.789,764 15.289,015 VII To agree witii the Tjin** (if in Column (if Instead second edition of Page text in table) of Document No. 105, there should be: 31 6 20,223,126 19,722,367 31 6 46.011,932 9.965.385 31 7 47.44 45.04 31 7 36.45 35.55 31 7 6.32 1..37 31 9 80.79 81.64 31 9 2.20 2.13 31 9 82.99 83.77 31 9 11.84 11.25 31 9 5.17 4.98 32 "12 210.326,652 204.679.088 32 13 21.28 20.71 32 A 3 23,288.845.22 24.363,892.07 32 A , 3 24.054.604.27 27.225,190.35 32 A 3 10,908.799.55 12..310,731.36 32 A i 3 778.197,633.71 783.845,198.45 32 A 4 5.458.291.78 4,383.244.93 32 A 4 8.328,919.73 5,158.333.65 32 A 4 3.918,612.45 2.516.680.64 32 A 4 210.326.652.31 204.679.087.57 32 A 5 18.99 15.25 32 A 5 25.72 15.93 32 A 5 26.43 16.97 32 A 5 21.28 20.71 36 1 >4.'33 $97,186.52 $93,614.87 36 29. ; JO. 31 5.17 4.08 36 36 $62,380.54 $65,952.19 38 30 $2,673,503.75 $2,682,797.92 38 33 $3,878,431.75 $3,887,725.92 47 2.18 $2,676,503.75 $2,682,797.02 47 19 $1,189,705.92 $1,192,503.67 47 19 $3,866,209.67 $3,875,301.59 47 19 $258,436.54 $267,528.46 47 20 $3,101,238.48 $3,210..341.52 80 2 7.16 7.18 80 16.: 25.' 27 2 $7.16 $7.18 81 8 0.76 0.78 81 8 $5,812,277.49 $5,965,232.16 83 2 430 944 968 10 431 210 671 03 83 2 864 633 119.64 7XU J.»A«A\_'»'_' 1 -K t\'*f 364,370.259.64 795 580 930 67 83 2 795 578 087 74 83 11.16 84.61 84.50 83 17 $4,008,643.06 $4,003,431.49 VIII AN EXAMINATION AND ANALYSIS OF THE Postmaster-General's Proposals Concerning Railway Mail Pat INTRODUCTION. This examination and analysis of the recommendation and argu- ment concerning railway mail pay made by the Postmaster-General and printed as Document No. 105 of the Sixty-Second Congress, first ses- sion, deals with a proposal to reduce the annual revenues of the railways by the sum of $9,000,000.00, which (capitalized at five per cent) would equal a reduction of $180,000,000 in the value of their property. This reduction the Postmaster-General proposes to accomplish by a diminu- tion of mail pay without any compensatory reduction in the services and facilities demanded by the Post Office Department and in a manner not enabling railway economies in any degree offsetting the loss of gross receipts. The extent and nature of this proposed reduction and the exceed- ingly large number of errors and omissions in Document No. 105 to which it will be necessary to call attention are deemed fully to warrant the length of the paper. Especial attention is invited to the following errors which, among others, are found in Document No. 105 : First. All the Postmaster-General's calculations and conclu- sions rest upon data for the single month of November, 1909, a month in which passenger traffic and expenses were relatively very light and freight traffic and expenses were relatively very heavy. (See pages, 43-50.) Second. The Postmaster-General wholly ignored the neces- sity (industrial as well as Constitutional) of a reasonable return upon railway investments, equitably proportioned to the fair value of railway property, and that this is an inevitable part of the cost of railway transportation, confining his attention to operating expenses and taxes which make up only a part of the real cost. (See pages 35-43.) Third. The Postmaster-General apportioned joint expenses between the passenger and freight services in accordance with a method that does not give the full, real cost of the passenger train services. (See pages 33-35.) Fourth. The Postmaster-General ignored important serv- ices and facilities rendered and supplied by the railways, such as station facilities and terminal services and the transportation of postal employees not accompanying the mails, and ignored the actual and direct expenditures of the railways for these pur- poses. (See pages 9-18.) Fifth, The Postmaster-General misconceived the nature of working space and temporarily unused space in cars carrying mail and not only refused to regard such space as required by the postal service but actually added it to the passenger space. (See pages 19-33.) All the foregoing errors, and many others, demonstrated and dis- cussed in the following pages, had the effect, separately and cumulatively, of making the Postmaster-General's estimates of the cost to the railways of the mail services and facilities they supply too low. THE POSTMASTER-GENERAL'S RECOMMENDATION BRIEFLY STATED. The Postmaster-General's letter to the Speaker of the House of Representatives, printed under date of August 13, 1911, but not received by the representative of any affected railway until December 8, 1911, with the accompanying reports and tabulations contained in House Document No. 105 of the first session of the Sixty-second Con- gress, comprises: — First. A recommendation for a revision of the basis of payment for the railway facilities and services required in con- nection with the postal service, and, Second. A series of reports and tabulations apparently in- tended to illustrate the results which would follow the applica- ._ tion of the revised basis of payment that is recommended. The system of railway mail pay wliich the Postmaster-General thus seeks to have substituted for that now in lorce may, perhaps, be best stated by means of quotations from the "Tentative Draft of Proposed Law for Eegulation of Railway Mail Pay" Avhich appears on the fourth and fifth pages of Document No. 105. Thus stated, it is proposed : First. (As to railways the construction of which was not aided hy Congressional grants of land) "The Postmaster- General is authorized and directed to readjust the pay to com- panies operating railroads for the transportation and handling of the mails and furnishing facilities in connection therewith, not less frequently than once in each fiscal year, ... at a rate of comijensation per annum not exceeding the cost to the railroad companies of carrying the mails as ascertained by him, and six per centum of such cost: Provided, That when such ascer- tained cost and six per centum does not equal twenty-five dollars per mile per annum, he may, in his discretion, allow not exceed- ing such rate, and. Second. [As to land-grant railways) "Railroad com- panies whose railroads were constructed in Avhole or in part by a land grant made by Congress, on the condition that the mails should be transported over their roads at such price as Con- gress should by law direct, shall receive not exceeding the cost to them of performing the service." The "tentative draft" contains no definition of the manner in which the cost of carrying the mails would be or could be ascertained nor as to the elements of cost to be considered. Much less does it contain any language suggesting the exclusion from consideration of any element of cost. As, upon any fair and reasonable basis of ascer- tainment, the cost of the postal facilities and services supplied by the railways exceeds the sums now paid therefor by the Government they could have no very practical objection to the proposed system if it would, in fact, although abandoning the proper and customary standards of compensation, increase their mail revenues to an amount really in ex- cess of the actual cost. But it is necessary to interpret the Postmaster- General's recommendations in the liglit of tlie whole report in which they are contained and especially in the light of the following claims which he makes. First. That the investigation reported in Document No. 105 discloses the real cost to the railways of carrying the mails, and, Second. That the enactment of his recommendations would effect a reduction of $9,000,000.00 from present railway mail pay- In his annual report to Congress, dated December 1, 1911, the Postmaster-General said, concerning this Document: "During the year the Department completed the investi- gation begun early in the administration with the object of determining what it costs the railways to perform this service, and the report of the inquiry was submitted to Congress on the twelfth of August last. The statistics obtained during the course of the investigation disclosed for the first time the cost of carrying mail in comparison with the revenue derived by the railways from this service. ... If Congress gives the recommendation of the Department in this regard its favor- able consideration and authorizes a readjustment of railway mail pay in the manner suggested, it is believed that the resulting saving to the Government will amount annually to about $9,000,000.00." Annual Eeport of the Postmaster-General, House Document No. 559, Sixty-second Congress, Second Session, pp. 19-20. Those portions of Document N"u. 105 which consist of reports and investigations apparently intended to illustrate the results that would follow the adoption of the new basis of payment exclude from consid- eration, as will more fully appear hereinafter, all services and facil- ities except the service of transportation on trains and the facility of space in cars occupied while such movement is in actual progress and all elements of cost save those of operation and taxes, that is to say. they exclude all the primary costs incident to securing the capital necessary to create the property operated. Therefore, the Postmaster- General's recommendation, if it is not to be regarded as wholly in- consistent with the argument that he submits in its support, which is unthinkable, is to be held and considered to be a recommendation to reduce railway mail pay below the cost of the facilities and service.^ supplied by ignoring some services and facilities and making payment equal the sum of a part of the elements of cost (that is to say, the sum of operating and taxation costs, but not including interest cost) of transportation services and train facilities. The Postmaster-General calls this proposed reduction a "readjust- ment of railway mail pay on the basis of cost with six per cent profit" (Document 105, p. 3) and estimates, as has been seen, that the resultant diminution of mail pay would amount to approximately $9,000,000.00 annually (Document 105, p. 3). As the aggregate sum paid for the facilities supplied by the railways during the fiscal year 1911 was $50,099,537.03* it is evident that the proposed reduction amounts to about eighteen per cent of the gross revenue which the railways now derive from this source. The detailed figures of Document No. 105, however, indicate that it would be higher. They show (pages 280, 281) that, during the month of November of the year 1909, the railways included received $3,607,773.13 for the postal facilities and services they supplied while, for the same period, the Postmaster-General estimates that the train space they furnished cost them, in operating expenses and taxes alone, $2,676,503.75. As he does not propose to make a return for any other items of cost and proposes to add only six per cent to the total of these items, it is evident that if his "readjustment" had been in effect they would have received f06 per cent of $2,676,503.75 or $2,837,093.98. The last named sum is 21.36 per cent less than $3,607,773.13, the sum these railways were paid, and this percentage, of course, approximates the reduction. In this calculation no allowance is made for the fact that some railways, that is, land-grant roads, ' would he denied the additional six per cent so that the actual reduc- tion would he somewhat more than 31.36 per cent. This brief statement discloses the fact that the Postmaster-General's recommendation really rests upon certain almost obviously incorrect and misleading conclusions which are, in part, as follows: First. He erroneously assumes that the train space oc- cupied by the mails is a fair measure of the services and facilities supplied by the railways whereas, in fact, they per- form important terminal and delivery services, supply a vast aggregate of personal transportation, furnish extraordinary station facilities and supply many and costly additional serv- ices and facilities of which he takes no account. *Tlie sum reported by the Postmaster-General (Postmaster-General's Auuual Report for 1911, House Docunieut No. 5Ci9, Sixty-second Congress p. 49), as the cost of "transportation of domestic mail by railroads," is $50,583,122.9(; luit not all of this sum was paid to railways. The sum so paid was actually $483,585.94 less. The cost, as reported, includes the cost of the quadrennial weighing of the mails in one of the four weighing sections, of tabulating the results of this weighing and perhaps other expenditures. The railways actually received only $50,099,537.02. This fact was stated by the Honorable Second Assistant Postmaster-General in a letter, dated on June 7, 1912, addressed to H. T. Newcomb, statistician to the Committee on Railway Mail Pay, which letter is as follows : "In reply to your letter of the twenty- second ultimo, asking for furtlier information relative to the amount actually paid to the raih-oad companies during the fiscal year ended June 30, 1911, I have to advise you that out of the total of $50,583,122.96 there was expended a total of $483,585.94 for purposes other than railroad transportation." The average annual cost of weighing the mails for the purpose of readjusting railway mail pay is stated in Document No. 105 (p. 15), as $400,000.00. At least this sum should, therefore be deducted from the reported annual cost of railroad services, previous to 1911, In order to ascertain the annual aggre- gates actually received by the railways. Second. He erroneously assumes that expenses in the operation of a railway and taxes exacted from it constitute all the cost of the services it renders, thus overlooking and ignoring the fact that property has to exist before it can be operated and that its existence is evidence of the investment of capital, a reasonable return on which is a necessary and legitimate element of the cost of transportation and that this element, in the case of railways, amounts to a very consid- erable fraction of the total cost. The foregoing misconceptions of fact are fundamental in character and importance and their destructive effect upon the argument of Document No. 105 will be further discussed herein. Attention is di- rected to them, at this stage, merely because any statement of the Post- mast er-GeneraVs plan which failed to note that it rests upon these basic inaccuracies would be seriously incomplete. It should also be noted at the outset that the second of these misconceptions leads to a rejection of that essential principle of fair treatment of the railway carriers of mail proclaimed by the Joint Commission to Investigate the Postal Service which reported in 1901, in part as follows: "We are of opinion that the true basis for payment to railroads for mail transportation should be such sums as will afford the railroads a fair compensation for the services ren- dered." Fifty-sixth Congress, Senate Document No. 89, p. 9. And the Joint Postal Commission continued: "It seems to the Commission that not only justice and good conscience, but also the efficiency of the postal service and the best interests of the country demand that the railway mail pay shall be so clearly fair and reasonable that while, on the one hand, the Government shall receive a full quid pro quo for its expenditures and the public treasury be not subjected to an improper drain upon its funds, yet, on the other hand, the Railway Mail Service shall bear its due pro- portion of the expenses incurred by the railroads in the maintenance of their organization and business as well as in the operations of their mail trains. "The transaction between the Government and the rail- roads should be, and in the opinion of the commission is, a relation of contract; but it is a contract between the sov- ereign and a subject as to which the latter has practically no choice but to accept the terms formulated and demanded by the former; and therefore it is incumbent upon the 6 sovereign to see that it takes no undue advantage of the subject, nor imposes upon it an unrighteous burden, nor 'drives a hard bargain' with it." Ibid, p. 10. It is submitted that these extracts but express considerations that are obviously and fundamentally correct and that must prevail wherever justice is respected and maintained. But there can be no just compen- gation when a reasonable return upon invested capital is refused and the Postmaster-General has confessedly considered , none of the expenses necessarily incurred in order to procure capital, but only those of opera- tion and for taxes. II. DETAILED ANALYSIS OF THE POSTMASTER-GENERAL'S REPORT. Although the argument for a reduction in railway mail pay made by the Postmaster-General (Sixty-second Congress, House Document No. 105) is addressed to the Speaker of the House of Representatives under date as of August 12, 1911, and the Congressional order for printing was entered on August 15, 1911, the Postmaster-General caused its j^ublication to be suspended, for the purpose, as it is stated, of making repeated changes and corrections, and it was not until December 8, 1911, that the Committee on Railway Mail Pay, or any of the rail- ways which would be affected by the adoption of the recommendations of the report, were able to obtain copies or were advised of its contents. Soon after obtaining copies of the report, with the accompanying docu- ments and tabular statements, and having given consideration to the whole document, the Committee, by Mr. Kruttschnitt, its chairman, on December 20, 1911, addressed a letter to the Speaker, which was, in full, as follows : "TO THE HONORABLE THE SPEAKER OF THE HOUSE OF REPRESENTATIVES, WASHINGTON, D. C: "My Dear Sir: Your attention is respectfully invited to the recently published letter from the Postmaster-General to the Speaker of the House of Representatives (House Docu- ment No. 105), submitting a report of his inquiry as to the operations, receipts and expenditures of the railroad companies transporting the mails, and recommending legislation concern- ing their compensation therefor. "This report has been so recently made public that there has not been sufficient time for its detailed examination and analysis, but such scrutiny as has already been possible, dis- closes that the data submitted are incomplete, the figures dis- torted, the presentation unfair, and the conclusions illogical and unwarranted. Among other things, it is grossly unjust to the railroads in that: "1. Data submitted by the railroads at the request of the Post Office Department, which are essential to a complete un- derstanding of the subject, have been withheld and suppressed. "2. The Postmaster- General has arbitrarily transferred to the passenger service much of the so-called ^dead' space in mail cars, although this space could not be utilized as pas- senger space, thus improperly increasing the apparent car-foot miles of passenger service, and correspondingly decreasing the car-foot miles of mail service. («: '3. The Postmaster-General has apportioned expenses in- curred for the joint purposes of the passenger and freight services between these services, in accordance with a method never accepted by any one with practical experience in rail- way accounting or operation, and condemned by the courts in at least two important cases. In one of these cases the opinion of the Court states that 'It was conceded that the method could be made to produce any desired result.' "4. The Postmaster-General has wholly overlooked the fact that a large part of the cost incurred by the railways in car- rying the mails, consists of interest on the capital they em- ploy. By ignoring all capital expenses, confining his attention to mere operating costs, and proposing to return to the railways only the amount of these operating costs, plus 6 per cent, he urges a method which, if applied generally to all their business, would render every railroad at once bankrupt. "In consideration of the foregoing and other errors and omissions in the report, we respectfully ask, for the railroad companies, a suspension of judgment and action until they have had time to present a complete and satisfactory analysis of the report, and of all material and relevant facts. Preparation of such a presentation has been undertaken and we request that when completed, we be given an opportunity to place our con- clusions before Congress in a suitable manner. "Very respectfully yours, "The Committee on Railway Mail Pay. "By J. Kruttschnitt, Chairman.*' The next purpose of this report will be to present detailed and convincing evidence of each and every assertion in the foregoing letter and they will be taken up in order. FIRST. Data submitted by the railroads at the request of the Post Office Department, which are essential to a complete understanding of the subject, have been withheld and suppressed. A. STATION AND TERMINAL EXPENSES DIRECTLY IN- CURRED ON ACCOUNT OF MAIL. That the facilities and services supplied by the railways in con- nection with the postal service go far beyond the ordinary incidents of transportation is generally understood but the fact is substantially ignored in the Postmaster-General's report. Some of these extraordi- nary services, being in the nature of terminal and station services, are covered by the following extracts from the Postal Laws and Regula- tions : "Railroad companies, at stations where transfer clerks are employed, will provide suitable and sufficient rooms for hand- ling and storing the mails, and without specific charge therefor. These rooms will be lighted, heated, furnished, supplied with ice water, and kept in order by the railroad company." Section 1186, second paragraph. "The specific requirements of the service as to . . . space required. , . at stations, fixtures, furniture, etc., will at all times be determined by the Post Office Department and made known through the General Superintendent of Railway Mail Service." Section 1186, third paragraph. "Railroad companies will require their employees who handle the mails to keep a record of all pouches due to be received or dispatched by them, and to check the pouches at the time they are received or dispatched, except that no record need be kept of a single pouch from a train or station to the post office or from the post office to a train or station which, in regular course, is the only pouch in the custody of the com- pany's employees at that point while it is being handled by them. This is not to be construed as relieving railroad com- panies from having employees on trains keep and properly check a record of all closed pouches handled by them, without ex- ception." Section 1187, first paragraph. "In case of failure to receive any pouch due, a shortage slip should be made out, explaining cause of failure, and forwarded in lieu of the missing pouch. Specific instructions in regard to the use of shortage slips will be given by the General Super- tendent of Eailway Mail Service." Section 1187, second para- graph. . , . > "Every irregularity in the receipt and dispatch of mail should be reported by the employee to his siiperintendent prompt- ly, and if a probable loss of or damage to mail is involved, or if the cause of failure to deceive a pouch is not known, the report should be made by wire, and the superintendent will notify the division superintendent of Eailway Mail Service with- out delay. A copy of the employee's report should be attached to and become a part of the permanent pouch record." Section 1187, third paragraph. "Train pouch records will be kept on file at the head- quarters of division superintendents of railroad companies for at least one year immediately following the date the mail cov- ered by them was handled, and shall be accessible there to post office inspectors and other agents of the Post Office Depart- ment. Station pouch records rwiW be kept on file at the sta- tion to which they apply for at least one year immediately fol- lowing the date the mail covered by them was handled, and shall be accessible there to post office inspectors and other agents of the Post Office Department." Section 1187, fourth para- graph, "Eailroad companies will require their employees to sub- mit pouch records for examination to post office inspectors and other duly accredited agents of the Post Office Department upon their request and exhibition of credentials to such employees." Section 1187, fifth paragraph. "Every railroad company is required to take the mails from, and deliver them into, all terminal post offices, whatever may be the distance between the station and post office, except in cities where other provision for such service is made by the Post Office Department. In all cases wliere the Department has not made other provision, the distance between terminal post office and nearest station is computed in, and paid for, as part of the route." Section 1191, first paragraph. "The railroad company must also take the mails from and deliver them into all intermediate post offices and postal sta- 10 tions located not more than eighty rods from the nearest rail- road station at which the company has an agent or other rep- resentative employed, and the company shall not be relieved of snch duty on account of the discontinuance of an agency with- out thirty days' notice to the Department." Section 1191, sec- ond paragraph. "At connecting points where railroad stations are not over eighty rods apart a company having mails on its train to be forwarded by the connecting train will be required to transfer such mails and deliver them into the connecting train, or, if the connection is not immediate, to deliver them to the agent of the company to be properly dispatched by the trains of said company." Section 1193. "At places where railroad companies are required to take the mails from and deliver them into post offices or postal stations or to transfer them to connecting railroads the per- sons employed to perform such service are agents of the com- panies and not employees of the postal service, and need not be sworn; but such persons must be more than sixteen years old and of suitable intelligence and character. Postmasters will promptly report any violation of this requirement." Section 1193. "Where it is desirable to have mails taken from the post office or postal station to train at a terminal point where terminal service devolves upon the company, in advance of the regular time of closing mails, the company will be required to make such advance delivery as becomes necessary by the requirements of the service." Section 1191. "When a messenger employed by the Post Office Depart- ment can not wait for a delayed train without missing other mails, the railroad company will be required to take charge of and dispatch the mails for the delayed train, and will be re- sponsible for the inward mail until delivered to the messenger or other authorized representative of the Department." Sec- tion 1195.. "Whenever the mail on any railroad route arrives at a late hour of the night the railroad company must retain custody thereof by placing the same in a secure and safe room or apart- ment of the depot or station until the following morning, when it must be delivered at the post office, or to the mail messenger employed by the Post Office Department, at as early an hour as the necessities of the post office may require." Section 1196. 11 "When a train departs from a railroad station in the night time later than 9 o'clock, and it is deemed necessary to have the mail dispatched by such train, the division superintendent of Railway Mail Service will, where mail is taken from and delivered into the post office by the railroad company, request the company, or where a mail messenger or carrier is employed by the Post Office Department will direct him, to take the mail to the railroad station at such time as will best serve the interest of the mail service. Such mail will be taken charge of by the agent or other representative of the railroad company, who will be required to keep it in some secure place until the train arrives, and then see that it is properly dispatched." Sec- tion 1197, first paragraph. "The division superintendent of Railway Mail Service will give reasonable advance notice to the proper officer of the rail- road company, in order that the agent or representatives of the company may be properly instructed." Section 1197, second paragraph. "Railroad companies will be expected to place their mail cars at points accessible to mail messengers or contractors for wagon service. If cars are not so placed the companies will be required to receive the mails from and deliver them to the messengers or contractors at points accessible to the wagon of the messenger or contractor." Section 1198. "A mail train must not pull out and leave mails which are in process of being loaded on the car or which the con- ductor or trainman has information are being trucked from wagons or some part of the station to the cars." Section 1199. "At all points at which trains do not stop where the Post Office Department deems the exchange of mails necessary a de- vice for the receipt and delivery of mails satisfactory to the Department must be erected and maintained; and pending the erection of such device the speed of trains must be slackened so as to permit the exchange to be made with safety." Section 1200, first paragraph. "In all cases where the Department deems it necessary to the safe exchange of tlie mails the railroad company will be required to reduce the speed or stop the train." Section 12UU, second paragraph. "When night mails are caught from a crane the railroad company must furnish the lantern or light to be attached to the crane and keep the same in proper condition, regularly 12 placed and lighted ; but if the company has no agent or em- ployee at such station, the company must furnish the light, and the care and placing of same will devolve upon the De- partment's carrier." Section 1200, third section. "The engineer of a train shall give timely notice, by whistle or other signal, of its approach to a mail crane." Section 1200, fourth paragraph. The foregoing extracts, all the requirements of which are enforced by fines and deductions, disclose the fact that many extraordinary and exacting services, involving responsibility and expense, are required of railway mail carriers in addition to the mere transportation of the mails. To transfer mail from stations to post offices railways are obliged to employ messengers and to supply vehicles; to furnish rooms for 'Tiand- ling and storing the mails," they are obliged to enlarge their stations and to encroach upon space needed for yard purposes, and other extraor- dinary services obviously entail considerable expenditures as well as interference with the orderly routine of the other business of the carry- ing companies. There are also certain requirements of the Department which are not to be found in the regulations, although no railway feels at liberty to oppose or disregard them, such as the common demand that postal cars be placed for advance distribution and supplied with heat and light while .so used. The existence of important elements of cost of this character was not overlooked by the Postmaster-Greneral at the time the investigation which culminated in his report was begun. On the con- trary, one of the original set of blanks on which the railways were asked to report (Form 2602, see copy reprinted at pages 28 and 29 of House Document No. 105) was so entitled as to indicate that it was intended to show the cost of supplying "Station service" and "Station and ter- minal facilities" in connection with the mail. Among other things, this form called for the following facts, to be reported separately as to each station, which were ignored and excluded in the Postmaster- General's estimates of the cost of rendering the service required by the Post Office Department: 1. Amount of wages paid to messengers and porters em- ployed exclusively in handling mails. 2. Portion properly chargeable to mail service, pro-rated on basis of actual time employed, of wages paid to station em- ployees a part of whose time is employed in handling mails. 3. Amount expended for maintenance of horses and wagons and for ferriage, and so forth, in connection with mail service. 4. Rental value, plus average monthly cost of light and heat, of room or rooms set apart for the exclusive use of the mail service. IS 5. Rental value of tracks occupied daily for advance dis- tribution of the mail. 6. Average monthly cost of light and heat for jwstal cars placed daily for advance distribution of mail. 7. Interest at the legal rate upon the value of cranes, catchers and trucks required for mail service. 8. Total of the previously enumerated items of cost of rendering mail service. Over the propriety of including every one of these items as ele- ments in the cost of mail service, controversy is impossible. The Postmaster-General recognized this fact by asking for data under all these heads, statements of all these facts were rendered by the railways in comjiliance with his request and the expenditures so reported were substantial in their amounts, but it seems subsequently to have been de- cided that the suppression of these data was not inconsistent with a purpose to present an accurate and truthful statement of the expenses directly incurred by the railways in serving the Post Office Department and all recognition of these expenses was denied in the tabulation of the data collected. There is not a figure derived from or represent- ing these data in all the 270 pages of tabulated statistics of the report. In the 18 pages of textual matter there is neither a total nor a conclusion based upon them. The summary statement signed by Second Assistant Postmaster-General Stewart does, however, contain the following: "The data reported by the companies on Form 2602 as to expenditures for station service and station and terminal facilities furnished were carefully considered, and in view of the fact that it was found impossible to ascertain the totals of the accounts from whicli the amounts directly charged on this form should be deducted, and of the fact that such data were found to be unreliable in many instances, and of the further fact that it was determined that the mail service should participate in all of the station expenses upon a basis of car- foot miles, it was decided not to make use of such information in connection with the cost ascertainment." House Document No. 105, p. 6. The foregoing states, in effect, tliat the Post Office Department preferred arbitrarily to assume that station expenses for mail bear the same relation to total station expenses that the car-foot mileage made in mail service bears to the total car-foot mileage of passenger trains, rather than to accept data which it had collected that showed a differ- ent result. The vj ell-founded claim of the railways, a claim that no one acquainted with the methods and exactions of the postal service will dispute, is precisely to the contrary. Station service and facilities 14 required for mail are greatly in excess of those which have been allowed for by the arbitrary method adopted by the Postmaster-Gen- eral. The fact tliat the totals of the accounts from which these items were deducted were unknown to the Department is attributable solely to the f^ct that it did not ask to have these facts reported, they could readily have been obtained by means of a supplementary inquiry as other facts were obtained, and the omission of the otTicers conducting the inquiry to ask for information certainly ought not to be regarded as a suthcient reason for their failure to tabulate the facts they did obtain. The further suggestion that some of these daia were "found to be unreliable," is without specification and it is unjust to the rail- ways which at considerable expense to themselves, supplied the figures asked for. The original reports in the possession of the Committee on Railway Mail Pay make it possible, in part, to remedy this omission of the Post- master-General and to that end the data in these reports have been most carefully and accurately tabulated. The committee, dependent upon the voluntary co-operation of numerous railway othcers located in many and widely separated cities, was naturally unable to obtain copies of all the reports sent to the Postmaster-General and its results are, therefore, necessarily and obviously incomplete. The following aggre- gates are submitted with the observation that they disclose portions only of the expenditures under these heads which were incurred by the rail- ways on account of the mails. The reports available to the Committee on Railway Mail Pay show that the railways complying with its request for copies expended the following sums and reported them to the Post Office Department on its Form No. 2603 : Item Amount of wages paid to messeiiRers and ]iorters employed exclusively in handling mails 4 Portion properly ohargeahle to mail service, prorated on basis of actual time employed, of wages paid to station employees a part of whose time is employed in handling mails Amount expended for maintenance of horses and wagons and for ferriage, etc., in connection with mail service Rental value, plus average monthly cost of light and heat, of room or rooms set apart for the exclusive use of the mail service Rental value of tracks occupied dail.v for advance distribu- tion of the mail Average monthly cost of light and heat for postal cars placed daily for advance distribution of mail Interest at the legal rate uiton the value of cranes, catchers and trucks required for mail service Total Amount $70,980.84 108,027.01 5,640.08 37,258.93 47,029.12 18,400.57 3,895.36 •1:401,126.00* *This total includes .^9,993.10 reported by four companies which gave totals for these items, but did not report the items separately. 15 The Postmaster-General reported the mail expenses of the rail- ways included in Document No. 105, for the month of November, 1909, as $2,676,503.75. It appears therefore that the omitted expendi- tures of these railways, for the seven items just enumerated, which constitute only a part of the items, he arbitrarily omitted from his tabulations, was not less than $401,126.00, during that month, or 14.99 per cent of the total he reported. As this total of $401,126.00 covers less than ninety-two per cent of the mail route mileage represented in Document No. 105 it is evident that the true percentage of omission is still higher. B. PERSONAL TRANSPORTATION. The law enacted by Congress requires railways carrying mails to carry the persons in charge thereof without any additional compensation but by a regulation, which the Department assumes to have the force of law, the requirement has been extended to cover personal transporta- tion for officers, agents and representatives of the postal service whether in charge of mails or otherwise. "Railroad companies are required to convey upon any train, without specific charge therefor, all mail bags, post-ofBce blanks, stationery, supplies, and all duly accredited agents of the Post Office Department and post-office inspectors upon the exhibition of their credentials." Postal Laws and Regulations, Section 1184. As this personal transportation hears no definite relation to the volume of mail carried on any particular route and, whether paid for in any sense or otherwise, its amount neither increases nor diminishes the expenses of the Post Office Department; as it is, to the persons receiving it, actually free transportation, it is not surprising that liberal use of these privileges is made. This travel is particularly extensive on certain routes on which the through travel of the representatives and agents of the Department is naturally in some degree concen- trated and on such routes it loses all relation or proportion to the volume of mail carried or to the amount of mail pay. Further, the Department demands for postal employees, in both quantity and qual- ity, free transportation far beyond that accorded to railway employees and the former, although carried free, are in the same class, as regards responsibility for accidental injuries, as are paying passengers, a class involving much greater pecuniary liability than that to either railway or express employees. In the case of express employees the principal liability is assumed by the express companies as a part of their con- tracts with the railways. That, in many instances, this privilege of 16 free transportation is eo enforced as to deprive the railways of fares, both for through travel and for suburban transportation to which they are justly entitled is beyond denial. That tlie burden of supplying this extensive volume of personal transportation is an important element in the cost of rendering the services for which the railways are paid was fully admitted by the Postmaster-General when he addressed his in- quiries to the railways. Form 2603 (see House Document No. 105, p. 28) requested the following facts as to each railway: 1. Number of miles traveled by Department officials, in- spectors, etc., and railway postal clerks not actually in charge of mails. 2. Value of above, at passenger rates not exceeding two cents a mile. These questions were answered by the railways and the data asked for are in the possession of the Post Office Department but the report contains no evidence of that fact, no use has been made of these data, they have not been compiled, aggregated or compared for the information of Congress, whatever light they would throw upon the activities of the postal service or the conditions under which it is aided by the railways has been withheld. The only allu- sion to this information in the report is as follows : "The information concerning the personal transportation of railway postal clerks and agents of the Department when in charge of the mails and when not actually in charge of the mails . . . was not used. It was found impracticable to satisfactorily and fully verify it. However, no similar informa- tion was given regarding travel of officials and employees of the passenger service, and it is believed that the omission of these items with respect to the three classes of service has not materially affected the results, because there was no specific ex- penditure for the personal transportation involved and the mail service participated in the apportioned expenses of the passenger service on the ear-foot mile basis." House Document No. 105, p. 6. These figures emanated from sources identical with those from wliich came all the data used by the Department and possess pre- cisely equal reliability — the Department has had no more opportunity to check the other figures than it has to check these. Moreover, the suggestion that this omission is immaterial because the expenses of the passenger service have been apportioned on a car-foot mile basis is self-contradictory as the apportionment which was made rests upon 17 considering only the space actually occupied by mail as chargeable to mail service and charges all other space, including that occupied by officers and agents of the Post Office Department, traveling without charge under this requirement, to the other services rendered by pas- senger trains. Surely, if the cost of mail service is to be determined by the space which it requires and, in addition to space occupied by mail pouches and postal clerks the Department also demands and re- ceives space in passenger coaches, dining cars, and Pullman sleepers and parlor cars for its officers and agents who pay no passenger fares, space which otherwise might be occupied by paying passengers, this space ought to be considered as a part of the space chargeable to tlie mail service. The Postmaster-General has suppressed the figures as to this travel although before they were collected he obviously believed it to be an element of importance and arranged to ascertain the facts. With no intention to reflect discredit upon the purposes of the Depart- ment it is asserted that it w^as, in fact, unfair to suppress these facts, that it would have been unfair not to add the space occupied in travel of this sort to the space occupied by the mails, but that the report is even more unfair than this, in that it not merely fails to include this space in the estimates of car-foot miles made in the mail service, it not merely ignores this travel but it has actually added the space required for such travel to the space occupied by paying passengers.' In this manner the free transportation accorded to the agents of the mail service has become a means of reducing the estimates of the cost of carrying the mails. In other words, this method leads to the absurd result that the larger the volume of free travel demanded by the agents of the Post Office Department and the more space required by them, the higher would be the proportion of the total passenger train space which would be assigned to passenger service and hence the smaller the portion of the total train cost which would be ap- portioned to the mails. The annual value of this personal transpor- tation, not required by law but demanded by the Department, exceeds $1,000,000.00. c. EELATIVE RECEIPTS FROM PASSENGER, EXPRESS AND MAIL TRAFFIC. Although the passenger train services are not proportionately prof- itable, any just comparison of the receipts of the railways from mail traffic with the returns from any other passenger train traffic which they carry will show that the mail service falls farther below the level of reasonable remuneration than any other among the services rendered 18 on such trains. In order to make clear the fact that such a showing would be the natural consequence of a comparison made upon the basis chosen by the Postmaster-General, that of relative car-foot mileage, tlie Committee on Railway Mail Pay lias carefully tabulated data reported to the Department in response to his requests, having been supplied for tliat purpose by many railways with duplicate copies of the reports, with tlie results shown by the table on page 20. The totals and averages on page 80 have been derived from a pains- taking and accurate tabulation of returns made by 187 railways, oi)erat- ing 2,411 mail routes and 178,709.96 miles of line, to the Post Office Department in compliance with its request and on the forms by its officers prepared. They doubtless epitomize the results which woidd appear from a complete tabulation of all the data received by the De- partment. That information as to the relative returns resulting from the different services supplied hy the railways is essential to sound judg- ment as to the reasonableness of charges is elementary and fundamental and it is respectfully submitted that Congress, in connection with any report concerning railway mail pay is entitled to all the pertinent information in the possession of the officer or department making the report. These omitted facts were in the possession of the Post Office Department, it had been considered worth while to collect them, but again facts of primary significance were withheld. These suppressed data were collected on the Postmaster-General's inquiry blank designated as Form 2004 which is printed on page 30 of House Document No. 105. No explanation of the reasons for this withholding of arailahle, relevant and important facts is to he found anyivhere in the report. SECOND. llie Postmaster-General has arbitrarily transferred to the pas- senger service much of the so-called "dead" space in mail cars, although this space could not be utilized as passenger space, thus improperly increasing the apparent car-foot miles of passenger service, and cor- respondingly decreasing the car-foot miles of mail service. A. CAR-FOOT MILEAGE DEFINED. As will more fully appear later in this report (see page 32 et seq.) the Postmaster-General has made the relative "'car-foot mileage" devoted, respectively, to passengers, to express and to mail, the basis of apportioning operating cost and taxes and has also used the same 19 s ^ = "?. d "3 00 o p. c; r-i cj CI S g S ^< ci -* in oo CO ^ rn CI ^^ d) 1 drl M -Ti C CI l- bo i I- O I- o\ rfi CO ^^,0 00 CO i^^'^ ^«^ M oo M<» 8 I- CO •* Ci s^ s CO a.' lO 03 oo'i- CI ^ S CD c: 2 a O CO CI «^ 00 r-i "Id lO c: X O .-1 1- H fl o o t o -t-" tH * t-1 a^ * c u o a> 4> t. es O) >■ > lion in llie general rule. Although the genius of rate-making officers has f(jr more than a generation been largely devoted to efforts to develop equality of loading in different directions there is no considerable route over which the empty-car movement and the partially-loaded car move- ment are not matters of continuing concern. More than this, it is not unc(mimon to liave seasonal variations in volume of traffic so that a heavy einpty-iar movement in one direction is unavoidable at one season although during the balance of the year there is an equally heavy movement of unloaded cars in the reverse direction. "Dead space" is also of importance where, for any reason, the load is wholly or partially distributed while Ihe train or car is en route as, for example, in local less-than-car-lol moMMnonl of freight and, as already noted, in snhnrhan passenger service. In the mail service so-called "dead space" of holii varieties is un- avoidable and important in its extent and cost. Closed mail pouches may occupy but a small amount of floor space in the end of a baggage car but this is only a fraction of the space that must be provided in 22 their service. In order that pouches may be taken on and put off at each mail station there must be "working space" in the car, aisles lead- ing to the doors must be kept free and open and no impediment to prompt and efficient handling can be permitted. Earely, if ever, on any route, is the volume of mail equal in both directions and the delivery of mail at intermediate stations is seldom equalled by the mail taken up at the same stations. There are many cases in which larger postal cars, or apartment cars, or more storage cars are required in one direc- tion than in the other. Obviously these cars must be returned or the service could not be maintained, it is equally obvious that the "dead space" in baggage cars carrying closed pouches of mail must equal the difference between the loading with mail at any particular time or point en route and the maximum quantity of mail at any time or point. Such temporarily unused space is palpably necessary. C. RELATION OF "DEAD SPACE" TO COST OF ANY SERVICE. It is perfectly plain that if a car or part of a car must be returned empty or if it must be carried during any part of its necessary move- ment empty, the paying load which it has in the other direction or during the balance of the journey, ought to bear the expenses of the empty movement. The justice of this principle is self-evident — it re- quires neither elaboration nor discussion. As a consequence of the fore- going there are, in practice, two ways in which it would be reasonable to treat the dead space in passenger train service if it should be con- sidered practicable to ascertain the total cost of such service and to apportion that total among passengers, express and mail in proportion to the space required. No criticism of the treatment of "dead space" would have been made herein had the Postmaster-General adopted either of the following plans: First. Added the "dead space" incident to each branch of service to the paying space of tliat service, or, Second. Ignored "dead space" made in all services and made the apportionment on the basis of paying space only. D. WHAT THE POSTMASTER-GENERAL DID. The Postmaster-General adopted neither of the foregoing plans. On (lie contrary he unjustly deducted from the mail service much of the dead space necessarily incident to that service and added it to the 23 space attributed to the passenger traffic although before the addition was made passenger space had included all the dead space actually incident to the transportation of persons. He insisted on the assign- ment to passengers of "working space"' necessary for the mails in bag- gage cars although if such space were taken away they could not be handled, he refused to regard as mail space reserve space where larger cars or compartments than were presently asked for by the Department were supplied, although the extra space was indispensable in the work- ing of the mails, and he transferred to the passenger service unused space when the maximum mail movement in one direction exceeded that in the other or such maximum was not reached during the period covered by his investigation. It may be noted, parenthetically, that even in the reports rendered by the railways the space occupied by officers, agents and representatives of the Post Office Department not in charge of mails, who are furnished witli transportation as an incident of the carriage of the mails and without any other compensation there- for, had been included in the space apportioned to passenger travel — plainly it ought to be considered as space assigned to mail service. Express space was made to include all ''dead space" incident thereto, so that the mail service, alone, was singled out for exceptional treatment and in such a way as seriously to understate the demands which it makes upon passenger train service and greatly to reduce the portion of the cost of such train service assigned to the mails. These modifications of the data correctly reported, not susceptible of justification upon any sound transportation principle, were carried so far, in the tabula- tions of the Post Office Department that its results, which are stated for railway routes having a total length of 194,977.55 miles (Document No. 105, p. 58), show a smaller car-foot mileage made in the mail service than was actually reported by the railways con- cerned for routes having a length of 178,709.96 miles. The table on page 25 compares the Department's total figures for 194,977.55 route miles with the totals of reports which it received covering 178,709.96 route miles. As the difference between the route miles covered by the Depart- ment's aggregates and by those of the routes whose reports were made available to the Committee on Railway Mail Pay amounts to 8.34 per cent of the former it would appear that the excess of the Department's figures of car-foot miles ought, in every case, roughly to approximate the same percentage. But the foregoing shows that while the figures of the Department as to car-foot miles made in the passenger and ex- press service are able to support this test of their accuracy the same test demonstrates the inaccuracy of the Department's figures as to car-foot miles made in the mail service. This may be shown in another way. 24 m tM- • • c ■S 'S « • u: Li g« *^ 80 fe «! ss Q •gS n m J) :g s 1 ; It: • cc ■ ^ • c^ o • • CJ s lA V tl 01 5 1 i n 05 05 CO s 00 CI CO li^ a, (u a 1) Q (U V. a 3 o n l-O 1—1 n 05 t- QO g lO tH 05 o 05 t-^ d 8 n M s MOS" CO U3 s o » o +*^^ m S3 o o y-i t- C\ o to rc 8 >. t,-" ode: d CD (UX-I 0- <5 or, ^ o ^ a 2g:2 4J o ® w: lO 00 Tt ^ ted 178, OUti 1 --1 to ca dodc 05 u u t- o -- 00 o ■4-> •1 CO 1-1 1- Uj &< ' v iM o c': lO a a> oi ir. t- 05 CO r- CO O Oi'rH r- I-I 4J " o OO «D CC o -4.^ 1-H 'X> .- c g 1-° ci d t- 00 T-H 3 1 3 5 »f3 C.O 1-H ■ ChLO CO y i'c--ii t- OIC w Qf5 v •* lo »r: CD t- t- Tt 05 t Offic< 194 route 1 os'irt-t -»»< tH CC ■ ^ 1 I- CO r- OX d' I •I eg CO t- . HI 0) C << o o. t« a, « Q u o J3 Q Ci o ^^ -f 1- (M O GO I- CJ O i-t kO CO M O § Q CI (M tH «) OO 1-1 (N (M \a o o T-1 • -COr-l • -roo 00 CO T-i 1— 1 lO (M I- ^ ro 8 • • 00 tH ■* CI 1- 8 »o tH 00 CI o fO CI 1-- OS • a ■ >o : o ; CO ■ CI I- 00 \6 ■ CO t- ■ C5 l- , Ci CI I- l- CO -g - 2 c 2^8 t- 00 t- rH GO CO CO 00 CD CO CD CO CI 1-1 co' CI CI d" CI © 2 gj 00 2 O CD (Tl O CD »0 CD 1-' co' -^ T*r CI O 05 rH I- Ci O t- o -^ \6 cS lO rH CD CC UO lO lO O t— Oti " QO CO »5 CI o CI OS -H lo <:S rA 05 ,-1 S O "*! f'5 '^\ t- co' tH CI 1-1 CD '* rH CO \6 ci CD CO O 1-1 Cf Q 05 00 C* O o: ^r. I- rH 05 I- ,-H h- ft I- c' ci 00 CI 05 ori CI CI T-^ I- C-' cd' \6 CO 1-1 .S.2 C3 ;_^ O) — ;^ +J p: »; tj 0) S ^ O O a) m\ x C 27 other changes by the Post Office Department in the car-foot milp- age made in the mail service, reported in response to its request, are disclosed by the following table: (See insert 28A). Nowhere in the Postmaster-General's report is there any explanation of the reasons for these very extensive changes in the basic data utilized in his calculations nor, indeed, is there any intimation that any modifi- cations of importance were made. There is no admission that any changes at all, arbitrary or otherwise, were made save in tlie bare state- ment on page 6 that discrepancies and inaccuracies were corrected. Tt is submitted that this acknowledgement is utterly inadequate recogni- tion of changes which, as shown by the statement (Insert, 28A), covering only ,the roads named, aggregate 210,320,652 car-foot miles, or an aver- age of 21.28 per cent. Apparently it was thought to be proper that Congress should be left to understand that barring minor and rela- tively unimportant corrections the data reported had been obtained from the railways and were, therefore, presumably accepted by them as truthful statements of facts. Nothing could be more con- trary to the real situation. As has been seen the statements made by the railways were radically reduced in nearly every instance; the car- riers assert and are prepared to sustain the essential accuracy of their reports. The nnits of the Department's calculations are necessary if its results are to be satisfactorily checked and corrected and the Post- master-General should be required to transmit the original data to Con- gress and thus to afford an opportunity to trace in detail the changes which he has felt authorized to make and for testing the validity of these changes and of the resulting averages and aggregates. By no other means can the true figures be established with certainty nor can the railways otherwise be accorded a fair opportunity to demonstrate the complete accuracy of their original returns. It can be demonstrated that scrutiny of these original data and computations would disclose numerous and serious clerical errors and omissions by the Department resulting in a further unjust reduction in the train space credited to the mails. Such errors have since been conceded by the Department in the case of individual roads, the aggregate of the conceded correc- tions in the case of one system being about 19,000,000 car-foot miles, and these concessions by the Department go far to discredit the entire value of Document No. 105. B. FURTHER PROOF OF ARBITRARY TREATMENT OF SPACE. The absence of any uniform or rational relation between the car- foot mileage for mail service reported in Document No. 105 and the 28 services demanded by and supplied to the Post Office Department is made fullv aunarent bv an PYaminatinn ni +}iP fio-nroo rrivon fr^i^ o^w,^ of onlyinree-quarters of a mile or 3.13 per cent;" both routes have closed pouch service only; both are now paid at the minimum per mile rate. 29 Atliuitic Cuasl Uiie Rnltimore iS: Ohio. . Bes^sfuier & Luke Krie liostoii & Maine Ceutral of Georfjia Central Railrojid iif Xew Jersey Central Vermont l^iiicago & Noi'tliwestern Chicago. Burlington & Quincy Chicago, Milwaukee & St. Piuil (Chicago, RofU Island & Gulf Chicago, Rock Island & Pacitic Cleveland. Cincinnati, Cliicago & St. Louis. ( 'olorado Midland Delaware & Hudson Company Delaware, Lackawanna & Western Denver & Rio Grande VA Paso & Soutliweslern Erie . . Fort Worth & Denver City Georgia, Southern & Florida (ivand Rapids &. Indiana Grand Trunk Great Nortliern Illinois Central International & Great Northern Lake Erie & Western Lake Shore & Mieliigau Southern I>eliigh Viiliey Long Island. , Louisville &, Nashville Maine Ceutral Michigan Central .Minneapolis, St. Paul & Sault Ste. Marie Mi-ssouri Pacific ■ Nashville, Chattanooga & St. Louis........ New York Central & Hudson River New York. Chieago & St. Louis New York, Ontario & Western , Norfolk & Western Northern Central Northern I'acitic itregon Railroad & Navigiition Oregon Short Line Pennsylvania Company Pennsylvania Railroad I'eoria .& ICastern Philadelphia & Reading and allied lines I'liiladelpliia. R:iltiiuore & Washington Pittsburgh & Luke Krie Pittsburgh, Cincinnati. Chicago & St. Louis. St. Louis, Iron Mountain & Southern St. Louis Southwestern San Antonio & .\ransas Pass San Pedro. Lns Angeles lS: Salt Lake Seahoard Air Line Sf)uthern , Southern Pacific Texas & Pacific Toledo, Peoria & Western Union Paritic Vandalia Virginian Wabash West .Torsey & Seashore Wheeling i.\: Lake Erie Wichita Valley Total id Car-foot niUes made In mall service incIudlDg dead space. As rcportffl .\s reported by Deducted by Postiiiaater-General by Company Oeneral .VmooDt Pereeut. lU.80U,427.(il! 13,6.59.016.79 3.140.S1O.S7 18.09 33,134.01(i.0O 25,391,705.45 7,7.42.31li,r,5 23.37 424.741.00 300.775.09 123.965.91 29.19 14,820.815.00 11,371,921.93 3.448,993.07 23.27 6,030.349.00 5,245,036.62 785,312,38 13.02 2.1ll2.:)r)0.00 1,530.359.74 031,990.20 29.23 2,2(l.-i.l.S4.00 1,007,204.00 357.980.00 15.80 :!S.|12(I.!I70.S0 32.240,574.98 6.371,395.82 16.50 .•,2i.'ii;.i"0.no 50.700.723.99 11.485.406.01 18.45 4r,.;;L'i;,'j:'.7.00 35,471.925.00 10.854.312.00 23.43 1 .J I S.I i.-i.K.oo 1,098,873.06 119.184.04 9,78 ;is.(;,".i,iu2.fi0 :!0,188,296.09 . 8.402.865.91 21.90 21.950,S4U.OO 17.610.4.38.37 4,340,110.03 19.77 387,803.00 294.4S2.91 93,380.09 24.08 3,833,870.0(1 2,270.541.27 1.563,.334.73 40.78 4,731,72ii.00 4.3S7.502.00 344.223.00 -.28 5.830,923.00. 4.710.3S0.45 1,126,542.55 19.,30 •5.SRr,.(lH4.40 1.854.584.86 1.032,049.54 35,75 n.l-IT.r,'. 12.00 10,333,747.00 1,113,945.00 9.73 1.7TS,744.42 1.644,222.00 134.522.42 7.56 2,o:j2,.".ou.oo 1,277.000.50 755.50,8.44 37.17 2.708,457.00 2.272.770.53 435.680.47 16.09 5,772,050.71 4,821,869.70 050.181.01 16.40 43,450,891.00 30,889.628.00 . 12,567,363.00 28.92 37,537,425.00 i!5,083.865.00 11,853,500.00 31.58 4,601,135.00 3.604,401.00 900,643,10 19.70 2,457,4110.00 1.465,02.3.42 092,4315.58 40.38 43.477,203.00 40,868,448.10 2.008,814.84 O.OO 5.713,580.00 4,054,625.25 1,658.954.75 29.04 1.210.724.00 953.315.87 257.408.13 21.20 j(i.77ii.:n4.ii(i 18,191.222,62 2.579.091.38 12.42 ."i,o,si.;io;inii 4.472.248.00 009.655.00 12.00 .S..-,,S(l.ll1fi.ttJ 7,170.420.36 1.400.595.64 16.42 12 4:S4 .SSO.OO 9.286.840.71 3.198,045.29 25.62 ■•i.:'.;i.n,2io.oo 10,887,104,88 4..508,1,35.12 21.07 f>.100,447.09 6.105.558.37 2.0.54.889..S2 25.18 54,096,823.00 49.076.804.00 5.019.019.00 9.28 893,792.00 ,837.040.38 56.751.62 0.35 1,087,251.00 9S2.820.94 104,430.06 9.G0 8,707,177.30 7.2111.608.89 1,415,568.41 10.26 2,894.093.00 2.606.27M.64 288,410.36 9.90 29,073.240.40 19.814.226.98 9,259,013.42 31.85 8,411,872.00 5.636.912.25 2,774,080.35 32.99 11,588,199.00 7,635.493.00 3,052.706.00 34.11 28,747,137.00 23.288.845.22 5.458.291.78 18.99 57,819,519.00 46,074,972.68 10.844..546.32 18.T0 1,814,670.00 1,381,441.10 433.22,8.00 23.87 , 5,220,350.04 3.270.478.16 1.953,907.88 7.4:t9..S33.23 705.207.00 li74.064.7» 91,142.21 :12.3SH.524.00 24.054,004.27 8,328,919.73 25.72 12,3,S2,,3G3.83 2.727.080.17 18.00 2.U41.WIO.00 1.611.046.90 1.155.670.86 430..848.10 130.862.14 21.10 10.17 .(O** 260 00 1.878.241.20 1.084,018.80 36.59 12,914.121.00 10.403,436.76 28.9,83.910.08 2,510,684.24 8,207.091.32 19.44 22.07 31.010.229.97 8,300,1.88.03 21.25 7 4"'l 70.1 00 6.271.189.34 1. 1 58.5 15.66 15.59 527.598.44 611.013.56 53.69 23,458.6.59.00 I3.77o.319.00 36.90 14 S"7 412.00 10.908,799.55 3.01.8,612.45 26.43 ."i44 599.no 4311.071.19 113,927.81 20.92 10.232,004.31 4,9110.204.69 23.19 1 l:',2.3S7.00 093.987.04 438,399.96 38.71 su .'11:1.00 577.055,02 234,257,38 28.87 r,r,ii.iil."..(«i 324.988.60 225,026.34 40.91 l».S,ri24.2S6.02 778,107,633.71 210,326,6.52.31 21.28 services demanded by and supplied to the Post Office Department is made fully apparent by an examination of the figures given for some of the smaller routes and comparing them with the services rendered on those routes. The table on page 30, prepared from the Postmaster- General's Table 8-A (Document No. 105, pp. 282-3), supplemented, as to the figures of one column only, by reference to the annual reports of the Second Assistant Postmaster-General for the years 1908 to 1911, inclusive, amply demonstrates the truth of this statement. The foregoing table includes every route, having closed pouch serv- ice only and for which the data contained in the second, third and seventh columns are given, represented in Table 8-A of the report. The figures in the second, third and seventh columns are taken from that report and those in the fourth are based upon facts shown in suc- cessive annual reports of the Second Assistant Postmaster-General. The figures in the fifth column, headed "pound miles during November, 1909," are the product of those in the second and third columns multi- plied by thirty; those in the sixth column, headed "service miles during November, 1909," are the product of those in the second and fourth columns; those in the eighth are quotients of those in the fifth divided by those in the seventh, and those in the ninth are quotients of those in the sixth divided by the same' divisors. The wide range in the relations dis- closed by the figures in the last two columns of this table points plainly to the unreliability of the method adopted in assigning car-foot miles and it is clear that if such inconsistent results are found as to these smaller routes, divergencies from the facts at least equal in proportions must vitiate the more elaborate and difficult calculations necessary in connec- tion with the more important mail routes. It is startling, therefore, to find that the Postmaster-General has assigned a car-foot mile to every eight pound miles in one instance (Route No. 110,331) while in another the proportion is one car-foot mile to 167 pound miles (Route No. 169,019). Equally surprising is the variation in the relation between .ervice-miles and car-foot miles, the range shown by the table being rom 0.49 service miles (Route No. 147,039) per car-foot mile to 2 04 ; Route No. 116,021). A particularly strange contrast appears in the Postmaster-Gen- rals Table 8-A between route 176,064, operated between Plumas Junc- lon and Clio, California, by the Sierra Valleys Railway, and the route 2imediately following in the table which is 168,030, operated by the a-izona & Colorado Railroad, of the Southern Pacific Company's syslen. etween Cochise and Gleason, Arizona. These routes are 36 14 and 5.37 miles in length, respectively, thus showing a difference in length . only three-quarters of a mile or 3.13 per cent; both routes have closed meh gervice only; both are now paid at the minimum per mile rate, 29 8ii _ -w Op »»^ £ 1 "O o h Z 4) g 3 >■ nS .SE§ T3 O ft Sj S'^-SES ^ V >-i (U c5 ^i- m re -r O 5ii •a E 3 C 3 o I- CO O t^ CO rH CD M -^ lO QO O C5 C; kO IN O O CI O O C( I- CO Q C: C: I- CD I- OO i-H CC -t C5 -t L'S :DC5(NCSrHOi-iT-(C;C5C5i-oc;^cOT-(CDCiT}iiMC>ccCi*c;cOTtiLCTHccoC:ccc:Occ CI r^ »niCOr^'*OC5'*ICDCI&lOCDlOTHC)CDOOCj>Cl:-C)iMT^lOl-lO-0 CO r "- ■" " ■' ----- T. OOCiOt-OOTjiCD »P CO .- So r^ _ I- CO (M Ci irOLOCOrftcDOCjOOiX>l.Oi^OTfi^C] _ CD lo o I- o I- CO CO c; o 1-1 1- ■* I- I- CO I (M •^ tH tH QC (M O c: CO c; i": o CD 00 CD CD CO r^ CO C\ r-l Ttl CI tH T-l CO 05 CO T-l CI C4 r^ M r-( CD iHoajCDcio:cD'*'tcDCDOCi:^oi-c;'-''tc:. o^co*Dcz:iCDOi-i-i'-icD-^-0 CD O 05 I- Ci O Ci CO ci CD CO CO O O CD r-i o c r-l C4 T-i CI CI ■* r-l C4 r-l 1-1 r-l CO CD LO C I- 05 C5 CD CD C! O rH •<*< I- O CD' CI QC' CO CI O - -I CD O O O r-l r^ CO O CI CD CI 1-* C CD 05 05 ■— ^ r-l l- CO r^ CI CI ' 05 CD CI I- CD L-0 O \r.. CI CD r-l r-< CO CO CI i— ■■: r- c- r^ C\ 30 t4 -CJi edi o « O the difference in length giving a difference in annual compensation of $32.92; reference to page 256 of the annual report of the Post Oflice Department for the year 1910 shows that on route 170,064 the service is six times per week in both directions while page 238 of tho same report shows that on route 168,020 the service is seven times per week; the average daily weight of mails given in Document 105" for these routes is 136 and 192 pounds, respectively. Here, then, are two routes that present no wide or marked difference of any sort, they carry about the same distance very similar quantities of mail, in the same manner, and with little difference in frequency of service. It would be reason- able to suppose that the car-foot mileage assigned to these routes would not vary more than these controlling conditions of service. But such is not the case. The route carrying only 136 pounds of mail daily (176,064) has been assigned 3,246.48 car-foot miles and the route car- rying 192 pounds has been assigned only 1,810.19 car-foot miles. Thus an excess of 79.34 per cent in the car-foot miles assigned to route 176,064 over those assigned to route 168,020 rests upon no more sub- stantial basis than 16.67 per cent more frequent service and 2.13 per cent greater length of haul and is despite an excess of average daily weight on the latter route of 41.18 per cent. Curiously enough the vagaries of the methods followed by the Department provide an offset for this as- signment of 80 per cent more car-foot miles to one route tlian to the other and table 8-A further shows that the Postmaster-General estimates the cost incurred in its mail service of tiie route whicli he says made 3,246.48 car-foot miles as $15.25 and that of the route which made 1,810.19 car-foot miles as $20.71. These figures give an average car- foot mile cost of 11.441 mills for tlie Arizona & Colorado, which is a part of a great system, as compared with an average of 4.69 mills for the Sierra Valleys Railway, a difference of 243.94 per cent of the smaller average. The following statement demonstrates still more vividly the inequal- ities resulting from the application of the Postmaster-General's method of assigning space. Route No. Length in miles Average Car-foot daily miles made Number weight '" closed ' of trains 1909 ' pouch per day service* i i Number of car-foot miles reported by railway 107,074 110,024 12.64 12.25 291 989 2,679 2,521 10 10 4,790 6,734 These two routes have only closed pouch service and are about the same length, have the same number of trains carrying mail and similar conditions in every way, except No. 110,024 carries about tliree and one- ♦Reported in Pocument No. 105. 31 half times as much mail as 107,074, nevertheless the Postmaster-General credits 107,074 with 158 car-foot miles in excess of the number credited to No. 110,024. Such inconsistencies as these counteract any superficial plausibility that the report might otherwise possess and destroy all con- fidence in the accuracy of its conclusions as to space or cost of service. F. THE EFFECT OF THESE ARBITRARY METHODS. . Under the methods applied by the Postmaster-General and by reason of the recommendation which he bases upon these figures the facts as to relative space devoted, respectively, to passengers, express and mail become of the first importance. They are the facts which control the estimates of cost and, therefore, the recommendation as to compensation. By arbitrarily reducing the car-foot mileage made in the mail service of any company the Postmaster-General reduced the estimate of cost of carrying the mail for that company because, by his method, cost is largely a derivative of car-foot miles, and he also re- duced his proposal as to its compensation for he asks to be authorized to base payment upon his alleged costs. Using the data as to the Atchison, Topeka & Santa Fe System, in the table on page 27 it is possible to ascertain just how much the changes affected the results claimed by the Postmaster-General as representing the mail operations of that sys- tem. Turning, first, to pages 272 and 273 of the report it appears that in his table 7 the Postmaster-General reports the "operating expenses and taxes chargeable to passenger traffic" of the Atchison, Topeka & Santa Fe as $1,964,620.10, that no part of this was directly charged to mail and that $97,186.52 was apportioned to mail. A simple arithmetical calculation supplies the omitted element in this statement and discloses the fact that $84,803.47 of the $1,964,620.10 was directly charged to passengers and express and that the balance, $1,879,816.63 was appor- tioned on the car-foot mileage basis. As the Department had allowed only 5.17 per cent of passenger train space to the mails it assigned only 5.17 per cent of this total expense to the mails. But the company re- ported 7.63 per cent of its passenger train space as devoted to mail and not 5.17 per cent, the figure used by the Postmaster-General. If the latter had used the company's figure the cost apportioned to mail, by his method, would have been $143,430.01 instead of $97,186.52 as stated in table 7. The revenue from mail of this system is given in the same table as $159,567.06, so that if the Department had used the accurate figures reported by the company it would have found a moderate sur- plus over operating cost and taxes of but $16,137.05 instead of the sur- plus of $62,380.54 which it claimed to find. And this result would have 32 been inevitable, except for the arbitrary changes in the data as to space, in spite of the fact that the reported operating cost of the ^Ailole pas- senger train service is very much too low. Wliat is true as to the effect of these changes with resprct to the Atchison, Topel-a S Santa Fe's fig- ares is true as to siihstanrialhj every companij included in the report. G. CONCLUSIO^T NECESSARY FEOM THESE FACTS. The inevitable conclusion from these necessarily destructive crit- icisms drawn from the figures of the report and the public records of the postal service is. that all the elaborate tables prepared in the Post Office Department, so far as they purport to show car-foot mile- age made in the mail service, are based upon radical modifications of the data reported at its request and upon arbitrary and undis- closed estimates with the result that they throw no light whatever upon the real or relative extent or cost of the services and facilities supplied by the railways. On the contrary, they destroy the value of every calculation in which they are an element and, as they enter into the most fundamental computations which Document No. 105 contains they deprive the whole report of whatever value it might otherwise possess. Until these data are carefully checked and fully corrected, and the modifications which these corrections would entail extended to the figures that are dependent upon or result from the use of car-foot mileage the use of Document No. 105 as a basis or guide in the formulation of legislation would be unfair, unwise and indefensible. THIRD. The Postmaster-General lias apportioned expenses incurred for the joint purposes of the passenger and freight services between these serv- ices, in accordance with a method never accepted by any one with prac^ tical experience in railivay accounting or operation. The fairness of railway mail pay can be tested by apportioning operating expenses between passenger and freight traffic, and then mak- ing a secondary apportionment of the passenger expenses between mail and other kinds of traffic carried on passenger trains. This method in- volves charging directly to each kind of traffic all expenses pertaining exclusively thereto, and the apportionment, on some fair basis, of those expenses which are common to more than one kind of traffic. In accordance with the request of the Postmaster-General, the rail- ways estimated the cost of conducting the mail service in the manner 33 Just explained and reported the results to the Postmaster-General. After first charging to each service the expenses wholly due to it they appor- tioned the common expenses between the passenger and freight services, following (with inconsequential exceptions) the method most generally employed for that purjDose, — namely the apportionment of these expenses in the proportions of the revenue train mileage of each service. Having estimated, in this way, the operating expenses attributable to passenger trains, the railways assigned to the mails the portion of this aggregate indicated by the proportion of the total passenger train space required for the mails. Using this method, 186 railways, operating 2,370 mail routes, with a total length of 1?6,T16 miles, ascertained and reported that for November, 1909, the operating expenses (not including taxes), for conducting the mail service were $4:,009,18-±. The Postmaster-Gen- eral states (Document 105, page 281), that all the railways represented in the foregoing, and enough others to increase the mileage represented to 19-1,978 miles, were paid for the same month only $3,607,773.13. It thus appears that the pay was far below the operating expenses, with- out making any allowance for taxes or for a return wpon the fair value of the property employed. While different methods are in use for ascertaining the cost of pas- senger train service and the results produced by such methods may show considerable variation, yet the mail pay is so far below reasonable com- pensation, from the standpoint of the cost of the service and a return upon the value of the property, that no method can be reasonably urged which would not demonstrate the non-compensatory character of the present mail pay. This is illustrated by the method which the Post- master-General himself emploj^ed, as the character of that method is such that it necessarily produces the very lowest estimate of cost for the passenger train service. The Postmaster-General, by his method of apportionment arrived at a cost of $2,676,503.75 But this must be increased on account of his erroneous apportionment of car space by 800,802.00 And also on account of his refusal to assign expenses directly incurred in the mail service (page 15) .... 401,126.00* Total, according to the Postmaster-General's method of apportioning costs between passenger and freight traffic T . .$3,878,431.75 Thus even the Postmaster-General's method of apportioning costs between freight and passenger traffic produces an operating cost in excess * There may be some duplication in this item, but to eliminate it would require an elaborate computation which, in view of the broad margin of ex- penses over receipts, is wholly superfluous. Whatever duplication exists must be small in comparison with this margin. return upon the fair value of the property or necessary but non-income of the total pay received by the railways, leaving nothing whatever for producing improvements. There is no allowance, in any of these estimates of cost, for the large volume of free transportation supplied to officers and agents of the Post Office Department, when not in charge of mail, although this amounts to over 50,000,000 passenger miles annually and, at the low average rate of two cents per mile, would cost the Post Office Depart- ment more than $1,000,000 per year. FOURTH. The Postmasier-General has ivholly orerloolced the fact that a large part of the costs incurred by the raihvays in carrying the mails, consists of interest on the capital they employ. By ignoring all capi- tal expenses, confining his attention to mere operating costs, and pro- posing to return to the raihvays only the amount of these operating costs, plus six per cent, he urges a method ivhich, if applied generally to all their business, ivould render every railroad at once bankrupt. POSTMASTER-GEXERAL ADMITS THAT SOME ITEMS OF EXPENSE WERE OMITTED. Attention has already been called herein to the admissions in Document No. 105 that neither the expenditures on account of station services and terminal facilities (see pages 9-16) nor the cost of personal transportation furnished without special charge therefor to the officers and agents of the postal service (see pages 16-18) were included in its estimates of cost. Attention has also been directed to the specific ad- mission that only two kinds of cost were considered, which admission was made in the following words: "It is shown that upon this basis of calculation, the infor- mation furnished, and the assignment of operating expenses and taxes (the factors of expense considered), the performance of mail service at the present rates is profitable to many com- • panies and unprofitable to others, . . ." Document No. 105, p. 14. B. THE POSTMASTER-GENERAL IGNORES THE FACT AFTER HIS ADMISSION. Yet after this admission the report, curiously and inconsistently enough, proceeds to assert that the figures show the relation between 35 actual cost to the railways and their present mail pay. The sentence last above quoted continues, in the very next words, as follows: "but that the net result shows that the Government is paying- more for the service than it costs the railroad companies to perform it; furthermore, that this excess over cost and 6 per cent profit is about $9,000,000 a year; that in cases where rail- road companies are carrying the mails at a profit the per cent of profit over the cost of performing the service varies in almost every instance, ranging from a low to a high rate, and that in cases where railroad companies are carrying the mails at a loss the per cent of loss compared with the cost of performing the service varies in the same manner."' Document No. 105, pp. 14-15. Eeferring, over his own signature, to the foregoing, the Postmaster- General says: "The committee estimates that through a readjustment of railway mail pay on the basis of cost with six per cent profit a saving to the Government could be made of about $9,000,000.'^ Document Xo. 105. p. 3. Anr in his annual report to the President, dated December 1, 1911 : "The statistics obtained during the course of the investi- gation disclosed for the first time the cost of carrying mail in comparison with the revenue derived by the railways from this service. ... If Congress gives the recommendation of the Department in this regard its favorable consideration and authorizes a readjustment of railway mail pay in the man- ner suggested, it is believed that the resulting saving to the Government will amount annually to about $9,000,000.'' An- nual Eeport of the Postmaster-General for the fiscal year 1911,^ pp. 19-20. The Second Assistant Postmaster-General makes substantially the- same statement but in words which point definitely to a source which discloses the incomplete nature of the estimates of alleged cost. He says : "A computation has been made, based on Table 7, of the amount of revenue the companies or systems reporting would receive if their compensation for mail service were based on the cost of carrying the mails and six per centum of such cost. The result indicates that the companies represented in the com- putation would receive annually under such method of payment about $9,000,000 less tlian at present." Document Xo. 105^ p. t. 36 Turning to Table 7 (Document Xo. 105, pp. 272-281) there is no difficulty in verif3^ing the facts already stated as to the factors of cost included and as to those ignored. The truth is disclosed bv the table headings. Thus, as to the Abbottsford & ^Northeastern Eailroad, the first company shown, the table headings and the entries under them, on page 272, are as follows: Table heading Total operating expenses (passenger and freight) Taxes Total operating expenses and taxes Total operating expenses and taxes chargeable to passenger traffic •• Passenger traffic operating expenses and taxes chargeable to mail service : Directly chargeable Apportioned Total Entry $1,522.10 90.49 1.012.59 268.19 nothing 5.20 5.20 It will, of course, be noted that the items of expenses shown in the foregoing are those of operation and taxation only; all other ex- penses are absolutely ignored. Yet the next page shows that this ob- viously incomplete item of $5.20 was compared with the company's mail pay receipts for the month, $54.25, and the whole excess, $49.05, shown as "gain from mail service.'" That the company had any other ex- penses than those enumerated is wholly ignored. And the same is true as to every other company and as to the whole of the Post- master-General's report. c. THE FACTORS IN COST OF PRODUCTION. The science of political economy may be almost said to begin with the classification of the factors of production under the three heads of labor, land and capital and the explicit recognition that each of these factors entails a distinct element of cost of production. Thus, labor receives wages, which constitute an element of cost of produc- tion ; land receives rent, which is another element, and capital receives interest, wliicli is a third element. The term "interest" as thus used is the exact equivalent, in economic nomenclature, of the term "reason- able return on investment," as used in ordinary parlance to denote the cost directly and properly occasioned by the use of capital. Where a government is supported in whole or in part by taxes on production the sums so paid may not improperly be treated as an additional element in cost of production and, under modern conditions, in which the whole process of production is rarely under unified control, the cost of ma- terials is also in the nature of an item of such cost, at least from the 37 point of view of any separate enterprise or establishment. Every one of these items of cost must be satisfied or there is loss ; until they are all fully met there can be no such thing as profit. Eailways have capitalized the rents of their rights of way and other land holdings and it is sufficient therefore, to speak of the cost of production of the services they sup- ply as including only the four elements of (a) reasonable return on in- vestment or interest, (6) wages, (c) cost of materials and (d) taxes. Operating expenses include wages and cost of materials (i. e., fuel, rails for replacement, etc., etc.) So the Postmaster-General has actually in- cluded three of the four factors and excluded the other, that is to say, he has ignored the recognized right of investors to a fair return upon the fair value of the property necessarily employed to render the services. To sppak of '"'six per cent profit," as the Postmaster-General has (Docu- ment No. 105, p. 3) when there has been no allowance for any return to investors, an essential and inevitable part of the cost of production, is a gross and misleading misuse of terms that have definite and estab- lished meanings. Eailways are much less able to ignore the rights of investors to proper and regular returns than some other undertakings, because, with ver}' few exceptions, their entire property holdings are pledged by mortgages given to secure interest pa3'ments. To be unable to pay interest, therefore, spells bankruptcy. From the point of view of the traveling and shipping public a reasonable recognition of the right of the owners of railway property to receive returns upon their invest- ments reasonably proportioned to its fair value is equally important. The rapidly growing industries of the United States continually require the services of more and better railway facilities and their urgent de- mands can be met only by the annual addition of very large sums to the capital invested in American railways. This needed capital cannot be obtained unless the promise of reasonable returns thereon is supported by evidence that capital already invested, under competent managment is able to earn fair returns. If Congress should now adopt the atti- tude of the Postmaster-General, as developed in Document No. 105, and ignore all capital expenses in fixing rates of payment for the mail facilities and services supplied by the railways, it would be notice to all potential investors in railway property that the policy of the Federal Government had been so formulated as to deny their right to reasonable compensation for the use of their capital. D. EAILWAY INVESTOES AEE CONSTITUTIOXALLY PEO- TECTED IN THE EIGHT TO EEASONABLE EETUENS. The Postmaster-General appears to have overlooked the fact that the Constitution of the United States protects the owners of railway 38 property against such a Congressional confiscation of the right to use their property as he proposes. In recommending a plan of payment which excludes any return whatever upon the value of the property used in rendering the services required by the Post Office Department he has proposed a plan that would be absolutely repugnant to the fol- lowing well-known provisions contained in Article V of the Amend- ments : "No person shall ... be deprived of . . . prop- erty, without due process of law; nor shall private property be taken for public use, without just compensation." It is not proposed or in any way necessary to enter upon an elaborate constitutional argument for everyone knows that the fore- going and the similar prohibition contained in the Fourteenth Amend- ment, have repeatedly been applied to prevent action similar in char- acter, albeit much less drastic, to that now proposed by the Postmaster- General. One citation, and that from a decision of the Supreme Court of the United States, will suffice : ''The corporation may not be required to use its property for the benefit of the public without receiving just compensation for the services rendered by it. . . . ''We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation main- taining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. . . . What the Company is entitled to ask is a fair return upon the value of that which it employs for the public convenience." Smyth v. Ames, 169 U. S. 466, 546-7; 42 L. ed. 819, 849. In the case from which the foregoing is quoted the Supreme Court affirmed a decision preveniing the enforcement of a schedule of maximum rates enacted by the Legislature of Nebraska as to two companies (among others) Avith regard to which the Court had found that they would have earned, in the years under consideration, more than their operating expenses because, as said in the opinion: ''the receipts or gains, above operating expenses, would have been too small to affect the general conclusion that the act, if enforced, would have deprived each of the railroad companies involved in these suits of the just compensation secured to them by the Constitution" Smyth v. Ames, 169 U. S. 466, 547; 42 L. Ed. 819, 849. Although the Fourteenth Amendment in particular has repeatedly been invoked to prevent the enforcement of rates prescribed under 39 lesfislative autlioritv which the courts have held would amount to a confiscatiou of the use of railway propert}' by depriving its owners of a return on its fair value, that is to say, of interest, no legislature has ever yet acknowledged an intention to fix rates so low as to have that result. Until the Postmaster-General made the recommendation embodied in Document No. 105 no public officer had ever avowed a purpose to refuse to any railway carrier a fair return on the fair value of any property used to render any service, no legislature had ever enacted a law which it admitted would have that effect, no State or National railroad commission had ever claimed that power exists to ignore the right of property to a reasonable return and, therefore, no court has ever yet been required to pass upon the validity of law-made rates in the light of a frank admission that they would do no more than provide for operating expenses and taxes leaving nothing, or substantially nothing, to the owners of the property. That such a contention will ever be made in any court is bevond relief. E. AMOUXTS' OF EXPENSES IGXORED BY THE POSTMASTEPi-GEXERAL. The Interstate Commerce Commission has just published the re- port of its Statistician for the year which ended with June 30, 1910 from which it appears (p. TO) that the gross receipts of the railways, amounting to $3,005,112,836 (This sum includes operating revenues, $2,?50,667,4:3o ; net revenue from outside operations, $2,225,455 and other income, $252,219,946, and thus obviously represents duplications in such instances as the pa^inent of rent for leased railway out of operating revenues when all or part of the amount so paid becomes, in turn, "other income," through receipt of interest or dividends on se- curities of tlie leased lines held by the lessee. These duplications are unavoidable, however, if, on the expense side, are properly to be set up such inter-corporate payments as those of rentals of leased railways.) during that year, were disposed of as showTi by the table on page 41. Omitting all expenses, included in the foregoing table, that are not absolutely necessary to avoid bankruptcies and the disruption of operating systems, the expenses shown in the table at the top of page 42, in addition to those allowed for by the Postmaster-General, at the very least, must be jDrovided for out of earnings: 40 a. o a o O O t- "t O lO CO l- o QC cc cr •J CI CI I- I- ?? "* QO r^ 1-1 2»« 05 o a; CI Ci a a OCT :d ci L-^ cj cr o i~ ci -f 00 cc 7c f * r: ^fi ~ ft TtH iH lO ' ro?^ (T. I- i-H 1- 1- r~. •t O c 1- cc -S! a 6 -ti te -tH o o o oc p. a a o — "+ r-i" \d tA of O rf i -t' C^ OC CI rH Ot O d. 1 ^.o QC O QO O ■* O fi CI X CO 1- GC CI rH ;::< «>J yj^v cc CI CI :+ 1^ c^ CC O 01 33 -t 1-H OC CI CI -tn CI y I- \6 O ^' O L-^ GO ^ Cl^ M ^_^ -ti cif L:f \6 0-" T-i on Cl L-j ^ O I- a Cl O ^ ~ x- X 0) o t/: OJ ' , r ~ c :J ^ y. (L Z 0) •- 41 Omitted expenses Item Amount Per cent of ex- penses consid- ered by Post- master-General Rents for lease of other roads Hire of equipment, debit balance. .... Payments for joint facilities Miscellaneous rents Interest on funded debt Other interest $133,881,409 27,625,077 28,811,031 2.933,067 349,092,709 13,207,243 5,355,416 6.97 1.44 1.50 .15 18.17 .69 Sinking and redemption funds .28 Total $560,905,952 29.20 The Postmaster-General's plan, however, if applied to all railway traffic, would allow the railwa3's to receive for the services they render only the amount of their operating expenses and taxes, that is $1,920,665,026, plus six per cent of that amount which is $115,239,922. Thus instead of the $560,905,952 absolutely necessary, as has been seen, to maintain their systems and keep them out of the hands of receivers they would have only $115,239,923 or 20.55 per cent, about one-fifth, of the necessary amount. Of course every reasonable person realizes also that the item of "dividends," as well as most of the other items in the table next but one above, is a necessary item and must be met if the railways are to be fairly treated, if they are to be protected in their Constitutional right to receive just compensation for their services and if they are to be enabled to render proper and adequate services as common carriers. The fact that the Postmaster-General's plan could not be generally applied without destructive effect should deprive it of any support whatever. There is nothing in the character of the mail traffic which suggests that it ought to be treated exceptionally or carried for so low a figure as to require rates on other transporta- tion to be kept at a higher level in order to prevent the insolvency of the carriers. Such treatment would make the mail service a tax on every other service rendered by the railways. F. EVEN ON THE BASIS OF THE UNFAIRLY LOW ESTIMATES OF OPERATING COSTS MADE BY THE POSTMASTER- GENERAL, ALLOWANCE FOR THE OMITTED EX- PENSES WOULD MAKE THE MAIL PAY HIGHER THAN IT IS NOW. The following figures are deduced from those contained in Table T, Document No. 105, pages 280-281. 42 Railway mail pay for November, 1909 $3,607,773.13 Operating expenses and taxes, same month 2,676,503.75 By reference to page 41 of this statement, it will be seen that the gross receipts of all railways for the year ended June 30, 1910, as reported by the Inter- state Commerce Commission were $3,005,112,836 Deducting therefrom — Operating expenses and taxes $1,920,665,026 Appropriations to Additions and Bet- terments and for new lines and extensions 55,061,675 Credit to profit and loss 175,480.326 $2,151,207,027 There remains $853,905,809 :z= 44.45% which must be provided for before a proper return on investment shall have been secured. If you add to the operating expenses and taxes, as shown by the Postmaster-General, $2,676,503.75, for November, 1909, 44.45 per cent or $1,189,705.92 it will give a total of $3,866,209.67 or $258,436.54 (equivalent to $3,101,238.48 per annum) more than Document No. 105 shows was paid for mail service in November, 1909, and consequently, even on the basis of the unfairly low estimates of operating costs made by the Postmaster-General, an allowance for the omitted expenses, which must be met would make the railway mail pay higher than it is at present. FIFTH. In confining his investigation to the month of Novemher, the Post- master-General selected a month that is not a fair average or typical portion of the year hut, in connection with the methods he employed, greatly reduced the apparent cost of the passenger train services, result- ing from his calculations. • There can be no contradiction of the assertion that, if in every other respect the basis of railway pay proposed by the Postmaster- General were reasonable and fair, the validity of his calculations would depend upon whether the period selected for his investigation could be considered fairly typical of an entire year. All his computations are based upon data obtained by him which represent only the single month of November in the year 1909. If that month was a rea- sonably typical month, particularly with respect to passenger train traffic and expenses calculations based upon these data would be en- titled to all the weight which the methods of computation employed would warrant. But, however accvirate these calculations and methods, the results could rise no higher than their source, and the most perfect system of computation most accurately applied would be wholly viti- ated if the basic data cannot be regarded as fairly typical and represen- tative. If the month of November varies from the whole period of the 43 year from which it was selected, and particularly if the differences are such as unfairhj io diminisli the apparent cost of the passenger train services, results based only on data for that month must he incon- ■clusive and worthless. Now this is precisehj the case. It may fairly be questioned whether the year contains any single month that could be properly denominated an average, typical or representative month but if there is such a month it is certainly not the month of November. The Interstate Commerce Commission has puhlished the receipts and expenditures of the railways of the United States for each month of the fiscal year that ended witli June 30, 1910 and includes the month of N"oyember, 1909, and these data conclusively prove that that month was very far from a representa- tive one and that the seasonal and other variations to wliich it was subject were such as to render the results of any calculations based upon it exceedingly imfair to the passenger train services.* The figures in the second and fifth columns of the table on page -to are from that Imlletin, the figures in the other columns have been derived from them. The most accurate comparisons permitted by the data on page 45 are those between the per diem averages in the third and sixth columns, as such comparisons are not affected by the varying numbers of days in the different months. These comparisons show that the average gross receipts per mile of line from the passenger service during the month ■of Xovember, 1909, amounted to but 95. IT per cent of the daily average for the year while the average gross receipts from freight service amounted to 113.07 per cent of the daily average for the year. In the whole year there were but four months that showed smaller gross re- ceipts from passengers than the month selected by the Postmaster-Gen- eral while there was but one month in the entire year which showed as high receipts from freight service. ]More conclusive still is the fact, shown by the last column in the table, that of all the months in the year the percentage of gross passenger receipts to receipts from both passengers and freight was alisolutely the lowest in November. In that month the passenger service earned, in gross, but $21.51 in each $100.00 of receipts from both the passenger and freight services while the average for the year was $24.61 and in one month it was as high as $29.25. It is perfectly obvious that if any direct charges to the different services are warranted the amounts of the accounts so charge- able must fluctuate, if not in exact proportion to the respective volume of traffic in the passenger and freight services, at least with some rela- * Interstate Commerce Commission. 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"7 . *" • « • X • , >.!—;£; ; 1 \ > •=,•;/< • , • & •.'-'i- • IS ^ !» c -x r ? oi ^^ r .2 i i = s H. n F 2 i 2 aJ r __^ "5 48 Operating Expenses per mile of line per day •o ><, •« •& «, Transportation Expense Maintenance or Equipment Maintenance OF Way and Structure G ENERAL EXPE NSE Traffic Expense I NOVEMBER 1 OTHER II MONTHS 49 weather conditions of Xovember render necessary the suspension of much of the ordinary maintenance work upon road-bed and structures and, at the same time, tend to enhance the operating expenses that do fluctuate with the volume of traffic. Consequently, as all the traffic fluctuations that find expression in Xovember tend to diminish the total expense apportioned, by the Postmaster-General's method, to the pas- senger train services, the fact that the expenses that do vary with traffic are relatively heavier in the month he selected had a further and strong tendency to reduce the apparent cost of the passenger train services re- sulting from his computations. It follows, as surely as the night fol- lows the day, that, if every other feature of Document No. 105 were utterly beyond criticism, the fact that it rests wholly upon the single month of November would render its results illusory, mis- leading, and grossly unjust to the railways. III. EECENT EEDUCTIOXS IX RAILWAY MAIL PAY. A. PRELIMIXAEY SUEVEY^ AXD COMPAEISOXS. Xo consideration of the reduction proposed in Document Xo. 105 would be adequate which did not make appropriate allowance for the fact that during the period of advancing railway expenses subsequent to June 30, 1907, the mail revenues of the railways have been subjected to repeated and drastic decreases brought about by legislative action and b}' administrative orders. The volume of the American mails, the revenue of the Ameri- can postal service and its demands upon the railways for services and facilities are constantly increasing. The costs of supplying railway transportation are also increasing. Capital costs (interest) have increased through the higher standards of service demanded and the higher value of real estate required for extended and necessary ter- minal plants, labor costs have grown by means of repeated advances in the rates of wages paid to employees in every grade, other operat- ing expenses have increased as prices of materials and supplies have mounted upward, taxes have increased with the growing exactions of State and local governments which have been rapidly augmenting their expenditures and forcing an increasing share of the total burden upon railway carriers and by the creation of an entirely new Federal cor- poration tax. But the aggregate railway mail pay has remained substantially stationary for several years and has not at any recent date advanced in proportion to the increased facilities and services required, the increased profit on the use of these facilities and serv- ices made by the Post Office Department or the increased expense 50 to the railways. The pay per unit of service rendered has been greatly reduced. The table on page 53 shows some of these facts. Eeduced to percentages, the figures in the table on page 53 show the following increases for the last ten, five and two years, respectively : Item Ten years 1901 to 1911 Fi ve years 1906 to 1911 Two years 1909 to 1911 Postal i'eceij)ts. ner cent increase 113.09 106.40 32.56 142.81 41.65 33.66 7.73 42.91 16 86 Postal expenditures : All DUTDOses, ner cent increase 7 92 Railway mail pay, per cent increase... All other expenditures, per cent increase 1.43 9.81 These percentages disclose what has happened too plainly to ad- mit of much comment. It appears that for either tlie ten or five- year periods just closed the postal expenses exclusive of raihuay mail pay have grown much more rapidly than postal business, as fairly measured by receipts, ichile railway mail pay increased during the longer period less than one-fourth as fast as other expenses and during the five-year period less than one-fifth as fast. The two-year period covered by the percentages in the last column covers the administration of the present Postmaster-General and, although during that period the enormous increase in postal business (amounting to $3-i,3 17,440 in revenue or nearly one-third as much as the entire postal receipts of the year 1901) has outstripped the growth of expenditures and the real postal deficit has been greatly reduced, expenses other than for railway facilities have increased 9.81 per cent while railway mail pay has grown but 1.43 per cent, or about one-seventh as rapidly as other expenditures and about one-twelfth as rapidly as postal receipts.* The * It may, of course, be suggested that the fact that nearly the whole recent saving in expense appears to be in railway mail pay is attributable to the increase in the cost of rural free delivery but this explanation would be inaccurate. The cost of rural free delivery reported by the Postmaster- General for the fiscal year 1909 was $35,586,780; for 1910, $37,073,733, and for 1911, $37,145,757. These figures give a percentage increase for the two years of the present administration of 4.38 which is much lower than the percentage increase of all expenses other than railway mail pay. Excluding the reported cost of rural free delivery and tlie pay- ments for railway facilities the increase in all other postal expenditures was from $135,547,947 in 1909 to $150,778,789 in 1911 or 11.24 per cent. Expenditures for rural free delivery are not, however, wholly for an additional servic-e as might superficially be conceived. In part, they repre- sent the substitution of a new method of delivery for delivery through the post offices, which has permitted a decrease in the number of post offices and, therefore, the expenses which would have been necessary to maintain the abandoned offices should be deducted from the apparent "cost of rural free delivery before calculating its real cost. At the close of the fiscal year 1901 there were 76,945 post offices in the United States; at the cor- responding date in 1906 there were 65,600; in 1909, 60,144 and in 1911, 59,237. The number of fourth-class post offices in 1901 was 72,479; in 1906, 59,690; in 1909, 52,944, and in 1911, 51,260. From 1901 to 1911 the reduction in the number of post offices of all classes amounted to 23.01 per cent and that in fourth-class post offices to 29.28 per cent. 51 85 if B v K s e a H O E I >> I I c s o B < 85 Ph O c 3 O E < CO QC t- C t- O (TJ O t- t- O cc Ci Lt tt c f t l:; ir; c li"^ o C c; ci L-t o oc i:c f^' s S p CD CC I- t- CO t- I- X OC 00 t- g. o a 3 c 3 O £ c. o o o c? c (X X L-; (T. t- Lt! X © CD C Ct T- c; X cc CI, CD ot CI in' cd" t-' c' x' cd' c' C5 CD o c; ic c: X CC Cl Tf CC fC tT ■* t-^ Iffl t-^ X Cf r-i' O t- « Oi C (M CC • — -I- rO a. w ^ v^ >^ V- ;-■ c oj 0^ »^ •;; f- r: . ■ ^ X t- /2 "^ ^/- -i i^' = <^ - "^^ ^ ^' e «= £ C C St'' I,- (i> J— "^ p- ^ ^ e- i-^^Ci-J-'tiCDCJi-'b-'-'CD IC ■* -^ T^ m CI CD X in CD CI ct ci r: cd' ci cd' cc x' x" cj c ccccocooooc S-'" '" ^ '^ '" S;2<^5S^ci^Cc^^ E|s-r^£i.i"ilii=l K K - jc £ •- V r ?: T, +-• " ct i- ,- r- .2 S c '-P 1? c i/. t: ^ Q c » 0) a; c; 1^ , ^ t- a: — ^D o — a. -t^ = > c: s:i:^£=q-::_-<^ a: r C "^ c."^. ^ *^ D ^, :: I-' t- "- — ^ - (^ 2r fli !:^ i< -£ CI C •" 5 Ln o a: c C c: c; c a. aj C C C " C r: a: OJ T- t- t; CD C) O QC 1- C. CD ■* 1- ■*' in ■*' cf Ln X X CD in t- t-. ft in •<*' x' cf 1- ci cc L': r-i T— I— 1— c X X CD CI Tf c: CD t- X X C Cl CD 1- t- CI X r- o) w c:' c x' T-' -f t-' t-' c; Tt ct L- c t~ o ct Tt CI e-: c: c: m t-' x' c x' T-' c; 20 CD I- c: c ci ci -t T- r-, T- CI CI d CI fC «^ t- cc "j^ m CI m ct ct t- f ■: Tt ■* ci X X o CD X m ci c ■*. CD_ in t~ c CD LL OTHER EXPENSES 53 averages in the table under discussion are even more significant than the affffre^rates. Thev shoAV that between 1901 and 1911 the cost of the postal service, reported by the Postmaster-General, per $100.00 of re- ceipts therefrom, declined from $103.51 to $100.26 while the cost for railway mail pay declined from $34.18 to $21.26 and that for other purposes increased from $69.33 to $79.00. That is to say, the net decrease of $3.25 per $100.00 of revenue is the difference between a saving in railway mail pay of $12.92 and an increase in other expenses of $9.67. In other words, not only is the whole reduction in postal expenses attributable to the reductions in railway mail pay but an additional reductioij in this item has been absorbed by increases in other items. Effective illustrations of the relation of railway mail pay to other postal expenses are found in the table on page 55 which shows the an- nual increment of revenue for each year of the last decade and the cost per $100.00 at which it has been earned, the cost of railway mail pay and the expenses for other purposes being stated separately. The table on page 55 shows that while the additional cost of earning the portion of total postal revenue added since 1901 has been, for railway facilities $9.8-4 per $100.00 of receipts the cost for other purposes has been $87.55 per $100.00 of added receipts. Thus the revenue added since 1901, which exceeds the entire revenue for that year, has cost, for railway mail pay, but 28.79 per cent of the average of 1901 ; it has cost, for other purposes, 126.28 per cent of the average at the beginning of the period. These figures give additional em- phasis to the conclusion that much more than the entire decrease in postal expenses has been taken from the revenues of the raihcays which transport the mails. The fact that the yearly averages show that each yearly increment of postal business has been taken up at a cost, for railway facilities, lower than the average cost therefor in 1901 while in six of the ten 3'ears the cost for other purposes has exceeded the average of 1901, in one year being more than three and one-half times that average, is most significant. These data again demonstrate the truth of the assertion that for a decade at least reductions in railway mail pay have constituted the solitary source of savings in postal expenditures. Looking at the problem from the point of view of railway revenues it is not surprising, in view of the foregoing, to find that the transporta- tion of the mails constitutes the single exception to the rule that their gross receipts from different elements of traffic have increased, albeit not in full proportion to the augmented volume of work they have done, at least with some rapidity. Comparing the years 1909 and 1911, and 54 ■S2 r:-t^ t-^ cf 0" co" c^ co' c? T-' c: t-' o" t- t— €^ r-! ^^ T-f tH r-l 1—1 X €«■ 1— I ■85 00 rH C-l CO CD CD CI '• 00 ": CD ^ CO feo ft 1- 00 1-; iO CD C: -CD . IC CI .- Pe 100.0 recei Tli CO LO" I- i-i Ci l-^ ; -^ -CO ci 1-H "m ">> CO 1— 1—1 CI 1—1 1— T—. . i-n • s«- CI a C4 a?-s<5- »&^ u a es- 1 ■3 E •3 C 00 t- TfH CD LO Cl ": " • Cl s CO' CD ^ CD CD T-1 I- CO . 0^ 00 CO CD I- CO CD . ^ T^ CI Ot 5? 4J C 3 X T-i T— x' c:' 00' ~f QC of -f • r-' t-^ c5' co' LO LO 1.0 c: c> ^ • T- I- x "3 1 -1-1 § *n! E T- CO OD C". coi : -(H r^ LO « -:t-:^>-:~zt-it~i*~:>-i*s T— 1 CO l/OCOOOOOOpO T— ! CJ rH — 01 co' -h LO' cd' I-' X Dt' o' '—I 5 • 3 C C C: 'C :r f-J ^ Di a c: c: d: c. c: X. J. „ ^ „ ^ „ ^ rt 1- ^ r-l ^ *^ '»' j7* ^ a ^ 0) Til ;_, g-'-r*":'-:'-:'":^*-:*":'-:'^ 0) £ "^ cT i aJ cT cT oI o/' oj iT c^ >. ^ 7; y. -/. a: y. a. -/. y. ^ x •S M _C .Z^ M) ■V s^ .2 1—1 X S J3 -^ -^ .a .2 5 t: 01 — C5 CI ■^1 tJD 'Hr^ X3 ■—« G •■J^ o^ a a "" c a a3 ^^ .(-« a) aj c: c; r 2 y. S +^ CJ 0^ 01 — —1 ^ X 'A ■!!? aj ^ X' tn ^ x S 0- 0; 0) a ■< .-■ QQkJ JOI 55 omitting express receipts for which official figures are not yet available, the figures are as follows: Railway receipts from : 1909 1911 Increase, per cent Freight^ $1,677,614,678 563.609.342 49.869.375 $1,929,335,457 658,772,786 50.583.123 15 00 Passenger^ 16.88 Mail= 143 ^ Data compiled by Interstate Commerce Commission. *As reported by the Postmaster-General. During the two years covered by the foregoing the receipts of the Post Office Department increased, as already shown, 16.86 per cent and the operating expenses of the railways of the United States increased from $1,599,443,410 to $1,935,511,581 or 21.01 per cent. The successive reports of the Statistician to the Interstate Com- merce Commission show that the receipts of Interstate railways from freight, passengers, express and mail, respectively, have been, during each year from 1901 to 1911, inclusive, as shown on page 57. That the relatively slow expansion of mail receipts shown by these tables is the result of reductions in the rates of pay and not of a slower rate of growth of mail business is apparent from the fol- lowino- : Freiglit. tons carried one mile ; Number^ Per capita of population. Passengers carried one mile ; Number^ Per capita of population Mail, pieces handled ; Per capita of population. 1901 147,077,136,040 1,895 17,353,588,444 224 7.424.390,329- 96 1911 255,016.910.451 2,767 32,338,496,329 351 16,900,552.138^ 161 Increase, per cent 73.39 46.02 86.35 56.70 127.64 67.71 * Interstate Commerce Commission, Twenty-third Annual (1910) Re- port on the Statistics of Railways, p. 58. ' Annual Report of the Postmaster-General for the fiscal year 1910, p. 47. ' Statistics published by the Third Assistant Postmaster-General. Figures showing the volume of express business in 1901 and 1911 are not available but as the amounts paid to the railways for the facilities with which they furnish the express companies are propor- tioned to the receipts of the latter it may be concluded that the growth in the railways' revenues from express at least roughly meas- ures the growth of this traffic. The last foregoing table shows that of the three services included, the business of the mails has grown with far the greatest rapidity, yet by the other tables it has been shown that the railways' revenues from mail have increased most slowly. 56 |1( si C3 3 o £ C4 O O C-l ^ tH 10 00 LO L-5 CO d 1^1 -t o CI un cc Tt< CO O '^ 05 CO IM 10 ^ '^ COODCOt-T-ITl^Oi^KI cdm'oforoT-i'odt-^ LTJ CO O 05 Cl t-- L-- tH Tt< C» t- -* '^i CO co__ »o 00" C5 T-T -i^' 10 t-' o" ao C0C0-:t<-TtO-* S81 p. 3 o E < c 3 o E 3 o s 3 o, o ^ V >< dcd CO 1-1 CO a o'co" OCOl^i-I^OO'trOCO ■^ TtH tH 10 10 O O cr O t-; o I© CO 10 CO CO C5 0-1 C t- t- (M CI 03 iq o CI CO o 05 ■*_ CO CI 00 o T|H ti5 k5 »o ifi LO d d d d t-^ LO 00 CI CJ^ dco CO 05 T-Tcf LO 05 CO CO ca iH 05 05 10 05 TjTd O CI I- CO CI ^ CI CO CO 00 t- 10 05 CO cf d' I- tH TjH LO CO CD CO I— co'cf o CO O Q0_ Til d O CD CI CO CD Tfi t~ GO C0__ T)^_ l-^ 05 cf ca O 05 t- CD 05 t- co'go'oo CD CI 10 LO -,D CD T-H Tt< LO CI LO "# CO r-l CO O I- ■* CI >o I- cj T-; 00 CD 10 CO »q -* 10 d d i-^ 05 d 00 00 d o T-' 1-1 T-( r-( T-l iH CI 1^ r-l CI CI -* kO CD CO CO T-H -$ CI 05 CO O CO O CD CO CO' OO'dcf cf -TtH CI CI O I- \0 CJ^O^O^l--; 00" i-^ co" cT d T-i o CO I- »o 1— d CO CO ■*! 6OlOlO>lOlO»0»0 i th ci d' 00 CD 'ti ci I CO O CI CO no 1-- 05 C^ O CO CD i-(CO-*CD~ — --.-- -- CD CO -H 0_ l'^ '^'2^ '^ "^ '"I '■'^ i-^ of d cf -* no t- GO d cf CO l-l-C»(XlGOaOGCCOOC505 01 a o m a a o o 0) ci o +-> 1) C3 0) c o u ' ci o — I CI CO ■* no 00000 CD I- X 000 >> ,Q -O 0) -4-J (1 Ck Oi f-t il 0*" 02 '^15 3 tfi ci a aj 0) 3 >3 T^tC S.i! >» a> .,'■ ci a; 0) -M fe ;S c^ -♦— ' Ci fl •rH .3$ '^ s 11 -^ ,72 .S ^5 n !K a3 Oi — . a< .- c: 7i ^ 7J Oi c fci: S -fc i-b c 3 i •rH 'P an i2!K o O 1- 1- 57 A'arioiis elements have combined to produce this decline in the mail pay of the railways, but in this statement reference will be made only to the more important reductions that have taken place within the past five years. These are: First. The natural operation of the law of 1873 by which the basis of mail pay is fixed, Second. The action of the Post Office Department in stimulating competition for mail where its power to divert part of the movement from any route or routes could be exercised for that purpose. Third. The statutory reductions provided for in the Ap- propriation Act of March 2, 1907, Fourth. The reduction accomplished by including Sundays in the divisor used to establish the average daily weight of the mails, in accordance with the executive order known as Post- master-General's Order No. 412 of June 7, 1907, Fifth, The withdrawal of all payments for special facilities, and, Sixth. The withdrawal from the mails of stamped en- velopes, postal cards, mail bags and postal equipment. ' B. REDUCTIONS DUE TO XATURAL OPERATION OF THE LAW OF 1873. Pay for the services and facilities supplied by railways is now fixed by the law of March 3, 18^3 (17 Stat. 558) subject to the deductions provided for by the Acts of July 12, 1876 (19 Stat. 78) June 17, 1878 (20 Stat. 140) March 2, 1907 (34 Stat. 1212) and May 12, 1910 (36 Stat. 362). The Act of 1876 effected a reduction to ninety per cent of the sums that would have been paid under the unmodified statute of 1873 and the Act of 1878 made a further reduction of five per cent. The reduction effected by the Act of 1907, as modified by that of 1910, will be discussed in a subsequent paragraph. The constant reduction due to the normal operation of the law from 1873 to 1898 was shown as one of the results of the in- vestigations undertaken for the Joint Postal Commission by Professor Henry C. Adams. The figures showing ton-mile rates in the following table are from his report.* * Fifty-sixth Congress, Senate Document No. 89, Part 2, p. 253. 58 Year Railway Mail Pay per ton per mile In cents Per cent of rate in 1873 Year Railway Mail Pay per ton per mile In cents Per cent of rate in 1873 Year Railway Mail Pay per ton per mile In cents Per cent of rate in 1873 3873. 1874. 1875 . 187 : Cause of reduction Amount of reduction Natural operation of Law of 187.3 No estimate. Competition stimulated by Post Office Department 8174,544.51 Act of March 2, 1907, and amendment of May 12. 1910 2,723,658.90 Postmaster-General's Divisor Order 4,941.940..34 Withdrawal of pay for special facilities j 167.005.00 Withdrawal of mail supplies from mails ' 525.000.00 Total (with no allowance for the first item above)... $8,532,148.75 Therefore, with no allowance for the natural downward tendency, due to the sliding scale of pa}Tnent so wisely provided for in 1873, the mail pay of the railways in 1911 was at least $8,532,148.70 less than it would have been under the laws and practices in vogue prior to 1907. Compared with transportation pay of $46,172,472.93 this reduction amounts to 18.48 per cent and on the basis of $50,099,537.02, the sum which includes both the transportation pay and railway post office car pay of 1911, it amounts to 17.03 per cent. A method of estimating the contribution of the railways to the reduction of the postal deficit, which is at once more simple and more comprehensive and more adequate is by ascertaining what the railway mail pay of 1911 would have been had it continued to absorb, as it did in 1901, that is but ten years earlier, $34.18 per $100.00 of postal receipts (see table on page 52). Postal receipts in 1901 aggregated $237,879,823 and, as already shown, even with the enor- mous increase in business of the decade 1901-1911, expenses for oth'-r * This change is described by the Postmaster-General in his Report for 1911 (House Document No. 559, Sixty -second Congress, p. 19) and. more fully by the Second Assistant Postmaster-General on pages 21 to 23 of his Annual Report for the same year. 66 purposes than raih\ay mail pay increased proportionately faster than receipts, so that in 1911 these expenses consumed $79.00 for each $100.00 of receipts as against but $69.33 in 1901. Fortunately, for the Post Office Department railway mail pay moved in the opposite direction. Had it merely remained stationary, in its relation to receipts, the mail pay of 1911 would have been $81,307,323 or $30,724,200 more than it actually was. The postal deficit never amounted to more than twenty-one or twenty-two millions and the Post Office De- partment never admitted as much as eighteen millions. The table next to follow merits more than ordinary attention. It serves, at once, to illustrate with marked clearness (first) the re- ductions in railway mail pay, exclusive of payments on account of postal cars, due to (a) the change in the divisor and (b) the statu- tory reductions of March 2, 1907, and May 12, 1910, and (second) the reductions which, without any changes in the law or in the method of its application, result from the progressively decreasing sliding scale of payment. This natural downward movement is illustrated both with reference to the old divisor and rates and with regard to the rates and the divisor now in force. In considering the table it is necessary to remember that ^the principle of adjustment crystallized in the law of 1873 has never been modified although the rates have been several times reduced, the application of the sliding scale of pay- ment has been extended and the method of applying the law has been changed so as to j)roduce a further reduction. This principle of progressive reduction with augmented volume of service was applied at the outset, and is still applied, by means of naming a series of specific rates for a series of specific services, each successive rate show- ing a lower average per unit of service than the rate named for the next lower volume of service that is specified. After the maximum service so specified is attained the law further specifies a still lower rate to be applied to each additional two thousand pounds in the average weight carried daily over the entire route. It is obvious that under this plan increasing service produces a progressive lowering of the average rate and that the limit of this downward movement is fixed by the rate applied to the final increment. Originally this final rate was applied to each, two thousand pounds in excess of five thou- sand pounds of average daily weight but since July 1, 1907, under the law of March 2, of that year, a further reduction has been applied to the excess over forty-eight thousand pounds of daily weight. Begin- ning in 1876 (Act of July 12, 1876), routes or parts of routes, the construction of which was aided by Congressional grants of land, have received but eighty per cent of the amounts paid for the same services when rendered by other routes. Prior to July 1, 1907, the 67 rate for each two thousand pounds in excess of five thousand pounds was $'il.37 per mile per annum, or 6.827 cents per ton per mile for other than land-grant routes and $17.10 per mile per annum or 5.463 cents per ton per mile for land-grant routes. The present rates on the excess over five thousand pounds, up to a total of forty-eight thousand pounds, are five per cent lower, that is to say, $20.30 per mile per annum or 5.562 cents per ton per mile for other than land- grant routes or $16.24 per mile per annum or 4.451 per ton per mile for land-grant routes. Beyond forty-eight thousand pounds the Act of March 2, 1907, now in force, provides rates of $19.24 per mile per annum or 5.271 cents per ton per mile for each increment of two thousand pounds for other than land-grant routes and, as modified by the amendment of May 12, 1910, $15.39 per mile per annum oi 4.216 ceiits per ton per mile for land-grant routes. In calculating the averages per ton per mile stated in this paragraph proper allow- ance has been made for the fact that under the Postmaster-General's Order No. 412, the divisor order, a route has annually to carry an average of 365 tons per mile of its length to obtain an average daily weight of two thousand pounds while prior to 1907 the same average daily weight represented an average annual service of 313 tons per mile of route. The reduction thus apj^lied to the excess over forty- eight thousand pounds average daily weight, as indicated by these average rates per ton per mile, amounts to 22.79 per cent for other than land-grant routes and to 22.83 per cent for land-grant routes. An important consequence of this scheme of payment is that, of itself, it should enable the Post Office Department to show a decreasing ratio of exj)enses to receipts resulting from the progressive expansion in the volume of the mails. Postage rates have not been diminished as postal business has increased and hence the average receipts of the postal service, per unit of business, have remained constant while the plan of payment for railway transportation, as has been seen, provides a steadily decreasing expense per unit for the element of cost represented by railway facilities and services. An understanding of the manner in which the rates are applied is also necessary to a complete comprehension of the table. Thus the minimum rates nominally applicable to an average daily weight of two hundred pounds, are, in practice applied whenever the average is 211 pounds or less because no account is taken of an increment of weight that would not have been sufficient, before the reductions of 1876 and 1878, to warrant an additional paj^ment of one dollar. At present this minimum rate (for other than land-grant routes) is $42.75 and the additional sum of 85.5 cents is paid for each twelve pounds above two hundred pounds of average daily weight, up to five hundred pounds 68 69 Average daily weiarht paid for. in pounds With old divisor 200 211 246 300 400 5110 510 1100 1105 700 800 900 1.000 1.019 I.ISH 1,250 1.500 1.519 1.T50 1.772 2.000 2.059 2.402 2.500 3,000 Witi) new divisor under Postmaster General's Order No. 412 Pay per milo per Averages per ton per mile, in cents Other than land-grant routes 171 181 211 257 343 429 445 514 519 soil nsr 771 857 S7S l.OIS 1.07! 1,2S0 1.302 l.SOil 1.519 i.71-1 1 .7115 2.059 2.143 2.571 $42.76 42.75 45..-.1 49.59 50.43 G4.12 114.12 118.40 (18.40 72.07 70.95 81.22 85.50 .85.50 93.19 95.70 lOn.87 100.87 117.13 1 1 7.99 1 28.25 128.25 133.38 135.09 141.93 On and after July 1, 1907 S42.75 52.15 ."js.itn 59..sr, 04.12 IH.12 08.40 71.82 75.24 78.00 79.51 85.60 .88.00 97.47 9.S.:i2 100.87 100.87 11.5.42 117.99 12.S.25 129.91 135.94 Land-grant routes Other than land-grant routes Land-grant routes Prior to July 1, 1907 1.34.20 34.20 51.72 54.72 .58.13 111.97 08.40 08.40 .V5.50 85..5II 93.70 94.39 102.00 102.00 1IM1.70 108.07 113.54 .534.20 34.20 31.20 41.72 47.19 47.88 51.30 51. .30 54.72 57.15 (111. 19 02.92 03.01 0,8,-19 70,11 77.97 70.00 85.50 85.50 94 39 102.00 103.90 1118,75 ,1134.20 31.20 34.20 30.93 41.72 47.19 47.8H 51.30 51 ,30 •54,72 57.45 00,19 02.92 63.01 68,40 70.14 78.00 .85 50 85 30 92 94 19 102 111 10,8.7 130,681 129,40 911,144 81,942 78,942 72,843 72,242 01.102 57,004 54.033, 53.057 50.093 4V.951 44.909 42.708 42..55II 40.974 39,804 35.488 34,528 3,0,2,'iO 130.581 129.40 111.04 98.339 83.307 75.387 73.085 0.S.285 67.304 63.4:9 50.202 49.898 45.962 45.015 41.521 41.372 39.021 38.539 3G.S75 36.620 34.123 33.217 28.054 109.265 103.57 94.158 84.494 72.109 0; .5.59 03.1.59 58.275 57.793 53,063 49.109 40.127 43.700 42.925 40.075 39.157 30.417 36.977 34.213 .■14.0.39 32.78(1 31.844 28.389 27.022 24.183 109.26.5 103.57 88.833 78.658 00.645 00.307 58.948 51.033 54.1.81 49,950 45,887 42,733 40,204 39.919 30.769 36.008 33.214 33.099 31.219 30.833 29.408 29.295 27.298 20.571 23.163 109.265 1I13..57 00,045 00,.307 58.948 54.633 54.181 49.960 45,887 42,73:; 411.2111 :i9,;iiii 30,709 30.008 33,214 31.219 30.833 29.498 29.296 27.298 26.671 23.163 Reduction. prcwiBt rates compared with those in force prior to July 1. 1907. per cent None None 5.65 0,84 7.58 8.00 o.eo 0.2B 6.2B 5.S1 0.07 8.43 8.00 7.01 8.26 8.04 8.80 8.00 8.76 9.42 111.00 8.00 3.86 3.8(1 4.22 3,600 3,559 4,000 4,152 5.000 3.fMio 3,051 3,429 :i,559 4,286 149,62 149.62 1.50.40 1.58.17 171.00 141.93 142.78 147.91 149.02 100.74 119.70 119.70 120.54 130.,80 113,54 114,22 119,71 12,8,51 113,54 114,22 118.32 119.70 128.59 27.315 20.807 24.994 24.342 21.853 25.911 25.039 23.628 23.026 20.642 21 ..853 21.494 19.994 19,474 17.482 20.728 20.610 18.901 18.421 10.433 20.728 20.510 18.901 1.8.421 10.433 5.14 4.67 6.40 6.41 6.011 5.079 5.920 0.001 1 7,000 8.00O 4.353 5.079 6.143 6,000 6,857 171.00 180.40 181.20 192.37 202.03 101.59 171.00 171.81 180.74 189.67 130.80 144.32 145.00 153..89 102.10 129.27 13(1..8(l 137.44 144..59 151.73 129.27 136.,80 137.44 144.59 151.73 21.513 19.452 19.304 17.560 10.185 20.329 18.438 18.297 10.498 16.160 17.210 15,561 15.442 14.047 12,947 10.203 14.761 14.637 13.199 12.120 10.203 14.751 14.037 13.199 12.120 6.60 5.21 5.21 0.04 6.39 9.000 10.000 15.000 20,000 25,0110 30,000 35,000 40,000 45,000 48,103 50,000 50.120 75.111111 IIHI.IIIIII 125.000 150.000 20O.(XIO 250.(HI(l 3011.000 3.50.000 400.000 450,009 5011,(1011 550,000 7,714 8.571 12..S57 17.143 21.421 25.714 30.1 34.2,'<0 .3,S,.571 41,231 42,857 48.103 64,286 85.714 107.143 128.571 171,429 214.280 2,57,143 3(1(1,(1(1(1 342,857 386,714 428,571 471,429 213.75 224.01 277.87 330.,S8 384,75 437.76 491.02 544.63 59,8.50 030.99 651.51 717.34 919.12 1.180.83 1.4.53,50 1,720,20 2.2,54.(;,-l 2,7.89.(11 .■').40ll.,s,s 5.995.2(> 197.80 20i;.73 293.114 33.7.51 3S0.50 424,42 408.28 511.33 53.8.J4 007|7 703J19 969.49 1,1761:; 1,381.77 1,793,81 2,200.99 2,618,1 :: 3,031,41 3,443.45 3.855.48 4.267.T7 4.679.8 1 171.(10 ;i5(i 2(1 393 29 435 70 478.80 5(14 79 .521 21) 57:; .'<7 73;) 29 949.40 1.102 80 1..-170 2(1 1.803 70 2.231 20 2.058 70 ;!.(i.s(; 20 158.24 1(i;5..-18 20(1.48 234.91 27(1.00 304.44 339..53 374.02 409.00 4:111.51 444.15 807 54 991 04 1.173 74 1,540,84 1.907 04 2.27:' 14 2,041 :;4 168,24 1 o5.:is 21111.48 2:14.91 2711.00 :104,44 409.0(1 430.51 444.15 4.85.74 filll.,SO 3.513.70 3.941.20 4,.308.70 4.790.20 :;. ;.n :i.'728.74 4.10,5.,S4 940,05 i,105.:-4 1 ,4.34,53 1.706.11 2.094.:t0 2,424.,88 2,754.07 3,084.20 3,413„84 3,743,0:1 15.170 14,314 1 1 .8:17 10..571 9.834 9.324 8,970 8.70(1 8.498 8.382 8.320 ,8,108 7,8:11 7,.584 7,430 7.328 7.203 7.128 7.079 7.04:1 7.010 6.995 14.043 10.675 9.382 8.626 S.106 7.748 7.481 7.201 T.148 7.095 0.91:1 6.601 6.195 0.012 6.SS0 5.731 6.639 6.570 6.534 5.501 6.475 5.464 5.437 12.141 1 1 .450 9.409 8.457 7.807 7,459 7,100 0.9011 6,799 0.705 6.661 6.534 6.204 0.007 5.944 5.802 5.703 5.703 5.063 6.034 6.013 6.696 5.583 11.235 10.66S 8.540 7.5(^1 0.901 0.4.84 0.199 5.9,84 5.8(18 ;5.719 5.531 5.:i21 5.100 6.004 5.000 4,92:; 4.874 4.842 4.820 4.803 4.789 4.765 11.236 10.568 8.540 7.505 6.901 0.4,84 0.199 5.084 6.808 6.719 5.676 5.631 5.204 4.957 4.806 4.709 4.683 4.511 4.461 4.427 4.:W9 4.379 4.363 4.349 7.46 S.10 9.81 11.25 12.29 13.07 13.07 14.02 14.50 14.71 14.78 10.36 10.98 18.31 19.08 19.68 20.44 20.90 21.19 21.42 21.60 21.74 21.85 21.94 69A u'hen another rate is applied, but nothing is paid for any fraction of twelve pounds. Under this system the rate for 211 pounds average daily weight is $-12.75 while for 212 pounds it is $-13.60. In the same manner the five hundred pounds rate is extended to apply to 519 pounds, the 1,0UU pounds rate to 1U19 pounds, the 1500 pounds rate to 1519 pounds, the 2000 pounds rate to 2059 pounds, the 3500 pounds rate to 3559 pounds, the 5000 pounds rate to 5079 pounds, the -18000 pounds rate to -18103.95 pounds. It is this plan of applying the rates which produces the notable fluctuations in the percentages of re- ductions as disclosed in the upper half of the last column. The table will be found on the insert, paged as 69A. The headings in the table referred to indicate the significance of the figures it contains but they deserve all the emphasis that can be given. Each horizontal line in the table represents the results ac- cruing, or that formerly would have accrued, to a railway route for an actual service measured, so far as these postal services can be measured in terms of weight and distance, by the figure at the ex- treme left of that line, in the first column. Thus, the last line repre- sents an annual service equivalent to carrying 86,075 tons over each mile of a particular route. Prior to July 1, 1907, the effective date of Postmaster-General's Order No. 412, this volume of service would have resulted in stating the average daily weight on which payment is calculated as 550,000 pounds; now it gives an average daily weight one-seventh less or 471,429 pounds. This change in the method of applying the statute, alone and had there been no other change adverse to the railways atfected, would have reduced the pay of a route hav- ing this volume of service no less than $839.61 for each mile of its length. But there have been additional reductions so that it appears that if this volume of mail is now carried on other than a land-grant route the annual ]^ay per mile is $4,679.81 or $1,315.45 less than $5,995.26, which would have been the rate prior to July 1, 1907. This is a reduction of 21.94 per cent, as stated in the last column at the right of this line. Similarly, if the route were a land-grant route its pay would have been $4,796.20 per mile prior to July 1, 1907, and now would be $3,743.03 per mile, also a reduction of 21.94 per cent. Prior to July 1, 1907, the pay of this route, if not a land-grant route, would have been at the rate of 6.965 cents per ton per mile, it would now be at the rate of 5.437 cents per ton per mile. The correspond- ing ton-mile rates for land-grant routes are 5.572 cents and 4.349 cents, respectively. These average ton-mile rates deserve especial attention. Con- sidering the fifth column from the right, which contains the standard rates now in force, it shows that for the lowest weight stated the 69 Average rate per ton per mile in cents z/soa 39/^5 46950. S477i 704XS. 7aR:so. 70 rate is considerably over one doilar per ton per mile and that the snbse- qnent decrease in the average is very rapid nntil it approaches the lower end of the colnmn when, although the decrease continues, the rate of decrease is more moderate. Of course the highest rates are in recognition of the character and cost of service on routes having very small quantities of mail and represent a small aggregate of railway mail pay and a relatively meagre portion of the total paid to the railway's for mail services and facilities. The average daily weight tends on all routes, or at least on nearly all routes, to become greater as an incident to the development of the country, its growth in popu- lation, industry and wealth, and the progressive increase in the utiliza- tion of postal facilities. Hence in the normal course, every route tends to pass from a class having higher pay per ton mile to a class having lower pay and to continue downward, each route tlius con- stantly approaching the minimum although the rate of approach varies greatly with different routes. Commenting upon this fact, in his report to the Joint Postal Commission, in 1900, Professor Henry C. Adams assigned it as ground for the assertion that "the law of 1873 is drawn in harmony with the fundamental law of transportation"' which, he declared, is that "a reduction in rates is a normal result of an extension of traffic" and, he said, "justifies a relatively more rapid reduction in the rate per ton per mile for a route whose traffic in- creases, let U8 say, from fifty pounds to one thousand pounds dail}', than for a route whose traffic increases from five thousand pounds to ten thousand, or fifty thousand to one liundred thousand pounds."* The percentages of reduction, in the last column of the table are very significant. Those corresponding to annual service of less than to 939 tons per average mile of route represent reductions, effected by means of Order No. 412, only, for below this volume of service the statutory change of 1907 had no effect. The curious fluctuations in the percentages of the reductions so produced, ranging from 3.85 per cent to 10.00 per cent and the highest percentage representing a smaller volume of service than the lowest percentage, indicate the com- plicated nature of the change, apparently so simple, brought about by that order. Beyond 939 tons the percentages progress steadily until they reach the maximum, 21.94 per cent, in the last line, which represents the heaviest mail movement. The figures in the last foregoing table are general in their sig- nificance. The table which follows shows precisely what has hap- pened to particular routes, taking for illustrative purposes, those routes, with a few exceptions, on which mail was Aveighed in the years 1910 or 1911 and having, under the present mode of calculation, an average * Fifty-sixth Congress, Document No. 89, Part 2, pp. 204-5. 71 daily weight in excess of twenty thousand pounds. All routes of this class are included except a few having lap service or in which other extraordinary conditions might have been thought to impair the value of the comparisons. (See the table on the inserts 73A and 72B.) The table just indicated rej^reseuts sixty-three routes on which mail Avas weighed during the years 1910 and 1911 with a total length of 17,645.72 miles. Although this represents but 7.88 per cent in length of the railway mail routes of the country, these routes receive, under present adjustments, $11,276,600.8-!: per annum of railway mail pay, exclusive of any pay for postal cars which they may receive, or 30.92 per cent of the total transportation pay of all the railway routes. Their present proportion of the transportation pay of the third and fourth weighing sections, in which weighing took place in 1910 and 1911, is 41.99. Other routes, weighed in those years and having average daily weights of twenty thousand pounds or more, but excluded from the table because, for one reason or another, they might have been thought to impair the accuracT of the comparisons, receive, under the adjust- ments of those years. $4,552,414.49 per annum. Adding this sum to the total of present transportation pay of the routes in the table gives $18,829,015.33 which is 55.38 per cent of the transportation pay of the third and fourth weighing sections. These data serve to demon- strate the importance of the fact, disclosed by the table, that the average reduction in transportation pay alone for these sixty- three heavy routes, since the close of the first half of the calendar year 1907, is 18.97 per cent. A tabulation of the postal car pay for these routes would show a still greater rate of reduction. COXCLUSIOX DRAWX FEOM THESE REDLX'TIOXS. This report does not assume to base any final conclusion as to the wisdom or justice of a further reduction upon the fact that within less than five 3'ears railway mail pay has been thus heavily reduced. Such a record as that disclosed in the foregoing pages does, however, create a presumption that is strongly adverse to any plan which would immediately require further large sacrifices of revenue on the part of the railway instrumentalities of the postal service. When this presumption has been supplemented by proof, whicli will presently be adduced (see pages 74-5), that the railways were not overpaid prior to July 1, 1907. the gross injustice of adding to the series of reductions begun on that date and still in progress must be conceded. It is now generally recog- nized that present railway revenues are, at the most, but barely adequate to provide for the requirements of increased wages, higher prices of 72 materials and supplies, progressively augmented standards of service and the reasonable return upon investments that is necessary to attract the .jj.,1 correctly tabulated nor forwarded to Congress the original re- ports which he obtained from the railroads and (b) in so far as comparisons can be made with the figures which he did submit, they do not warrant but are destructive to the conclusions and recommendations which he makes and tend strongly to demon- 73 Averagra daily weiffht Under Order No. 412 As it would liave been prior to July 1, 1907. for same service Transportation pay per mile per annum Now in force As it would have been prior to July 1. \WJ, for same service Transportation pay for route per annum As it would have been prior to July 1. 1907, 17G022 145018 i:il023 131024 163014 173001 131005 131047 155001 141058 171010 135130 131028 13303S 131045 150007 170053 170014 101013 135010 150008 157002 167014 168001 13:!010 167021 167029 176042 131016 133012 167003 150095 135017 Davis : Tehama. Cal Burlington, Iowa ; St, Louis, Mo Toledo : Cincinnati. Ohio Hamilton. Ohio : Indianapolis, Ind Miles City. Montana; Spokane, Washington Portland : Ashland, Oregon Cleveland, Ohio ; Leavittsburg, Ohio Chicago, Ohio ; Chicago, Illinois Kansas Cit,v, Missouri: Denver, Colorado St, Paul, Minnesota ; Hanliinson, North Dalsota Blaine ; Seattle, Wash Bernice ; Colehour. Illinois Parkersburg, West Virginia ; Cincinnati, Ohio Indianapolis ; Monon, Ind Toledo, Ohio ; Elkhart, Indiana Long\'iew ; San Antonio. Texas Barstow ; Los Angeles. Cal Los Angeles, California ; Yuma, Arizona Fargo, North Dakota ; Miles Cit,v, Montana Galeshurg : Quincy, Illinois Te.xarkana. Arkansas; Fort Worth, Texas Omaha, Nebraska; Denver, Colorado El Paso, Texas ; Carrizozo, New Mexico Yuma, Arizona ; EI Paso, Texas Cincinnati, Ohio ; East St, Louis, Illinois Santa Rosa ; Carrizozo, New Mexico Tucumcari ; Satita Rosa. New Mexico Barstow ; Needles. Cal Gahen, Ohio ; Granite City, Illinois Evansville (L, & N. Depot 1 ; Terre Haute, Indiana, Isleta, New Mexico; Needles, California Texlioma, Oklalioma ; Stale Line between Texas and New Mexico Chicago ; East SI. Louis. Illinois Southern Pacific Company Cliicago, Burlington & Quincy Railroad .,. Cincinnati, Hamilton & Dayton Railway Cincinnati. Hamilton & Dayton Railw.ay Northern Pacific Railway Southern Pacific Company Erie Railroad Baltimore & Ohio Railroad Union Pacific Railroad Minneapolis, St. Paul & Sault Ste. Marie Railway... Great Northern Railway Pennsylvania Company Baltimore & Ohio Southwestern Railroad Chicago, Indianapolis & Louisville Railway Lake Shore & Michigan Southern Railway International and Great Northern Railroad .Uchison, Topeka & Santa Fe Railway Southern Pacific Conipan.\- Northern Pacific Cniupany ' (.'liicago. Bill liiiL'loii & t^uincy Railroad Texas & Pacific Railway Chicago. Burlington & Quincy Railroad El Paso & Southwestern Conipan.v Southern Pacific Company Baltimore & Ohio Southwcstci'n Railroad El Paso & Southwestern Company Chicago, Rock Island & EI Paso Railway Atchison, Topeka & Santa Fe Railway Cleveland, Cincinnati, Chicago & St, Louis Railway. Chicago & Eastern Illinois Railroad .\tchlson. Topeka & Santa Fe Railway Chicago. Rock Island & Gulf Railway t'liii'ago & Alton Railroad. 111.83 218.01 202.30 !)8.SK) 762.32 .342.71 49.30 278.61 630.76 217,011 119.61 9.16 195.25 !15..34 142.44 342,06 141.23 251.68 40.'>.3:l 99.76 246.10 537.37 145.4:1 564.29 3:i5.lj6 128.48 50.37 169.07 +48.05 110.04 56,5.17 92,35 2.80.68 20,465 20,921 21,096 21,135 21.506 21,735 21,758 21,821 21,920 21,950 23,123 23,831 24,854 24.915 25.122 27.,344 27,494 28,120 28.831 29,568 29,9.35 30,252 30,918 31,183 31.,357 31,738 32.287 32.444 .32,502 32,844 33„327 33.708 36.065 23,876 24,408 24,811 24.657 2.5.089 26,357 25,384 25,458 25,673 25,808 26,977 27,803 28,996 29,087 29,306 31,901 :12,076 32,807 33,636 34,496 .34.924 35.294 38.071 36.380 36.583 37,028 37,868 37,851 ,37,919 38,318 38,881 39,326 42,004 9:327.76 332.03 .3:m.26 334.26 270.65 .140.71 340.76 .341.57 :!42..38 .336.05 354.56 361.87 ' 372.43 372.43 374.87 397.01 399.24 .324.59 :129.79 42ll.:;6 423.60 426.85 430.79 434,04 438,23 4:',9.72 445,30 :!59.6S 449.60 4.53.66 366.82 469..30 486.15 $.371.92 .377.91 380.47 380.47 308.48 .388,17 .388,17 .389.02 .390.73 390.73 405.27 414.67 42C.04 427.50 4.30.06 458.28 459.99 .374,14 380.98 485.64 490.77 494.19 502.74 500.16 507.87 513.1X1 519.84 417.24 522.40 .526.88 426.13 537.79 ,566.86 $36,663,40 72,150.77 67,620.79 :B,08S.39 200,321,90 116,764.72 16,830,13 95.164.81 219,041,02 72,952,22 42,373.40 3,314.72 72.716.96 ,35,507.47 53.396.48 136,006,47 58,384.66 81,602,81 16,3,364.88 41,935.11 104,247.96 220,378.38 62,649,17 244,922,^7 147.096.28 56.494.71 26,437.68 60.811.09 201.443.28 50,320,04 207,316.65 12,416.70 136,452.58 $41,691.81 81.972.46 76.989.08 37.662.73 236,160.47 133,029.74 19.171.72 108.384.86 249.973.42 84,823.58 48.433.82 3.798.38 a3.301.46 40.757.85 61.257.75 166.769.28 84.964.39 94.163.56 188.710.82 48.447.46 120.778.50 265,562.88 73,113,48 285.621.03 170.471.64 65,010.24 :!0,862.00 70,642.77 234.061.32 68,429,88 240,835.89 40,664,91 159.106.26 (Table concluded on next page). 72 A daily weight in excess of twenty tliousand pounfls. All routes of this class are included except a few having lap service or in which other extraordinary conditions might have been thought to impair the value of tlie comparisons. (See the table on the inserts 72A and 72B.) The table just indicated represents sixty-three routes on wliicli mail was weighed during the years 1310 and 1911 with a total lengtli of lT.(i45.~8 miles. Altliough this represents but 7.88 per cent in length of the railway mail routes of the country, these routes receive, under present adjustments, $14.2T(i.fiOO.S-l per annum of railway mail pay, exclusive of any pay for postal cars which tliey may receive, or 3f>.i)-J per cent of tlie total transportation pay of all the railway routes. Tlieir present proportion of tlie transportation pay of the third and fourtli weighing sections, in which weighing took place in 1910 and 1911, is 41.99. Other routes, weighed in those years and having average daily weiglits of twenty thousand pounds or more, but excluded from the table because, for one reason or another, they miglit have been thought to impair the accuracy of the comparisons, receive, under the adjust- ments of those years, .$4,5.52.414.49 per annum. Adding this s\nn to the total of present transportation pay of tlie routes in the table gives $18,829,015.33 which is 55.38 per cent of the transportation pay of the tliird and fourth weigliing sections. These data serve to demon- strate tlie importance of tlie fact, disclosed by the table, that the average reduction in transportation pay alone for these sixty- three heavy routes, since the close of the first half of the calendar year 1907, is 18.97 per cent. A tabulation of the postal car pay for these routes would show a still greater rate of reduction. J. CONCLUSION DRAWN FEOil THE8K REDUCTIONS. This report does not assume to base any final conclusion as to tlie wisdom or justice of a further reduction upon tlie fact that within less than five years railway mail pay has been thus heavily reduceil Such a record as that disclosed in the foregoing pages does, however, create a presumption that is .strongly adverse to any plan which would immediately require furtlier large sacrifices of revenue on the part of the railway instrumentalities of the postal service. When this presumption has been supplemented by proof, wliicli will presently be adduced (see pages 74-5), that tlie railways were not overpaid prior to July 1, 1907. the gross injustice of adding to the series of reductions begun on that date and still in progress must be conceded. It is now generally recog- nized that present railway revenues are, at the most, but barely adequate to provide for the requirements of increased wages, higher prices of 1 Bounds All routes of this daily weight in excess of f'-f*-'' .^^^Tla^ ser vice or in which other class are in_cluded except a few haung lap lias ijctrii oui^iyn-iin,. — -,. I T ^. . . , - pages 74-5), tliat the railways were not overpaid prior to July 1, lim'. the gross injustice of adding to the series of reductions hegun on that date and still in progress must be conceded. It is now generally recog- nized that present railway revenues are, at the most, but barely adequate to provide for the requirements of increased wages, higher prices ot (Tjible (•(included from previous pnge.) AveraEe daily weight Transportation pay per mile per annum Under Order No. 412 As it would iiave been prior to July 1, 1907, for same | service i Iluutingtou ; Portland, Oregon La Juula, Colorado; Albuquerque. New Mexico Chicago, Illinois; Terre Haute, Indiana St. Louis ; Kansas City, Mo Poeatello, Idaho ; Huntington, Oregon Toledo. Ohio ; Granite City, Illinois Chicago. Illinois ; Milwaukee, Wisconsin Granger, Wyoming ; Poeatello, Idaho Spokane ; Everett, Washington Chicago, Illinois; Kansas City, Missouri Chicag*. Illinois ; Davenport, Iowa Fargo. North Dakota ; Havre, Montana Willows ; Madison Tower, Illinois Chicago (Park Row Station); Carbondale, 111 Cleveland ; Cincinnati, Ohio Havre, Montana ; Spokane. Washington Casselton ; Devils Lake, North Dakota San Francisco (Ferry Station), Cal. ; Ogden, Utah. Columbus ; Cincinnati, Ohio Xenia ; New Paris. Ohio St. Louis (Union Station), Mo.; Granite City. III.. Union Pacific Transfer. Iowa; Ogden, Utah Minneapolis. Minnesota; La Cro-sse, Wisconsin Columbus, Ohio; Indianapolis, Indhma Milwaukee ; La Crosse. Wis Pittsburgh, Pennsylvania; Chicago, Illinois Indianai)olis, Indiana; East St. Louis. Illinois Cliicago, Illinois ; Burlington, Iowa Chicago. Illinois ; Milwaukee. Wisconsin RulTtilo, New York ; Chicago, Illinois Total ~ Oregon Railroad & Navigation Company Atchison. Topeka & Santa Fe Railway Chicago & Eastern Illinois Railroad I Wabash Railroad Oregon Short Line Railroad , , Wabash Railroad Chicago & Northwestern Railway Oregon Short Line Railroad Groat Nortlii'i II Railway Atchison, Topeka & Santa Fe Railway Chicago, Rock Inland & Paciiic Railway Great Northern Railway. Vfindalia Railroad Illinois Central Railroad Cleveland, Chicinnati. Chicago & St. Louis Railway.... Great Northern Railway j Great Northern Railway ; Southern Pacific Company I'iftsburgh. Cincinnati. Chicago & St. Louis Railway... Pittsburi-'h. Cincinnati. Chicago & St. Louis Railway... St. Louis Merchants Bridge Terminal Ry. Co Union Pacific Railroad Chicago, Milwaukee & St. Paul Railroad I'ittsliurgh. (;ineinnati, Chicago & St. Louis Railway... Chicago, Milwaukee & St. Paul Railroad Pennsylvania Company ^'andalia Riiilroad ■ , . . . r'liicago, Burlington & Quincy Railrond Chicago. Milwaukee & St. Paul Railroad Lake Shore & Michigan Southern Railway 401.1)1 .30,771 42,899 If493.46 348.37 38,000 45,453 515.39 177.80 41,080 48,627 543.01 270.49 41,812 48.781 .-.40.1 ;7 326.88 42,880 50,027 r..j.-..11i 428.31 43,487 30,735 5.".0.il,s 85.00 44,170 51,532 riOS.l'.i 214.70 47,498 55,414 {■,i)2,::ii 305.98 50,133 58,488 (127.41 454.00 5.3,948 02,930 iiO;*..o.". 182.84 54,371 63,433 007. .S!» 711.99 5B,4b7 05,866 688.13 3.37 59,015 08,851 712.37 306.80 59,806 09,774 675.69 203.18 59,824 09,795 720..37 531.07 01,099 71,282 732.81 126.47 71,421 83,324 831.81 783.77 93,613 109,215 1.045.43 119.74 94,620 110,397 1.053.i;9 52.12 1.30,978 152,808 1,405.01 9.BS 144,3r5 108,437 1,530.72 993.78 147,210 171,752 1,560.93 140.80 180,205 210,239 1,737,8-3 187.99 164,037 191,376 1.723.09 197.00 201,244 234.785 1.II29..3:: 468.43 211,644 240,918 2,180.01 238.22 215,.585 251,510 2,219.09 205..57 226,784 204,581 2,.3ir,.71 85.39 2.33,903 272,887 2.244..33 522.18 428,833 500,072 4,noo,r,s 1 7.045.T2 .^SMll.nT As it V ul Apartment cars The foregoing shows that the railways receive for the use of a car, which in every relation is to them the full equivalent at least of a standard passenger coach, only about the fares of two and one-half pas- 82 sengers at the low rate of two cents per mile. But even if they were paid one-third as much per mile run hy apartment cars as they are per mile run by full postal cars the 219,372,356 miles run by the former, for which they now receive nothing, would have produced $3,685,455.58 gross revenue in 1911. In Document No. 105 (Table 4, p. 65) the Postmaster-General gives the following figures of car-foot mileage which are exclusive of all space that he defines as '^storage space" and "dead head" space. Kind of Car Car-foot miles during November, 1909 Apartment cars 430,944.968.10 Postal cars 364,633,119.64 Total 795,578,087.74 It has already been shown (see pages 19-33) that these figures are too low but, leaving that fact aside, they show that the space utilized in apartment cars amounted to 84.61 per cent of the space utilized in full postal cars. There can be no valid reason why the railways ought not to be paid as much for a car-foot mile, placed at the disposal of and utilized for the postal service, in an apartment car as for similar space in a full postal car. If they were so paid they would receive for apartment cars, on the basis of the Postmaster-General's figures, 84.61 per cent of $4,737,788.75, their postal car pay, or $4,008,643.06. Neither of these figures is offered as indicating the precise rate of pay- ment for apartment cars which would be reasonable and just but both serve approximately to suggest the lowest possible limit of the minimum payment which substantial justice would permit. In this connection, it must not be overlooked, that the furnishing of traveling post offices is not a natural function of railway carriers, nor one that is undertaken by them without reluctance. These cars, whether full postal cars or apartment cars, are not essential to the transporta- tion service which is the normal purpose for which railways exist, but they are required by the Post Office Department in order that the labor of distribution may be performed while the mails are undergoing trans- portation. This is an obligation not assumed with relation to any other element of railway traffics If the Department could evolve a different method of serving tlie public, the railways would welcome relief from the requirement to supply traveling post of^ces of any sort; would will- ingly surrender the meagre compensation now received for the fraction of these offices wliich is paid for, and would gladly confine their mnil services to those of transportation only. P)ut if such cars are nec^es- sary in order that the public may receive the service which it demands, the railways ought to be adequately and fairly paid for all of them. 83 G. THE WEIGHT BASIS OF RAILWAY MAIL PAY SHOULD BE ASCERTAINED ANNUALLY. There is no prcteuse^ under the present system, that the railways are paid for all the mails which they carry. The weight basis is ascer- tained only once in four years and the weight resulting from these weighings of one A^ear becomes the basis of payment for a period of four years beginning with the fiscal year which commences next after the year of the weighing. But the weight of mail carried never remains stationary, it is the exception that on any important route it does not increase during the whole four year period. This is shown by the table on page 84A which compares the results of the weighings of 1907 and 1011 on the first forty routes, shown in the reports for those years of the Second Assistant Postmaster-General, for which comparable data are given. It should be noted that tbe routes illustrated in this table are forty of tlio first forty-three routes shoAvn in the annual report for 1907, it having been necessary to omit routes 131011, lolOlS and 131026 as the termini of 131011 and 131018 were changed between 1907 and 1911 and 131020 was vacant in the earlier year. Of the forty routes shown twenty-four, or a little more than half, show in- creases and sixteen show decreases. But from July 1, 1907 to June 30, 1911, inclusive, all payments were adjusted upon the basis of the weights of 1907 so that during the entire period of four years whatever weights may liave been carried there was no change in compensation. If there is a decrease in volume during the quadrennial period this sys- tem is unfair to the Government, if there is an increase it is unfair to the railways, but owing to the increase in National wealth, in business activity and in population, it has always happened that the balance of unfairness has operated to produce a loss to the railways. The only rectification of this situation reconcilable with justice is to provide for more frequent, tliat is to say for annual weighings and readjustments of pay. No conmum carrier would he required or even permitted to contract to transport tlie entire oul]nil of any private enterprise during a four-years period for a fixed aninial sum regardless of diminution or expansion in its volume. A contract covering so long a period at an unchanging aggregate payment is indefensible from every point of view anil unjust alike to the public and to the railways. 84 :.D BE 13100] 131002 13100E 13100-^ 131005 131006 131007 131008 131009 131010 131012 131013 131014 131015 131016 131017 131019 131020 131021 131022 131023 131024 131025 131027 131028 131029 4310SO 131031 131032 131033 131034 131035 131036 131037 131038 131039 131040 131041 131042 131043 as pnn- was not II eighty nt extra he post- railway iron, in require- er mails nd it is ffice De- that the r routes, for the the least iy either ;r routes force to iscussed, extraor- ;r which compen- ender. tmaster- Listice or 1 princi- reported ive data the rail- facilitios for the mails (see pages 9-16) ; (b) cost of furnishing a large volinne of personal transportation, not in postal cars, to officers and representa- 85 Namb«r et Route 131001 131002 131003 131004 131005 131006 131007 13100S 131009 131010 131012 131013 131014 131015 131016 131017 131019 131020 131021 131022 131023 131024 131025 131027 131028 131029 •J31030 131031 131032 131033 131034 131035 131036 131037 131038 131039 131040 131041 131042 131043 Average dslly weight, in poundi 190.07 12,584 46S.43 155.503 46.99 1,721 144.59 2.655 49.35 18,623 148.38 9.784 80.10 4,081 32.26 577 116.57 1,287 28.85 881 131.00 3,009 263.34 50,803 119.74 65,754 188.06 133,211 448.59 34,763 21.91 1,158 428.32 43,694 415.49 1,261 15.45 117 47.08 1,286 202.89 21,708 99.04 26,046 300.87 16,821 19.20 1,012 195.35 30,631 148.80 1,310 331.17 574 22.14 169 190.92 217,029 18.04 388 316.18 11,574 30.14 46 76.82 3,628 83.95 946 44.04 634 95.59 545 110.89 1,345 162.41 2,159 50.00 528 84.77 8,256 1911 ~ 11,802^ 211,644 1,483 4,776 21,758 12,448 5,497 437 1,641 584 4,283 59.824 94,620 164,037 32,502 1,057 43.407 1,479 129 1,982 21,093 21,135 20,029 5,876 24,854 1,208 474 154 295,564 397 12,048 57 3,801 404 952 642 1,240 1,918 586 13,729 84A 2,121 3,135 2,664 816 354 1.274 8,931 28,872 30,826 218 12 3,208 4,864 78,535 9 474 11 173 .sis 97 58 5,473 79.89 10.83 27.23 17.43 42.34 17.55 43.91 23.14 17.29 10.26 54.12 19.07 480.63 36.19 2.32 4.10 23.91 4.77 50.16 17.80 782 238 140 297 2,261 101 287 613 4,911 5,777 102 100 15 10.98 66.29 105 241 >i' the nuiils (soe pages H-in) ; (ii) cn.si df furiii.sliiiif,' n large voIiutk r personal trau.sportation, not in postal cans, to officers and representa H. TEEMINAL SERVICES ON LIGHT ROUTES SHOULD BE PAID FOR.. Two or three generations ago, when mail transportation was prin- cipally by stages, and railways were in their early infancy, it was not considered an hardship that, where the stage terminal was within eighty rods of a post-office, the stage should be asked to make a sufficient extra journey or detour to take up and deliver the mail pouches at the post- office. It is a curious consequence of the feeble beginnings of the railway industry that when the mails began to be carried over tracks of iron, in vehicles which could not deviate from their rights of way, this require- ment was extended and the railway required to receive and deliver mails at all post-offices located within eighty rods of any station. And it is • irresistible proof of the persistent force with which the Post-Office De- partment has continually imposed its will upon the railways that the practice still continues although in many instances, on the lighter routes, the cost of performing this service exceeds the entire mail pay for the route. This abuse is most frequent on those railways which are the least adequately paid and it would be but reasonable to ask that they either be relieved of this burden or that tlic compensation of the lighter routes be readjusted on a basis enough liigher than that now in force to eliminate these heavy losses. V. CONCLUSION. This report of the Committee on Railway ]\Iail Pay has discussed, as fully as a proper regard for the time of its members and the extraor- dinary importance of the subject warrant, the conditions under which (he railways serve as auxiliaries to the postal service and their compen- sation for the indispensable services and facilities which they render. It has been shown that the recommendations of the Postmaster- General contained in Document No. 105, are not founded in justice or based upon accurate statements of fact or sound transportation princi- ples. It lias been shown llial, in Hie course of Ihe investigation reported in that Document, the Postmaster-General collected illuminative data which he finally withheld from Congress as to (a) cost to the rail- ways of supplying extraordinary station services and terminal facilities for (lie mails (see pages 9-1 H) ; (b) cost of furnishing a large volume of personal transportation, not in postal cars, to officers and representa- 85 tives of the Post Office Department (see pages 16-18) ; and (c) relative returns from passenger, express and mail traffic (see pages 18-19). It has been shown that the most fundamental data as to train space occupied, respectively, by the mails and by passengers, accurately re- ported by the railways, were arbitrarily changed and modified for the report so as greatly to diminish the former and to augment the latter and that these changes operated so as to diminish the estimated cost of the mail service (see pages 19-33). Further, it has been shown that tlic data used as the basis of Docu- ment 'No. 105, relating to the single month of November, represent a month in which passenger expenses are actually far below the average or normal level and are abnormally low as compared with freight ex- penses (see pages 43-50). And, still further, it has been shown that railway mail pay has ' been reduced fully twenty per cent within the period of about ten years which began with the declaration of the Joint Commission to Investi- gate, the Postal Service that it was not excessive while during the same period substantially all the expenses of rendering these postal services have greatly increased i^vv unit of sudi services (see pages 50-77) and, Finally, that railway mail pay is plainly and demonstrably inade- quate at the present time (see pages 77-81). And reasonable measures for providing more adequate and reason- able compensation have been pointed out (see pages 82-85). As a final word, the Committee on Eailway Mail Pay urges that, in justice to the great interests which it represents, in justice to mil- lions of railway emjiloyees whose arduous and responsible services are not over-paid, in justice to hundreds of thousands of depositors in sav- ings banks and owners of policies of insurance and frugal investors everywhere, in justice to millions of workers in thousands of industrial enterprises whose prosperity depends upon services which only solvent railways can suitably render, that, if any doubt remains, as to the pro- priety of the relief herein recommended, an effort be made to have the voluminous data in ilie possession of tbo Postmaster-General laid before Congress, io the end that the facts herein set forth may be fully substantiated. When those data are completely, accurately and fully tabulated, with such other facts as may be necessary to illuminate and explain them, no scintilla of doubt as to tlie urgent necessity of sub- stantial relief can remain. All of which is respectfully submitted. 86 APPENDIX A Grosa Receipts Atlantic Coast Line Baltimore & Ohio Boston & Maine Central of Georgia Chesapeake & Ohio Chicago & Northwestern Chicago, Burlington & Quincy Chicago, Indianapolis & Louisville Chicago, Milwaukee & St. Paul Chicago, Rock Island & Pacific Chicago, St. Paul. Minneapolis & Omaha . . . Cleveland, Cincinnati, Chicago & St. Louis. Colorado & Southern Delaware, Lackawanna & Western Denver & Rio Grande Erie Great Northern Illinois Central (4) International & Great Northern Lake Shore & Michigan Southern Lehigh Valle.v Louisville & Nashville Maine Central illchigan Central Minneapolis. St. Paul & Sault Ste. Marie .Missouri Pacific Nashville, Chattanooga & St, Louis New York Central New York. New Haven & Hartford Norfolk & Western Northern Pacific Oregon Railroad & Navigation Company Oregon Short Line Pennsylvania Company Pennsylvania Railroad Pere Marquette Philadelphia & Reading Philadelphia. Baltimore & Washitigton Pittsburgh. Cincinnati. Chicago & St. Louis, . St Louis, Iron Mountain & Southern Seaboard Air Line Southern Pacific Texas & Pacific Union Pacific Vaudalia Wabash $2,740,291..S5 7.351,675.33 3,748,625.98 1.117,426,72 2.f-.r.7.437.7S i;..'Hll.C81.6e 7.9.-,-.>.241..38 .".11:1.224.10 ...a.^i;.7.'-i2.24 .^.4(;7.7i)4.47 1,427.236.73 2,584,603.85 901.747.65 :'..232.699.29 2.1t7.nS.'i.e7 4.240.370.51 i;.l".,'i.404.96 6.247,758.24 875.607.60 4.092,945.97 v,302,219.Sl 4.540,696.51 7.''>5. 177.2s 2.526. 762.iin l,580,790.:i4 2,238,270.37 989,554.23 8,441,637.63 5,161,870.(1.". 2,990,.353.41 6.e90,435.5tl 1.311.040 0:1 i.'.iOi;.m.s.4s 4.742.400. '^ I4.i.'.7.r..".i 7.; Pfissen^r train aervicea Paeaengerl 1,: ni: '. l.s ]..'.oi.::5o.i's :'..40ii.473.i;:; 2.420. 7t 18.41 1.734.707.44 s,:-;8n.4;!i;.iin l,.".illl.6S':.Tl 1,'. i::..81Ki..M :l..".oii(;j 21I,40S,11 $550,023,99 1,079,864,92 1,121,090,39 277,236.97 ,384,030.56 1.523,824,64 1,812.338.67 113,865.33 1,048,180.63 1,494,280.72 370.688,40 567,050.30 115,711.29 539,948.011 437,027.75 693.459.23 1,151,914.24 1,212.311.83 172,982.51 770,.37,5.68 30S..S! 18.77 857.273..->(l 221.213.44 .''.1S..316.10 29.-.,44ii.75 .•a;4,7s4.oi 20i,ti:;.:j.; 2.2011. 'n.ij 3.0-'1.7si;.'.i-2 3IH. CI 14.26 1.58; 1.0: 12. 60 •■'.2 1.427.17 40l',7.".S.23 r.<;4,o.-.2.::t; 2..".:;i.r,:i4..so 2-ss.4s:-.i6 ."..•■.S.400.9.-1 .".8i;.(;os.i2 .56!. 176.40 400,755,54 344.239.211 2.407.Glll.i;i 319.801.22 909.113.67 164.2.",3.ll.-. 549.735.21 Total S170,042.91."..51 I .1:35.267.247.22 Mail' $50,769,95 08.015.98 36,768.08 19.497.36 30.094.49 126.284.69 104.737.01 16,110.47 141.4.39.42 111.982.68 22.873.66 60,719.79 6,791.03 16,719.82 25.481.90 30.037.32 121.514.98 90.932.45 18.231.82 177.198.22 16.205.74 71.802.43 1. "1.489. in 30.230.48 39.098.04 63.118.37 21. .342.35 212,003.25 53,180,&4 28,262,38 86,916.81 24,351,14 34,206,47 84,043.34 203,120.54 20.437.61 11,797.06 30.239.04 08.434.79 56,778.25 39.098,03 161,861.70 26.430.05 172.638.78 43.209,69 (I4.666..52 $3.10!),160.32 .187,504.17 184.180.00 140,496.42 27.244.50 53.865.92 262.996.08 238,022.84 10.904.67 183.781.08 175.205.50 44,979.17 88.140.92 16.620.26 131.71B.33 36.698.67 179.844.17 101.592.75 )86.19e.a3 15.037.92 185.091.25 47.757.17 136..531.92 20,679.17 128,968,26 47,202.17 49,353.58 26.312.08 I 418,342.84 '• 289.537.75 ( 43.845.33 167.051.17 27.617.67 38,7(i0.92 149,686.50 461,307.67 I 40,487.08 j 80,793.25 I 104,672.75 I 131.669,334. .53.781.67 61.304.42 220,627.92 35.815..5.S 11.3.865.75 , 24.468.50 77.316.25 $5.343.2,82.13 Total Operatine expenaea and taxea Percentaae of groaa receipts required to pay operating expenses and t^xes Taxes. Total .$688,288.11 1,362,050.90 1.298.354.89 323.978.83 467.990.97 1,912.10.5.41 2.245.098.52 146.870.47 1.373.401.13 1.781.474.90 438,541.13 716.911.10 1.39,122.57 688,384,24 499.208.32 909,340.72 1,375,021.97 1.489.441.11 206.852.25 1.132.665.15 .372.861.68 1.01!5.007.85 257.381.71 677,614.83 381,747.86 477,255,96 251, ,397,66 2,830,665.21 2.397..5II5.51 373,711,97 1 ,,833,060.58 381,295.98 475.730.li2 797,782.20 .3,196,129.01 349,407.86 631,057.86 720.819.91 799.2S0.62 520.316.46 444.641.65 2.7!lli.100.23 .3S2.046.a5 1.195,018.20 2,31,931.84 691.717.98 $43,719,689.07 $1,553,292,95 4,907,585.00 2.542,320.45 694,767,56 1..57,"i,411..37 4.526.768.73 5.452.830.37 311,043.57 3,871,300.09 3.9.36,332.18 836,298.76 1.753,029.97 .546,992,11 1,605,176,09 1,429.691.51 2.545.297.61 2.975,.897.19 4.1S.S.56.5.17 i;4li.305,90 2,457,043.72 1.8:16.042.20 2.702,231.44 490.263.17 1.604,688.83 692.877.67 1.679.671.99 702.540.14 5.6.38.422.85 3.218.818.37 1.696.813.58 3.,S01.081.14 739.321.15 756.796.80 2,,S41,021,49 8.6.S2.285.27 944.300.28 2.349.536.05 l,n63,510.,37 2.125,005.14 1.377.773.78 1,1(>7..362.5I 4.3112.017.01 9119,314.66 2.186,436.63 606,633.06 1 ,61)3.0.34.28 $104,217,987.56 $95,600.00 190.399.28 181.926.79 66,200.00 07,500.110 228,000,00 215,587.31 20,600.00 206,636,73 222,117.85 53.007.84 74.000.00 21.025.00 151.600.00 71,000.00 108.929.81 318.650.07 246,647.53 22,000.00 125.000.00 94,600.00 125,446,00 39,141.09 94,000.00 80,683.30 80,401.00 20,600,00 434,692,01 .3.30,000,00 .84,000.00 254,237.00 92,190.15 50,000.00 150.280.00 197..526.1S 73.3,S5.,S0 35.771.59 10.5.1117.00 69.S6I1.III. .".9.4I,S.OO 24tl.Otl2.ll2 1:1.9." 142.1 24.(t.8ti.0o 64.494.!I2 .$5,742,735.17 »S $1,648,792.95 5,097.984.88 2.724,247.24 749,957,56 1,642,911.37 4,754,768.73 5.668,417.68 331,643.67 4,077,996.82 4,167,450.03 889,306.60 1 .827.029,97 .56.8.617.11 1.756.775.09 1,500.691.51 2.(154,227.42 3,294„547.26 4,435,112,70 662,306.90 2,582.(H3.72 1,930,642,20 2,827,670.44 529,394.26 1.698,888,83 773,560.87 1.760.072.99 723.040.14 0.073.014.86 3.648,818,37 1,780,813.58 4,065,318.14 831,511.30 800.796.80 2,991.901.49 S.S79.S11.45 991.672.66 2.422.920.86 1.O'.l9.2,S].90 2,230.022.14 1.447.6.39.78 1.106.780.61 4.. 102.079.63 1.047.076.51 2.32.8.1:10.1:1 030.719.06 1.757.529.20 Passen^r train $695,343.33 991.910.96 940.606.71 261,590.01 287,179.32 1,004,881.83 1,042,878.81 108,704.63 1.242,168.59 1,200,583.25 296,222.44 633.656.41 132.726.23 609,139.82 410.708.08 867,693.82 1.049.938.69 9I>8,704.31 199,448.19 684,667.20 334,421.46 698,416.17 179,082,12 483,429.79 385,204.67 466,361.46 202,173,22 2,096,398.21 1.599,439.,S5 283,374.25 1.327,401.96 313,078.49 300,295.16 613,350.60 2,056,327.76 207,734.17 692,222.10 460.729.03 525,545.13 386.702.58 360.049,21 2.032,:.20..ii: 2511.21 1. 2s 829.380.47 144.261.49 470.(:8o.69 60.04 69.34 72.71 67.11 61.82 72.19 71.28 66.11 68.46 76.04 62.31 70.69 03.06 54.35 70.89 02.69 53.70 70.99 75.63 63.10 68.47 62.27 70.10 07.23 48.66 78.64 73.07 71.94 6S.75 59.55 60.61 63.42 42.31 63.00 62 72 71 .,31 61.28 73.22 66.46 59.80 67.26 54.88 65.46 46.63 75.58 69.48 $109,980,722.73 | $32,300,818.99 64,67 and No. IS. car receipts and inisoelbim' (1) As reported by the Interstate Commerce Coinmissioti in Bulletin of Revptittcs and Kx[ipnses of Sfeiim Roads No. 10 (2) .\s stated by the Postmaster-General in Document No. 105. (3) One-twelfth of the total receipts from expre.ss, excess baggage, milk carried on passenger trains, parl.n- and chtiir I; terstate Commerce Commission, (4) Including, also, Indianapolis Southern and Yazoo & Misslssipi.l \'iill.'y, EXPLANATION. This table contains data for forty-six railways, being all that appear in Pi.BtmasterGenerars 'I'able 7 (Document 106, pp. 272-281) for whi.li tlial tabic st.ites ..peratiiig expenses and taxes chiirgeal.le ti. during November, 1909. of $10,000.00 or more, with the excepti.in of the Granil Trunk .'System, for which comparable data are not reported by the IiifiMstate Commer.-e Coiiiniission, and the Atchison, Topeka & Santa Fe, for which the figures used by the Postmaster-General are those ..f the month of January. 1910. It represents $3,109,160.32 out of $3,607,773.13' of mail revenue included in that table or 86.18 per .-ent. Its purpose Is to show- that even using the extremely low and erroneous estimates of .iperating exiienses and taxes chargeable to the mail service made by the Postmaster-General, the disparity between the ratio of these expenses to revenues, for the passenger services is so great as to leave no room for the belief that (with any reasonable allowance for a return to Investors upon the fair value of the property used in the service of the public) the passenger train services as an whole are adequately remunerative. Of the forty-six railways included, two show a ratio of operating expenses and taxes apportioned to the passenger train services by the Postmaster-General of over one hundred per cent, five over ninety per cent, ten river eighty per cent, twelve i>ver neventy per ci.|it. .sixiceii over sixty per cent and inily one under the latter percentage. Tbi> ratio for all 'the railways in the table is 73.,8S per cent. 'ceipts dnriiiL' the fiscal year 1910 as rc[i'.i'ted by the the mails, DEMCO PAMPHLET BINDER ^«" Pressboord UNIVERSITY OF ILUNpi9.URBAJ|JA 1655 3 0112 04591