NINETEENTH ANNUAL YEAR BOOK— PART VII 423 



The gravity of the situation comes in this manner: When the rail- 

 roads are able to impress the public of the necessity for more revenue, 

 the result is that they then try to remove certain privileges you had in 

 the past, and impose other burdens and increase rates on these people 

 who are not the best organized to protect their intei-ests. During the past 

 year we have seen a general advance in rates, not $400,000,000, but some- 

 thing like $900,000,000 or $1,000,000,000. It has been repeatedly said that 

 we were fighting a wrong contest; that if we had not opposed the advance 

 of 1917, we would not have had this large advance of 1918, and the rail- 

 roads would not have been placed in the serious condition that the gov- 

 ernment found them in when they were taken over. I think I have 

 correctly stated the charge. Now, is that charge sound, true, or is it false? 



Because of the development in 1917, today the railroads are demand- 

 ing we shall not go back to the conditions existing in 1917; that we shall 

 not give the power to the Interstate Commerce Commission and the state 

 commissions that they have had in the past. They say that the thirty 

 years of regulation we have had before the government took over the 

 railroads constituted a period of failure so far as regulation is concerned; 

 that our method of regulation was too severe; that it broke down. I am 

 here today to claim that position is absolutely wrong, and that we must go 

 back to the pre-war conditions just as quickly as possible. I am here to 

 claim that we have not had a year of government operation of railroads, 

 but we have had a year of railroad operation of the government, and I am 

 going to prove it. 



First, as to the revenues. It is true that you have had $900,000,000 or 

 $1,000,000,000 more of an advance in rates. Why was it? Was it because 

 the railroads broke down in 1917? A few days ago I was sitting in the 

 hearing before the senate committee in Washington, and I heard Mr. 

 Krutchnitt, of the Southern Pacific Railroad, prove with incontestable 

 figures that the railroads as a whole were as efficient in 1917 as they are 

 today. I leave it to you whether you are getting better service or worse 

 service than in 1917. It wasn't because the railroads had broken down in 

 1917 financially, because the records show, and I challenge any man within 

 the sound of my voice to prove to the contrary, that the three-year 

 period selected as the test period, showed a net income greater than any 

 other three-year period, with only one exception, and that was the three- 

 year period including 1907. Just a word about that. That was the time 

 you had the phenomenal increase in business, and the railroads did not 

 keep up their property sufficiently for the demands of the public. The 

 Interstate Commerce Commission, in the advanced rate case, referred 

 specifically to that fact, and said that was no criterion whatever as to 

 what constituted a reasonable return. Since 1907 the railroads have been 

 compelled to include additions and betterments out of surplus in their in- 

 vestment. These property investments of the railroads are heralded 

 broadcast throughout the country. Will you be surprised to know it is 

 greater than the total outstanding stocks and bonds. It is over $1,000,- 

 000,000 greater than the total capitalization, water and all. That is what 

 the railroads are forming a basis on as to what shall constitute a reason- 

 able return in the future. In 1907, the Interstate Commerce Commission 

 said no court or commission would consider as suggesting in a remote 



