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QUESTION AS TO AUTHORITY OF OFFICE OF DEFENSE TRANSPORTATION

TO PAY STATE USE TAXES

Mr. Case. In the payment of these expenses, you include the compensation of employees as a legitimate expense?

Colonel Johnson. You mean pay of employees for wages?
Mr. Case. Yes.
Colonel JOHNSON. Yes, sir; why, sure.

Mr. Case. What distinction do you make between compensation of employees, and compensation for the use of highways?

Colonel JOHNSON. Well, when the Federal Government does not pay it, and I am the Federal Government, I just do not pay it.

That has been taken to the Attorney General and to the White House, and everywhere, but to Congress, and I told these gentlemen from these States that I did not intend to pay it unless Congress passes a law telling me to pay it.

I am not going to pay Federal funds out for the purpose of making up a deficit in freight rates allowed by a State in a State.

Mr. Byrnes wrote a letter to me and said that that was a matter I could decide, and he thought I was perfectly within my rights.

I think it would take an act of Congress to clear my conscience to pay out Federal funds for the use of highways, when the Post Office Department does not pay, the Treasury does not pay, the Army does not pay and no other Federal activity pays it. I am not going to pay it out of this Federal fund until the Congress of the United States tells me to do it.

Mr. CASE. As a matter of fact did not the Attorney General tell you that the authority vested in you by the orders was broad enough to permit the payment of those highway compensation fees?

Colonel Johnson. Somebody up there said that, but nobody signed his name to it, and even if he did, I would not pay it, because I do not think it is right, and I am not going to pay it.

Mr. Care. As a matter of fact, did not the Attorney General hold that the terms of the War Powers Act and all other acts under which the President acted were broad enough to permit the waiver of Federal immunity in commercial operations?

Colonel JOHNSON. It may be broad enough, but it is not broad enough for me to pay out Federal money that we have, and I am not going to do it until this Congress tells me to do it.

Mr. Case. Did not the Attorney General advise you that you could pay them?

Colonel Johnson. He never signed any letter telling me that.
Mr. Roddewig. He never told us anything in writing.
Colonel Johnson. He has never signed anything to me.
Mr. Case. Did he advise you to that effect orally?

Colonel Johnson. Oh, I think somebody said up there it could be done, so my attorney tells me, but I will tell you if he had written it and signed it and said I could do it I would not do it. I just would not pay it.

Mr. Case. Was - this information given to you by the Attorney General, or a representative of the Attorney Generali

Colonel JOHNSON. It came to me from my general counsel, or some body in the Attorney General's office. He said the powers were broad enough that I might pay it. That is what I understand

Mr. Case. And you hold that the use of the highways in the several States where licensing fees are proportionate to the weight of the trucks using those highways, and which are designed for the purpose of compensating the States for the wear and tear involved in the maintenance of those highways is not a proper expense of your operation of commercial truck lines?

Colonel JOHNSON. I am operating those truck lines as a Federal Government activity, and the Federal Government pays no such license fees. This is a Federal Government activity. Therefore, in my opinion they should not be paid. Mr. Case. You stated that you pay the ad valorem tax? Colonel JOHNSON. Yes. Mr. Case. Why do you pay the ad valorem tax?

Colonel JOHNSON. That is a lien against the property I am operating. That is not the Federal Government, it is a lien against that property

Mr. ČASE. Does the Government pay ad valorem tax on property that it has in the States?

Colonel Johnson. You mean on post offices, and so forth?
Mr. CASE. Yes.

Colonel Johnson. I am advised that they do not, but this is not Federal property. It belongs to those people, and your ad valorem tax is a lien on that property that we operate.

Mr. CASE. What will be the situation of these truck lines when your operation is over and you turn them back and the States have a lien against the operation for operating on the highways without a license?

Colonel JOHNSON. I am going to do my best to make my lien supersede that of the State and get the Federal Government's money back. I will try. I do not know whether I will be successful, but I am going to try to turn every nickel of this $5,000,000 back into the Government's pocket, if I can.

Mr. ČASE. Do you receive petitions from the people of the country and give them any consideration?

Colonel Johnson. Sure.

Mr. Case. Did you write a letter to Senator Reed, commenting upon a petition addressed to you by the Kansas City Board of Trade, in wbich you replied that:

It is a little discouraging that a group of men such as you, without any general knowledge of transportation difficulties, would attempt a solution by allocating yourselves a profitable and easy transportation road which would, if followed, paralyze the whole transportation situation and have an immediate effect on the war effort and would result in ultimate disadvantage to yourselves.

and then say:

It would seem to me that you would appreciate that you are presumptuous to make such recommendations. I consider you so.

Colonel Johnson. Yes; I surely did, and I still think so. There was a bunch of men out in Kansas interested in profitable transactions in the grain business, and they had the temerity to tell me that I should turn the railroads of America, in this freeze, in this emergency, for their solution, by appointing three men with full authority for all the railroads in America. I said it was presumptuous and I still say so. I wrote it to the same man that wrote to me about it, not to Senator Reed.

Mr. Case. I just wondered if you actually wrote a letter like that. Colonel Johnson. Yes, I actually did, and I have the letter here, and I would like to read it all into the record. When anybody tells me, with the reputation that these railroads have earned, to turn them over to three men, with all of the other railroad men there are in America, I say it is presumptuous.

Mr. CANNON. Without objection the letter will be included in the record.

Mr. CASE. Only if the letter from the Kansas City Board of Trade can be put in also.

Mr. CANNON. Yes, both of them.
(The matter referred to is as follows:)

THE BOARD OF TRADE OF Kansas City, Mo.,

Kansas City, Mo., March 23, 1945. Hon. J. MONROE JOHNSON,

Director, Office of Defense Transportation, Washington, D. C. DEAR Sır: I am enclosing with this letter copies of a statement on behalf of representatives of the grain and milling trades in the Central West, a letter to Mr. John J. Pelley, president, Association of American Railroads, Washington, D. C., and to the members of the Interstate Commerce Commission, all relating to the severe shortage of boxcars for loading grain and grain products.

At the meeting referred to in the statement I was directed to communicate with you in protest against the methods of the railroads in dealing with this matter. It appears to us that the eastern lines are pursuing a course for which there is no justification in that they are retaining i estern lines' boxcars on their lines and applying them to eastern loading, whereas there should be a prompt adjustment of the existing dislocation by increased substantial deliveries of boxcars to nestern lines. It also appears that the western lines, when they get these cars, are not properly distributing them, in that no fair proportion is being assigned to the loading of grain and grain products.

We do not expect the Association of American Railroads to correct this condition. Our information is that that organization is dominated by the eastern trunk lines, and it is hardly to be expected that it will take any drastic action in this matter. Unless the Office of Defense Transportation acts or the Interstate Commerce Commission takes the matter up, it is difficult to see any relief in sight.

On behalf of the parties signing the statement I respectfully urge you to take hold of this matter vigorously to see if something cannot be worked out. Yours very truly,

E. R. JESSEN, President. OFFICE OF DEFENSE TRANSPORTATION,

Washington, D. C., April 2, 1945. The BOARD OF TRADE OF Kansas City,

Kansas City, Mo. (Attention Mr. E. R. Jessen, president) GENTLEMEN: Some days ago I received a copy of a very surprising letter that you addressed to the Internstate Commerce Commission. That letter has now had a reply from Commissioner Miller, Chairman of Division 3. I think it necessary for me to make some comments which I now do.

It is not unusual for some group interested in a certain commodity to insist on its relief in utter disregard to the transportation of others, including the military. Yours, however, has been the most outstanding instance I have yet experienced. It's a little discouraging that a group of men such as you, without any general knowledge of the transportation difficulties, would attempt a solution by allocating to yourselves a profitable and easy transportation road which would, if followed, paralyze the whole transportation situation and have an immediate effect on the war effort and would result in ultimate disadvantage to yourselves. It would seem to me that American transportation, in view of the record it has established in this World War, with 600,000 fewer freight cars and other serious deficiencies as compared to the First World War, deserves more confidence than you exhibit.

A miracle of transportation unprecedented has been performed by the transportation men of the United States and their customers, the Association of American Railroads, the American Short Line Railroad Association, the motor industry, the Interstate Commerce Commission, and the Office of Defense Transportation working together as a unit. They certainly would be presumed to have more talent in transportation than the Board of Trade of Kansas City, even if not established by the record. It would seem to me that you would appreciate that you are presumptuous to make such recommendations. I consider you so.

I do not ask whether you know that there is a war on, but I do ask whether you realize that there are two wars now as compared to one heretofore, either of which would challenge the ingenuity and genius of the transportation people of America. In addition, there are the rescued peoples all over the earth, hungry and cold and pleading for relief. That transportation alone is challenging.

The exports of America in 19 4 were 465,238 cars, or 33.2 percent more than in 1943 and, due to the outbreak in the full tide of the Pacific war, exports of course have been at a greater rate of increase in the latter part of 1914 than in the early part, and they now are at an unbelievably greater rate.

This has been maintained in spite of the fact that the principal gateways of the United States experienced a convulsion of nature in snow and blizzards for months unprecedented in the meteorological history of the Nation. (You might recollect your Kansas City flood situation in 1903, which was pigmy by comparison, both in extent and in effect on the Nation.) Transportation had no supports or reserves with which to contend with such an upheaval, but, even so, it has flattened out the break-through. The entire recovery, however, because of delay of the program will take more than a year. I want to remind you that during the period those gateways were paralyzed by weather, except for a few embargoes, the shipping public, including you, shipped into that area without regard and wondered why they didn't get their cars back.

During that time and for some time thereafter there was a tremendous overownership of cars in the East and, in addition, an unusual number of Canadian cars and, of course, an under-ownership of cars in the West. However, at the same time there was a far more critical car shortage in the East than in the West. This was due entirely to manpower shortage, and transportation was then confronted by another draft of its labor which has since been averted,

We found ourselves at that time facing, and to some extent we still face, the fact that we have boats with grain in storage on the Great Lakes that must be unloaded else they will be late (navigation is now open and they are late) for the transportation of grain, ore, and coal on the Great Lakes.

With elevators in the West filled with wet corn now damaging, with the gigantic burden of moving grain to the rescued countries, and with a back-log of wheat to be moved to make room for the new crop, which promises to be another billion bushels, the grain movement is a problem within itself.

Even with all that, more was shipped to our armed forces than ever before. We are moving more grain today than we were a year ago, as is shown by the enclosed report of the Interstate Commerce Commission. The last report on grain carloadings, herewith enclosed, shows loadings above 1943 or 1944. At the rate of present loadings we will have moved by the last week of June at least 48,000 carloads more than in the same period last year.

Of course, if we had more boxcars and more employees and more locomotives, we would be loading and handling more. We are faced now with the biggest boxcar shortage in many, many years. A chart is enclosed showing the comparative shortage now and formerly.

The carloadings today are almost, if not quite, on a parity with full fail loading. And yet you complain.

Of course, when we were faced with these problems, our first effort after the military (please never forget that) was to unload boats to avoid delay of vessels on the Lakes, next to save as much of the wet corn as possible, and then, so far as grain is concerned, to move the back-log of wheat. We are loading at present a greater proportion of corn as compared to wheat than ever before, and that is as it should be.

You should always remember, when you are prone to criticize, that in World War I we had about 1,900,000 'railroad employees and that now we have only 1,410,000, of which 300,000 (including 115,000 women) are recruits to replace that number of men drafted to the military. We have 22,500 fewer locomotives, 600,000 fewer freight cars, and 17,600 fewer passenger cars, and yet we are transporting over twice as many passenger miles, nearly twice as many revenue tonmiles as in the First World War, and one and one-half times as many revenue ton-miles as in 1941. I enclose tabulation for your perusal.

I also enclose tabulation showing that we have attempted to get for the railroads 186,000 more freight cars, 2,000 more locomotives, 2,600 more passenger cars, and 762,000 more tons of rail than we have received. I do not here attempt to give you the details of how many busses, trucks, and cars we have tried to get without success.

Remember, too, that in the First World War the average haul was about 250 miles, and now it is about 500 miles, and will grow tremendously greater as our emphasis is transferred from the Atlantic to the Pacific.

*

The outlook for the next 15 months is most alarming. You will probably store more grain in the producing areas this year than ever before. I am informed that the Department of Agriculture is making provisions and arrangements therefor. There will be throughout our commercial activities difficulties in transportation. We hope that such difficulties may be averted for the military.

Immediately on receipt of this letter from the Board of Trade of Kansas City, the Office of Defense Transportation and the Interstate Commerce Commission called in the Association of American Railroads to discuss the various statements made in your letter and your recommendations. The Association of American Railroads was asked to write up the conclusions there reached, using reports and data of the Interstate Commerce Commission and the Association of American Railroads. That was done, has been verified, and the statement is herewith enclosed. It would seem your letter needs no further comment, except your proposal “that immediate consideration be given to the appointment by you (me) of a committee of railway operating officials not to exceed three in number to be advantageously located within the eastern congested area, whose responsibility would be to work with the railways in an effort to break up the seriously congested situation

and that such committee be given absolute authority to support its judgment in whatever way may be necessary to obtain the result so badly needed.” I presume that this was copied by you from a recommendation made to me by the Office of Defense Transportation-Interstate Commerce Commission Grain and Grain Products Transportation Conservation Committee in Chicago during the congestion which was almost as absurd then during the congestion as it is now after the congestion. Did you ever pause to think that I have at my command the talent and experience of every railroad man in the United States and that they were all giving their expert advice, work, and collaboration to the breaking up of the congestion, together with many hundreds of soldiers and thousands of cilivians? It was successfully done, and much earlier than anybody, including the Grain Committee and, I presume, you, would have thought possible, with the result that empty cars moving west at the rate of only 604 on March 1 reached 1,039 by the 8th, and nearly 1,500 by the 13th. On the 16th empty boxcars moved west at the rate of 1,654. During the first 29 days of March, there moved to the West 33,546 empty boxcars, an average of 1,157 cars per day, much of

movement during the congestion, and many other thousands of loaded cars that were made empty in the West. Chart is herewith enclosed.

I hope sincerely that you will study the enclosures in order that you may grasp the full meaning and import of each.

I have found the Board of Trade of Kansas City helpful in the past, although last year, on your insistence, my agents were persuaded to allow congestion to develop in Kansas City which had to be straightened out ruthlessly. The transportation problems in front of us will require hearty, cordial cooperation and that each of us lose sight of our own selfish interests for the common good. There is no other way to solve this transportation problem. That method in the past has made the accomplishments of transportation possible, and I place those accomplishments not second to those of the Army or the Navy. I sincerely hope that you are in a position in the difficulties ahead to render that customary hearty support and cooperation. Very cordially yours,

J. M. JOHNSON, Director.

(Enclosures. Distribution to all parties known to be interested.)
THE BOARD OF TRADE OF Kansas City, Mo.,

Mareh 23, 1945. The Honorable

John L. ROGERS, Chairman
CLYDE B. AITCHISON,
CLAUDE R. PORTER,
WILLIAM E. LEE,
CHARLES D. MAHAFFIE,
CARROLL MILLER,
WALTER M. W. SPLAWN,
J. HADEN ALLDREDGE,
WILLIAM J. PATTERSON,
J. MONROE JOHNSON,
GEORGE M. BARNARD,

Interstate Commerce Commission.

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