INVESTIGATION OF FEASIBILITY AND DESIRABILITY OF FIXING RAILROAD RATES ON THE BASIS OF ZONES

FRIDAY, JUNE 16, 1939

UNITED STATES SENATE,

SUBCOMMITTEE OF COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C.

The subcommittee met, pursuant to call, at 10 a. m., in room 135,. Senate Office Building, Senator Homer T. Bone, chairman of the subcommittee, presiding.

Present: Senators Bone (chairman of the subcommittee), Johnson of Colorado, and Reed.

Present also: Hon. William Lemke, a Representative at Large from North Dakota.

Senator BONE (chairman of the subcommittee). The subcommittee will be in order.

This hearing is called to take testimony in connection with Senate Joint Resolution 58, introduced on February 6, 1939, calling for an investigation of the feasibility and desirability of fixing railroad rates on the basis of zones. This appears to contemplate such zone rates for freight as well as passengers; but I understand that whatever is said here today will be largely in connection with passenger

rates.

(Senate Joint Resolution 58 is as follows:)

[S. J. Res. 58, 76th Cong., 1st sess.]

JOINT RESOLUTION Providing for an investigation of the feasibility and desirability of fixing railroad rates on the basis of zones

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the Interstate Commerce Commission is authorized and directed to make a thorough study and investigation with respect to the feasibility and desirability of fixing the charges made by railroads, subject to its jurisdiction, for the transportation of passengers and goods, on the basis of zones, with a particular view toward the establishment of a simplified rate structure for the transportation of passengers and goods within or between such zones and the establishment of rates low enough to encourage full utiliza. tion of the carrying facilities of such railroads. The Commission shall report to the Congress of the United States the results of its study and investigation, together with such recommendations relating thereto as it deems appropriate, at the earliest practicable date, but not later than January 3, 1940. In carrying out the purposes of this joint resolution, the Commission shall have the same powers as are conferred upon it for carrying out studies and investigation in the performance of other duties imposed upon it by law.

SEC. 2. There is hereby authorized to be appropriated the sum of $25,000 for carrying out the purposes of this joint resolution.

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Senator BONE. Congressman Lemke, do you desire to be heard regarding this matter?

Mr. LEMKE. I do.

Senator BONE. Will you please come forward now? If possible, I should like to have this matter concluded by noon; because it is almost impossible to get members of these subcommittees out here when there are so many major committees.

STATEMENT OF HON. WILLIAM LEMKE, A REPRESENTATIVE AT LARGE FROM NORTH DAKOTA

Mr. LEMKE. Mr. Chairman and members of the committee, I am vitally interested in Senate Joint Resolution 58. I have introduced an identical resolution in the House, being House Joint Resolution 152. I have also introduced a bill as the basis of postalization transportation, known as H. R. 5579. I realize that no such bill should or would be passed until the Interstate Commerce Commission has had an opportunity to make a thorough investigation into the feasibility. However, as a Representative from the agricultural West, I think I can say that I appear in behalf of agriculture from that section of our country. We have had a serious situation. We have had overproduction, so-called, when there were plenty of people who were hungry and who wanted that so-called overproduction to

eat.

I shall go back, in my discussion, to 1937, when at Park River, N. Dak., we sold potatoes at 12 cents a bushel in the sack-the finest that ever grew anywhere in the United States of America. Of course, most of those potatoes were allowed to rot on the field. Twelve cents a bushel is, I think, less by three times than what those same potatoes would cost us, per hundred, to ship to Chicago-where there were plenty of people who would like to have these potatoes. Then I have seen in the State of Montana large quantities of timber, after fire passed through, permitted to rot and to go to waste, when there were plenty of people who would like to have that timber, to be used either as lumber or as firewood.

Our transportation system is connected directly with our economic welfare. I am concerned not with railroads or busses, but I am concerned with a transportation system in the United States which will be such that mass production can be met by mass consumption. I think it is obvious and as my friend, Mr. Hastings, will say that it costs just as much, or at least within a few dollars as much, to haul an empty boxcar or an empty seat across the continent as to haul one that is filled. I realize that no transportation means or facility can continue unless it can at least produce some revenue over and above operating expenses.

Therefore I feel it is vitally important for the Interstate Commerce Commission to be authorized to make this investigation. I cannot see why anybody should object to this investigation; because, after all, the resolution calls for an investigation so that we can authoritatively act, one way or the other, upon a theory of transportation.

I might state that when I first introduced this railroad postalization bill in the House the chairman of the Interstate Commerce Commission told me that he thought it was a foolish idea. He said,

however, that he took the bill and submitted it to one of the leading economists in this Nation, in whom he had confidence, and that that economist told him that the plan was not only highly desirable but feasible and that if enacted into law or if an investigation were made, perhaps it would be found to be for the best interests of the railroads as well as for the best interests of the people of this Nation.

I think we can generally agree that our economic troubles in this Nation are not so much due to overproduction as they are due to underconsumption and maldistribution. It does not make so much difference what our production is, so long as we can get it to the people who need it and who want it, so that they can utilize it.

While I do not say that the enactment into law of this bill will result in curing all evils, nevertheless I think it is one of the necessary steps that this Nation must face, and that Congress must face, to bring about a transportation system that will function for the good of all and that will reach every part of this Nation.

There is nothing new about postalization. We have it in our streetcars and in our busses. You step on a bus here and you do not pay for every block you travel, but you pay so much for the trip. You can go to New York and ride all night on one of their subways for 5 cents, if you wish.

However, I shall not take up the committee's time by referring to the different figures or to how far the person who does use the railroads travels per year. I may say, roughly, that it is 72 miles, and the amount he pays to the railroads, under the present system, is $2.65 per year, if I am correct in that figure. Those are the figures regarding those who travel. If a system of this kind can be adopted I am sure the result will be a tremendous increase in the number of people who travel and the distances they travel.

Senator BONE. Mr. Lemke, I doubt if many Members of Congressand, at least, I can speak for myself in this respect-would have any hesitancy in clamping this down as an absolute, mandatory regulation on railroads, whether they liked it or not, and compel them to do it if they could take in enough gross revenue to maintain their systems. Of course their men would rather see more traveling being done by the people generally; but I think it all bears on what the gross revenue might be and whether the railroads could operate with profit. The idea does not frighten me at all, and I believe that many Members of Congress feel as I do. I do not care how much of a novelty the idea is, provided the railroads could take in enough money so as properly to operate their systems. I think the more people who travel, the better. Transportation is an evidence of civilization, and I think the more people traveling and the more people employed, the better for the country.

Representative LEMKE. I think so, too.

Senator BONE. So I should not hesitate about that. However, if I had to pass judgment on your bill, I should want in my own mind to be as nearly satisfied as possible regarding it, to feel that, in the light of all conditions, the enactment of your bill would result in the taking in of enough revenue to keep the railroads operating.

As I say, the novelty of the idea is not frightening to me at all. Representative LEMKE. Well, it is, to the public, generally. I know that when the automobiles first appeared the horses were ter

ribly afraid of them, whereas now they will walk by without even noticing them.

I may say that I think Mr. Hastings can submit sufficient factswith which I am familiar, but I do not have time to go into those and I should prefer to avoid duplication—to show that the probabilities are more than a mere guess-that the railroads will take in far more revenue and make more money. It is self-evident that if in the past they have taken in only $2.64 from the average passenger, during a year, then if this bill were passed there would be at least 10 times as many passengers traveling within a given time.

It has been suggested that people would get on and ride back and forth, for pleasure. What of it? However, experience does not prove that; experience proves that in our transportation in the New York subways, they get off when they reach their destination. They may once or twice make the rounds, but they do not travel just for the purpose of traveling.

Senator BONE. Of course, people have to make a living, and naturally they cannot spend their time in idly riding around.

Representative LEMKE. Yes. Now, Mr. Chairman, with that statement I shall conclude by simply saying that I sincerely hope that the Senate will pass this resolution. I expect and have had some assurance-that we shall get a hearing over on the House side, and that if the Senate passes this resolution, there can be no great harm in having the Interstate Commerce Commission make an investigation, so that we can act not on impulse but on facts.

Senator BONE. We are getting down toward the end of the session, and may be going home before long, unless we have a neutrality fight, in which case we may be here until Christmas, of course.

Representative LEMKE. I shall leave a copy of the resolution here; it is identical with the Senate resolution. The only purpose I have in leaving the House bill here is so that it may be used for reference, if the committee wishes to do so.

Senator BONE. I think it would be well to insert it in the record. Thank you, Congressman.

(The bill referred to is as follows:)

[H. R. 5579, 76th Cong., 1st sess.]

A BILL To relieve the existing national economic emergency by postalizing transportation rates; to provide for the incorporation of the Railroad Postalized Fare Guaranty Corporation in order to allot and apportion just and equitable indemnification to the railroad carriers; authorizing an appropriation for the purpose of carrying out the provisions of this Act; and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act shall be known and may be referred to and cited as the "Postalized Transportation Act of 1939".

SEC. 2. A DECLARATION OF POLICY.-It is the purpose of this Act to postalize all railroad transportation rates and fares within the next three years. It is the intent to promulgate and establish fares and rates for railroad transportation that will abolish the unsound, unscientific, and discriminatory fares and rates predicated, devised, filed, and scheduled upon mileage and location basis, and to bring about within the next three years a base for the promulgation and establishment of fares and rates for railroad transportation which shall be equal and uniform in all respects, within the scope and limitation of each railroad system, without regard to destination, location, or starting and destination points.

It is the purpose of this Act to provide adequate railroad transportation facilities for the transportation of persons and goods from one point within the continental United States to another, under uniform fares and rates which will

stimulate the exchange and rapid distribution of goods and commodities produced by the energy of our people. And finally it is the purpose of this Act to take the entire railroad structure out of bankruptcy and made it once more a prosperous enterprise, serving the public as well as its owners and creditors and providing an adequate transportation system for our national defense.

SEC. 3. MANDATE TO CARRIERS AND THE INTERSTATE COMMERCE COMMISSION.All railroads and railways now or hereafter classified by the Interstate Commerce Commission as class I carriers operated under the supervisory and regulatory jurisdiction of the said Commission on and after the date when this Act takes effect shall be and become subject to the provisions hereof.

SEC. 4. The Interstate Commerce Commission shall establish not more than eleven zones from each point within the continental United States where passenger railroad transportation now or hereafter may originate.

Zone numbered 1 shall have a radius not less than two hundred and fifty miles.

Zone numbered 2 shall have a radius not less than five hundred miles. Zone numbered 3 shall have a radius not less than seven hundred and fifty miles.

Zone numbered 4 shall have a radius not less than one thousand miles. Zone numbered 5 shall have a radius not less than one thousand two hundred and fifty miles.

Zone numbered 6 shall have a radius not less than one thousand five hundred miles.

Zone numbered 7 shall have a radius not less than one thousand seven hundred and fifty miles.

Zone numbered 8 shall have a radius not less than two thousand miles.

Zone numbered 9 shall have a radius not less than two thousand two hundred and fifty miles.

Zone numbered 10 shall have a radius not less than two thousand five hundred miles.

Zone numbered 11 shall have a radius not less than two thousand seven hundred and fifty miles.

It shall also establish within each such zone or radius a suburban zone with a radius of not less than fifty miles. The Commission shall promulgate and prescribe and fix within each zone or radius railway fares between any two points in the same direction, which fares shall be flat fares irrespective of mileage, to wit:

The suburban postalized first-class passenger coach fare shall not exceed 50 cents within any suburban zone between any two points in the same direction within any such zone or radius: Provided, That in densely populated centers where a system of commutation exists or is hereafter established then the fare shall not exceed 15 cents for single trip or 25 cents for return trip. The interurban postalized first-class passenger coach fare shall not exceed $1.25 within any interurban zone between any two points within the same direction within any such zone or radius; the interurban postalized first-class passenger coach fare shall not exceed $2.50 between any two points within the first and second interurban zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $3.75 between any two points within the first and third zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $5 between any two points within the first and fourth zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $6.25 between any two points within the first and fifth zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $7.50 between any two points within the first and sixth zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $8.75 between any two points within the first and seventh zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $10 between any two points within the first and eighth zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $11.25 between any two points within the first and ninth zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $12.50 between any two points within the first and tenth zones or radius; the interurban postalized first-class passenger coach fare shall not exceed $13.75 between any two points within the first and eleventh zones or radius.

SEC. 5. The Interstate Commerce Commission may from time to time, by order, after hearing, increase but not decrease the radius of any or all such zones. It may be increasing the radius, decrease the number of interurban zones. If at