This chart, reproduced from the Passenger Traffic Report, dated January 17, 1935, prepared for the Federal Coordinator of Transportation by his Section of Transportation Service, shows the accommodations of passenger service used and the income therefrom and the passenger accommodations not used and the extent to which the same could be made income-producing.

NOTE.-If postalized passenger rates increase passenger traffic only 50 percent, a total of 433,000,000 passengers will be transported. If this traffic is divided into 300,000,000 passengers at $1 and 133,000,000 at $3, the revenue result will be

Senator BONE. Mr. Fort has indicated that the railroads might like to have something to say here through their representatives. We have 25 minutes, Mr. Fort, and I think we can then go over until Monday at 10 o'clock. You may as well occupy the 25 minutes if you care to. I want to consider this a very informal affair, and if anyone has a contribution to make around the table, it is perfectly all right with me. However, it would be better to indicate your name to the reporter.

STATEMENT OF CARTER FORT, REPRESENTING THE ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C.

Mr. FORT. My name is Carter Fort. I appear here for the Association of American Railroads.

Since my representation is stated, I wonder, Mr. Chairman, if it would be proper to have the record show whom Mr. Hastings represents, or what his interest is in this scheme?

Senator BONE. It is entirely proper.

Mr. HASTINGS. I represent myself, and this has been a hobby with me for a period of 15 years. I have, and can offer for the record, and will on Monday, tens of thousands of letters from people around the country in support of this plan. I have no money interest in it and I do not expect to make any money out of it.

Mr. FORT. You use newspaper advertising to a considerable extent, do you not?

Mr. HASTINGS. We used two full-page advertisements, one running in the Chicago Tribune on November 4, and one running in the New York Times on December 26, 1938. Those advertisements were paid for by Frank R. Fageol, president of the Twin Coach Company at Kent, Ohio; and his only interest is an endeavor to make a public contribution in order to bring about the rehabilitation of our national economy. So he regards it as a sound plan.

Senator BONE. Do you practice law?

Mr. HASTINGS. No; I do not.

Senator BONE. What is your business?

Mr. HASTINGE. I am associated with Mr. Fageol.
Senator BONE. In the truck business?

Mr. HASTINGS. Yes, sir.

Mr. FORT. Mr. Chairman, Mr. Cleveland will be our witness, and I only want to say a few words of a preliminary character.

In the first place, our chief objection to this investigation, in a sentence, is this: We know that it would cost a lot of money. It would be bound to cost a lot of money. It would cost us a great deal more than it would cost the Commission. We think it is a wild

goose chase of the most obvious sort. We do not want to spend our money, we do not want to spend our time, in that kind of a proceeding when we have so many other places to put our money and when there are so many other more profitable activities upon which we can spend our time. If the Commission should be required to make this investigation there will probably be hearings from one end of the country to the other, and worlds of questionnaires. What would it accomplish?

Mr. Hastings himself has said that he does not think such an investigation would show whether or not the plan is feasible. He thinks a practical application would be the only test. Such an investigation as is contemplated by the resolution could not, of course, result in any practical application of the proposed scheme.

Now, just one more word. Something has been said here about group freight rates. Such rates are always due to special circumstances. They are often due very largely to the fourth section. When it becomes necessary to make low rates across the continent to compete with water carriers, those rates are blanketed back for long distances. There are other circumstances in which group rates are found, and Mr. Cleveland will mention them. But rates of this kind are always due to special circumstances.

With respect to the so-called postalization of passenger rates, our principal competition, as has been said heretofore, comes from the automobile, the private automobile. The cost of operating a private automobile depends, of course, on the distance traveled. But postalization of railroad passenger fares would ignore distance very largely. It would put short-distance fares up so high that we could not meet automobile competition, if we were to get revenues which are at all adequate. And long-distance fares would have no relationship to automobile competition-they would be much lower than required by_competition.

Pricing transportation is like pricing any other merchandise. It must take into account a thousand actualities. Proponents have talked about mass production, but such generalities have nothing to do with the proposal before you. The automobile is in mass production, but all automobiles are not sold for the same price.

Something has been said about putting a far-distant country on an equality with nearby countries, as to markets. There is no more reason why a farmer in a far country should be relieved of his fair cost of transportation than that he should be relieved of his fair cost of plowing.

You said one thing, Senator, which I think calls for a little comment. You said the question here is whether or not this postalization scheme would produce the revenues which the railroads must have. Of course that is a very serious and important question, but there is also another question. I refer to the effect upon shippers and upon the general economic structure of the country. Business has been built up on a basis of freight rates, under which, roughly, a man pays for the service he gets. Under the proposal for postalization, you should subsidize a great many and put the additional cost on others. You would reduce to chaos the entire economic situation.

Senator BONE. That is why I asked about the fellow out West being on a competitive basis with the man in the East. It is not only the rate structure as it affects railroads. It is true that great economic

areas have been created in this country due to many conditions, possibly one of them being railroad rates. It is too large a plan for me to envision or to pick up by its four corners and scrutinize intelligently. I do not presume to be an expert or an economist, but I have a very open mind.

Mr. FORT. It would make a shambles out of the whole economic system-the greatest discriminations against some and the rankest preferences to others. We do not think that Congress wants to spend money on anything of that kind, and we do not want to spend our money on anything of that kind.

Senator BONE. Is it your thought, Mr. Fort, that the Interstate Commerce Commission would attempt to impose on the railroads the cost of any such inquiry?

Mr. FORT. They could not help it.

Senator BONE. I take it they have enough information from railroads now, after 50 years of study, to give them all the basic information they require. This is a layman speaking, of course, but after 50 years of intensive ditching, dredging, mining, and sluicing and what not, in the way of examination of the railroads that have been indulged in by the Interstate Commerce Commission, they would have sufficient information. What could they exact from the railroads by way of information that they do not possess now?

Mr. FORT. They would probably, in the first place, have hearings all over the country to give everybody an opportunity to be heard. But after we got through we would not have anything more than when we started, except thousands and thousands and thousands of pages filled with words. That in itself would cost a great deal of money. Then there would be the possibility of a groping around by the Commission in an effort to respond to a wholly impracticable resolution from the Congress. There would be a tendency to ask for all kinds of special cost studies and things of that kind. I do not think anyone who has had experience with investigations in the past has the slightest doubt that the cost to the railroads would run into large sums of money.

If you could hear Mr. Cleveland I am sure that he will get through this morning.

STATEMENT OF A. F. CLEVELAND, VICE PRESIDENT IN CHARGE OF TRAFFIC, ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C.

Mr. CLEVELAND. My name is A. F. Cleveland. I am vice president in charge of traffic of the Association of American Railroads. That association comprises 98 percent of the class I carriers of the United States. Class I carriers are those carriers who earn gross revenues of $1,000,000 or more per annum.

I appear at the request of the railroads in opposition to this resolution. I understand, Mr. Chairman, from what I have heard this morning that you will strike from the resolution the term "goods," and that if the resolution should pass it will relate only to passengers?

Senator BONE. Well, frankly, Mr. Cleveland, that is rather a vague idea that the chairman had, and the suggestion has been made that even if it were passed it should not embody any freight rates.

Mr. CLEVELAND. I have not heard any testimony in support of any freight proposal, but I do not want to leave the matter in doubt, because I want to say something about that in the event that there is any possibility

Senator BONE. I do not think there is much possibility of goods being left in the resolution. I would not want to advise you on that, and then have it done later. If anything is done, you will be advised. I think the reference to freight will be stricken from the resolution, in any event.

Mr. CLEVELAND. We are opposed to this resolution, because we believe that there exists ample authority for the Commission to make an investigation under the present status of the law if it, in its judgment, thinks it would be desirable to do it. Section 13, paragraph 2, of the act authorizes the Commission to initiate on its own motion any investigation at any time it may desire.

Senator BONE. That is from the Interstate Commerce Act?

Mr. CLEVELAND. Yes, sir. We have had some experience with investigations as a result of resolutions of the Congress. There was a joint resolution passed in 1925 known as the Hoch-Smith resolution, which directed the Interstate Commerce Commission to make a study of the rate structure, to remove discriminations, and to make the lowest possible lawful rates on agricultural products, including livestock. Responsive to that resolution, the Interstate Commerce Commission set up a special docket which it called docket 17,000. Senator BONE. I participated in one long case.

Mr. CLEVELAND. I take it you participated in part 7. I heard you say something about grain.

Senator BONE. Yes; on the Snake River, grain moving from the Snake River to the ocean gateways on the Pacific coast.

Mr. CLEVELAND. It began with part I and it went through to part XII, I think.

Take that grain case alone. At the first hearing there were 100,000 pages of evidence; there were over 2,000 exhibits, and there were over 20,000 pages of briefs, answers, and arguments. So we know what an investigation at the direction of Congress means.

What happened as a result of that investigation? The rate structure was changed in many particulars. The rate structure today I do not believe is generally as satisfactory to the public as that which was in effect prior thereto, which, to a very large extent, was a structure which had evolved over the years.

The railroads are anxious to have their rates responsive to the necessities of commerce-and I mean, by "rates," fares as well. Rates are in a constant state of flux. But we do not believe that the Congress will direct the Commission to do that which is going to cost us a great deal of money and from which no benefit will be derived.

This particular scheme that you have before you here today is only one of hundreds of fantastic schemes in regard to passenger traffic that have reached me since I have been in Washington. I came here in the latter part of 1934. There have been schemes, without any merit whatsoever, that would confiscate our property if put into effect. I had a scheme from one man who wanted to sell it. He was after money. His idea was that he was going to double the passenger traffic of the railroads of the United States, but he would not tell us