XI. THE POSTMASTER-GENERAL'S PROPOSED PLAN OF PAYMENT BASED UPON OPERATING COST AND TAXES, TO BE ASCERTAINED BY THE POST OFFICE DEPARTMENT, PLUS SIX PER CENT. IS SERIOUSLY WRONG IN PRINCIPLE AND WOULD ENCOURAGE AND PERPETUATE INJUSTICE.
The foregoing discussion makes plain the error and injustice in the Postmaster-General's proposal to pay the railways for carrying the mail upon the basis of returning to them the operating expenses and taxes, as ascertained by the Post Office Department, attributable to the carriage of the mails, plus six per cent. of the sum of these expenses and taxes.
The discussion under heading III above demonstrates that the plan leaves out of consideration any allowance for return upon the property and would be destructive of the universally recognized rights of the railroad companies.
Furthermore, such a plan is fundamentally erroneous because it involves paying the highest rates to the railroad that by reason of physical disabilities or inefficient methods is most expensively operated and the lowest rates to the railroad which, by reason of the highest efficiency, operates at the lowest cost. A railroad's superior operating efficiency is frequently due to exceptionally heavy capital expenditures to obtain low grades, two, three or four main tracks, and to improve in other respects the roadbed and tracks to the end that trains may be hauled at the lowest expense. Such a railroad needs, and is entitled to sufficient net earnings to enable it to pay a proper return upon the increased value which is due to such expenditures. But under the Postmaster-General's plan, a railroad would be penalized for all the capital expenditures made by it for the purpose of decreasing its operating cost, because the more it decreased its operating cost the more it would decrease its mail pay.
The ascertainment of the cost to a railroad of conducting mail service is necessarily very largely a matter of judgment and opinion, because a large proportion of the total operating expenses are common to the freight and passenger traffic and can only be approximately apportioned. There is room for a very wide discretion in the making of such apportionments. It would not be right or proper to entrust the Post Office Department with the discretion of making such apportionment, because the Post Office Department has an obvious interest at stake, its object always being to reduce the railroad pay to a minimum.
The last preceding statement is fully justified by the facts disclosed by the foregoing pages, which show how consistently the Post Office Department has relied upon reductions in railway mail pay as the ever available source of desired curtailments of expenses and how unsuccessfully the railways have resisted this persistent pressure. They show that successive Postmasters-General have taken advantage of every legal possibility, such as taking the longest time between mail weighings which the law permits and the strained interpretation of the statute fixing the basis of payment ([page 19]), in order to effect reductions in railway mail pay. Consequently, the facts point irresistibly to one conclusion, namely, that the Post Office Department is a bureaucratic entity with an interest in the reduction of the amounts paid to the railways that is incompatible with an impartial ascertainment of what is fair compensation. This interest, coupled with the brief tenure of the responsible officers of the Department, must always incline the latter to support insufficient standards of mail pay and prevent their recognizing the ultimate necessity of paying fairly for efficient service. It would, therefore, be clearly inexpedient and strikingly unjust to place railway mail revenues wholly at the mercy of the Department by enacting a law which would authorize each Postmaster-General to fix railway mail pay on the basis of his own inquiries and opinions in a field in which so much must be left to estimate and approximation as that of the relative or actual cost of the different kinds of railway service.
It is conceded that every railway mail contract is between the Government, which is the sovereign, and a citizen, and that the nature and terms of the contract are always substantially to be dictated by the former. But this very condition invokes the principle of primary justice, that the sovereign shall take care to exercise its power without oppression. To this end the determination of the terms on which the Post Office Department may have the essential services of the railways ought to be reserved, as at least partially in the past, to the Congress, or, if delegated at all, they should be entrusted to some bureau or agency of Government not directly and immediately interested in reducing railway mail pay below a just and reasonable compensation.
APPENDIX A.
EXTRACTS FROM THE POSTAL LAWS AND REGULATIONS.
"Railroad companies, at stations where transfer clerks are employed, will provide suitable and sufficient rooms for handling 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 company's employees at that point while it is being handled by them. This is not to be construed as relieving railroad companies from having employees on trains keep and properly check a record of all closed pouches handled by them, without exception." 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 Superintendent of Railway Mail Service." Section 1187, second paragraph.
"Every irregularity in the receipt and dispatch of mail should be reported by the employee to his superintendent promptly, and if a probable loss of or damage to mail is involved, or if the cause of failure to receive a pouch is not known, the report should be made by wire, and the superintendent will notify the division superintendent of Railway Mail Service without 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 headquarters of division superintendents of railroad companies for at least one year immediately following 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. Station pouch records will be kept on file at the station to which they apply for at least one year immediately following 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 paragraph.
"Railroad companies will require their employees to submit 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 where 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 stations located not more than eighty rods from the nearest railroad station at which the company has an agent or other representative employed, and the company shall not be relieved of such duty on account of the discontinuance of an agency without thirty days' notice to the Department." Section 1191, second 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 1192.
"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 persons employed to perform such service are agents of the companies 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 the 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 1194.
"When a messenger employed by the Post Office Department cannot 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 responsible for the inward mail until delivered to the messenger or other authorized representative of the Department." Section 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 apartment 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.
"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." Section 1197, first paragraph.
"The division superintendent of Railway Mail Service will give reasonable advance notice to the proper officer of the railroad 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 conductor 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 device 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 the mails the railroad company will be required to reduce the speed or stop the train." Section 1200, 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 placed and lighted; but if the company has no agent or employee at such station, the company must furnish the light, and the care and placing of same will devolve upon the Department's carrier." Section 1200, third paragraph.
"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.
"Railroad companies are required to convey upon any train, without specific charge therefor, all mail bags, post office blanks, stationery, supplies, and all duly accredited agents of the Post Office Department and post office Inspectors upon the exhibition of their credentials." Section 1184.
APPENDIX B.
CLASSIFICATION OF OPERATING EXPENSES.
(Data from Reports of the Interstate Commerce Commission.)
| Average cost per mile of line. | ||||||
| Class | Fiscal year 1910 | November, 1909 | Monthly average for the other eleven months of the fiscal year | |||
| Amount | Monthly average | Amount | Per cent. of monthly average for the fiscal year | Amount | Per cent. of monthly average for the fiscal year | |
| Maintenance of way and structures | $1,562.88 | $130.24 | $124.04 | 95.24 | $130.80 | 100.43 |
| Maintenance of equipment | 1,746.00 | 145.50 | 148.44 | 102.02 | 145.23 | 99.82 |
| Traffic expenses | 220.61 | 18.38 | 18.85 | 102.56 | 18.34 | 99.78 |
| Transportation expenses | 2,893.71 | 324.48 | 327.78 | 101.02 | 324.18 | 99.91 |
| General expenses | 287.71 | 23.98 | 23.10 | 96.33 | 24.06 | 100.33 |
| Total | $7,710.91 | $642.58 | $642.21 | 99.94 | $642.61 | 100.00 |
APPENDIX C.
RECEIPTS FROM PASSENGER AND FREIGHT TRAFFIC BY MONTHS.
(Data from Reports of the Interstate Commerce Commission.)
| Month | Passenger receipts per mile of line | Freight receipts per mile of line | Per cent. of passenger receipts to receipts from both passengers and freight | ||||
| Total | Daily Average | Per cent. of daily average for year | Total | Daily Average | Per cent. of daily average for year | ||
| 1909, July | $251.66 | $8.12 | 112.15 | $608.67 | $19.63 | 88.46 | 29.25 |
| Aug. | 269.70 | 8.70 | 120.17 | 653.97 | 21.10 | 95.09 | 29.20 |
| Sept. | 254.95 | 8.50 | 117.40 | 704.51 | 23.48 | 105.81 | 26.57 |
| Oct. | 231.80 | 7.48 | 103.31 | 781.91 | 25.22 | 113.65 | 22.87 |
| Nov. | 206.69 | 6.89 | 95.17 | 752.69 | 25.09 | 113.07 | 21.54 |
| Dec. | 211.55 | 6.82 | 94.20 | 640.59 | 20.66 | 93.11 | 24.83 |
| 1910, Jan. | 187.42 | 6.05 | 83.56 | 618.06 | 19.94 | 89.86 | 23.27 |
| Feb. | 171.92 | 6.14 | 84.81 | 603.76 | 21.56 | 97.16 | 22.16 |
| March | 202.61 | 6.54 | 90.33 | 716.76 | 23.12 | 104.19 | 22.04 |
| April | 203.84 | 6.79 | 93.78 | 658.93 | 21.96 | 98.96 | 23.63 |
| May | 218.47 | 7.05 | 97.38 | 682.96 | 22.03 | 99.28 | 24.24 |
| June | 233.25 | 7.78 | 107.46 | 674.97 | 22.50 | 101.40 | 25.68 |
| Average | $220.32 | $7.24 | 100.00 | $674.81 | $22.19 | 100.00 | 24.61 |
APPENDIX D.
HOW RAILWAY WAGES HAVE INCREASED.
In the year 1901 the railways reporting to the Interstate Commerce Commission received, in gross from operating sources, the sum of $1,588,526,037.00 and expended in wages and salaries the sum of $610,713,701.00; in 1910 the corresponding totals were $2,750,667,435.00 and $1,143,725,306.00. Computations from these totals show that in 1901 the railways expended in wages and salaries $38.45 out of each $100.00 of gross operating receipts, while in 1910 the proportion had increased to $41.58 a difference of $3.13 in each $100.00 of gross receipts. This difference does not seem small but it is hardly realized, except when the calculation is made, that on the basis of the gross receipts of 1910 it would amount, as it does, to an additional expense of $86,095,890.72. It is to be borne in mind that this largely increased payment to labor is in spite of the fact that a part of the increase in wage rates has been offset by higher efficiency in method and facilities. Comparisons of rates of wages, from the annual statistical reports of the Interstate Commerce Commission, follow:
| Class of Employees | Average wages per day | ||
| 1901 | 1910 | Increase per cent. | |
| General office clerks | $2.19 | $2.45 | 11.87 |
| Station agents | 1.77 | 2.14 | 20.90 |
| Other station men | 1.59 | 1.91 | 20.13 |
| Enginemen | 3.78 | 4.34 | 14.81 |
| Firemen | 2.16 | 2.57 | 18.98 |
| Conductors | 3.17 | 3.73 | 17.67 |
| Other trainmen | 2.00 | 2.72 | 36.00 |
| Machinists | 2.32 | 3.03 | 30.60 |
| Carpenters | 2.06 | 2.39 | 16.02 |
| Other shop men | 1.75 | 2.20 | 25.71 |
| Section foremen | 1.71 | 1.99 | 16.37 |
| Other trackmen | 1.23 | 1.57 | 27.64 |
| Telegraph operators and dispatchers | 1.98 | 2.16 | 9.09 |
| Employees, account floating equipment | 1.97 | 2.10 | 6.60 |
| All other employees and laborers | 1.69 | 1.96 | 15.98 |
APPENDIX E.
HOW RAILWAY TAXES HAVE INCREASED.
(Data from Reports of the Interstate Commerce Commission.)
| Year | Amount paid | Average per mile operated | Per cent. of net receipts |
| 1900 | $48,332,273 | $251.00 | 8.7 |
| 1901 | 50,944,372 | 260.50 | 8.6 |
| 1902 | 54,465,437 | 272.12 | 8.3 |
| 1903 | 57,849,569 | 281.76 | 8.4 |
| 1904 | 61,696,354 | 290.69 | 9.0 |
| 1905 | 63,474,679 | 292.55 | 8.5 |
| 1906 | 74,785,615 | 336.36 | 8.8 |
| 1907 | 80,312,375 | 353.09 | 8.9 |
| 1908 (1) | 84,555,146 | 366.84 | 10.7 |
| 1909 (1) | 90,529,014 | 384.57 | 10.1 |
| 1910 (1) | 103,795,701 | 430.99 | 10.3 |
(1) Not including terminal and switching companies.
APPENDIX F.
UNITED STATES SENATE
Committee on Post Offices and Post Roads
September 11, 1912.
My dear Sir:
I hand you herewith a copy of Senate Bill No. 7371, introduced by me by direction of the Senate Committee on Post Offices and Post Roads, embodying a plan recommended by the Post Office Department for determining the compensation to be paid to railroad companies for transportation of the mails. This general subject has been referred to a joint Committee of Congress. The Committee has not yet organized and probably will not do so for several weeks, but as a member of that Committee and as Chairman of the Senate Committee on Post Offices and Post Roads and under authority of Senate Resolution No. 56, I desire to secure immediately such information as may be available for submission to the Committee at its first meeting. I will ask you, therefore, to answer the following questions:
(1) Do you deem the present plan of compensation an equitable one as between the Government and the railroads? If not, in what respects and as to what classes of railroads is it inequitable?
(2) Is the underlying principle of the plan embodied in the inclosed bill a proper basis for compensation? If not, wherein is it improper, and why?
(3) What, in your opinion, is a desirable plan for compensating railroad companies for transporting the mails?
I desire an early reply to these inquiries relating to the general plan, and, if you are not ready to do so now, shall be glad to have you submit later a detailed discussion of this bill and of House Document No. 105, 62d Congress, 1st Session, with which, I assume, you are familiar.
Yours very truly,
(Sgd.) Jonathan Bourne, Jr.
Chairman Senate Com. on Post Offices and Post Roads.