The ratio of 64.1% for the second half of 1908 is the true measure of the ability of the railways to cut their expenditures to fit the times. But they were on bed rock, as the succeeding months of small receipts proved, when the ratio went up to 72.43% in January, and averaged the high figure of 68.3% for the first six months of 1909. The heavy receipts of October and November without a corresponding expansion of expenditures resulted in the phenomenally low ratios of these months. But the severity and necessities of operating conditions in December, 1909, ran the ratio of expenses up to 69.23%.

The net earnings for the three years under consideration are apt to lead to erroneous conclusions as to the effect of the depression. Neither the loss in 1908 nor the recovery in 1909 reflects the true swing of the pendulum. The one minimizes the loss, because it conceals the cessation of all constructive work, the curtailment of betterments and improvements, and the postponement of all purchases for replacements except of the most immediate and imperative nature; the other exaggerates the recovery because of heavy receipts without the resumption of the concurrent expenditures that should attend them. The railways in the fall of 1909 were simply doing business on the margin of facilities provided during the fat months of 1907 in anticipation of a continuation of prosperous times. Some idea of the extent of this margin may be gained from the parking of 400,000 freight cars in the yards with 200,000 in the shops in April, 1908. At no time since has this margin been wholly exhausted.

But a continuation of traffic on the scale of the past six months will necessitate an immediate expenditure of $100,000,000 to $150,000,000 for the replacement of freight cars alone.

Income Account for the Calendar Year 1909.

The monthly summaries issued by the Interstate Commerce Commission from time to time afford the details for the construction of the following statement of the transportation revenues and expenses of the railways for the calendar year 1909, from which the averages per mile and the ratios have been computed on the basis of 234,950 miles of operated line.

Statement of Operating Receipts and Expenses of the Railways of the United States for the Calendar Year Ending December 31, 1909, with Amounts per Mile and Ratios.
(Average miles of line operated, 234,950.)(a)
AmountPer MileRatio to Gross Earnings
Receipts from:
Freight$1,796,258,314$ 7,64568.96
Passengers601,722,9592,56123.10
Other transportation revenues182,706,0907777.01
Non-transportation sources24,080,802103.93
Total revenues$2,604,766,165$11,086100.00
Expenses:
Maintenance of way and structures$ 339,167,666$ 1,44813.06
Maintenance of equipment387,155,0801,64414.83
Traffic expenses53,257,4082232.01
Transportation857,339,0373,65032.92
General expenses65,441,0532802.52
Unclassified16,809——
Total expenses$1,702,377,052$ 7,24565.35
Net operating revenues902,389,1123,84134.65
Profit from outside operations3,367,71314—
Net revenues$ 905,756,825——
Taxes92,964,5103953.56
Net income$ 812,792,315$ 3,460
(a) At the close of the year the reports covered 236,166 miles of operated line.

Unfortunately there are no similar figures for the calendar year 1907 with which comparisons may be made, but the official returns for the year ending June 30, 1907, when railway earnings reached their maximum before the panic of that year, afford the following instructive comparisons:

Year toYear to
June 30, 1907Dec. 31, 1909
Gross earnings$2,589,105,578$2,604,766,165
Per mile11,38311,086
Operating expenses1,748,515,8141,702,377,053
Per mile7,6877,245
Ratio67.5365.35
Net revenues840,589,764902,389,112
Per mile3,6963,841
Taxes80,108,00692,964,510
Per mile367395