Comparing results of operation of all railroads of the United States for the year ending June 30, 1907, with 1898, when this question was last up, it is shown by reports of the Interstate Commerce Commission that gross revenue from operations, as well as income from investments, increased $1,380,000,000. This is a very large sum, but let us see what becomes of it. Increased wages paid to employes consumed $577,000,000, or 42 per cent., purchase of material included in operating expenses, $354,000,000, or 26 per cent. of the increased income, and these material purchases represented largely labor involved in their production. Increases in betterments and miscellaneous deductions consumed $77,000,000, or 6 per cent. of the increased income. Larger payments for interest on funded debt and current liabilities consumed $96,000,000, or 7 per cent., and larger taxes 2.5 per cent., leaving $240,000,000, or 16.5 per cent. of the increased income for the owners of the properties, the stockholders. In 1898 dividends were less than 2 per cent. of the capital stock, and in 1907, even with the large increase noted, they were only 4 per cent. Contrast this with the manufacturers' returns of 15 per cent., the farmers' of 10 per cent., and the National banks' of 18 to 20 per cent. on their capitalization.
Reduction in railway mail pay was not justified in 1898; it was far less justified in 1907. On the contrary, there has been a large fall in mail pay per ton mile, and conditions under which mails are transported are becoming more and more onerous. The cost of building a railway postoffice car to the present plans and specifications of the Postoffice Department is at least 50 per cent. more than it was in 1898, although pay received for handling these cars, that weigh from 25 to 30 per cent. more than formerly, has been arbitrarily cut over 16 per cent. by the Act of Congress of 1907, and has since been further cut through readjustment of routes. For the year ending June 30, 1908, the railroads received gross $48,155,379, including railway postoffice pay, for carrying 80 per cent. greater tonnage of mails than in 1898, a sum $12,747,629 less than it would have been but for the reduction of rate from 12.59 cents in 1898 to 9.94 cents in 1908. In face of this, as we have shown, arbitrary cuts of $8,500,000 more have been made, a grand total of over $21,000,000 less paid now than ten years ago.
About eighteen months ago the conclusion was reached that heavier and stronger cars were demanded by changed conditions resulting in heavier trains, greater speed and increased frequency and consequent risk of accident to clerks and mail in collisions and wrecks. After careful investigation and expert testimony the specifications were revised so that full 60-foot cars would weigh about 100,000 pounds instead of 80,000 pounds, and be greatly strengthened by the free use of steel plates and oak timbers. To meet the views of car builders, east and west, two plans and specifications, slightly differing, were adopted as standard, and railroads were given the option of conforming to one or the other. The best known anti-telescoping features were adopted in both plans, producing in the judgment of responsible car builders a car of exceptional resisting and carrying power. When new lines of cars are authorized by the Department, or new cars are ordered to take the place of old cars in service, companies operating the routes are furnished copies of these specifications and the superintendent of division is instructed to see that cars are built in conformity therewith. Inspections are made while the car is in the shop, and when it is completed a full report is made and forwarded to the Department. A decision is then reached as to whether the car is satisfactory and can be accepted.
(Annual Report Postmaster-General for 1905.)
This increase in weight of a postal car might not be thought of much moment, but it means to the railroads the movement of 1,000,000 additional gross ton miles per car per year, costing them $10,000 per annum in operating expenses, whilst, as shown, they receive 16 per cent. less railway postoffice pay now than formerly.
United States Postal Laws and Regulations, Section 1164, provide that the average weight of the mails used in fixing rates shall be established by the actual weighing of the mails for a period of not less than thirty days and "not less frequently than one in every four years." The construction placed upon this by the Department has been the one which reduced to the minimum the pay which the railroads receive for services rendered. If mail traffic were stationary, weighing every four years would not matter much, but the increase of mail matter throughout the United States has been very great, and, because of the policy of the Department, to weigh the mails not more frequently than every four years, heavy losses have resulted through the railroads having to haul tonnage for three successive years following each weighing for which they receive no pay.
As a result of this policy of quadrennial weighings, the roads in Interstate Commerce Groups 7, 8, 9 and 10 (including the territory west of the Missouri river and the Mississippi below St. Louis) between 1878 and 1905 suffered a loss of $19,200,000, or 12 per cent. of the aggregate railway mail pay, compared with what they should have received if the mails had been weighed annually. In other words, this loss is equivalent to a reduction in the rate received per ton mile in these groups of states of 12 per cent. The loss to roads in the western part of the United States is most striking, due as it is to the rapid growth of that section. The same reduction, though to a slightly less degree, obtains in other parts of the United States.
COMPARATIVE RETURNS TO THE RAILROADS FROM CONDUCTING MAIL. PASSENGER AND FREIGHT SERVICE IN THE UNITED STATES.
In order to make a fair comparison of operating results from different classes of traffic, it is necessary to consider them under substantially similar conditions. The best measure of railroad service is work done, or weight multiplied by distance carried; in other words, the ton mileage. A comparison of services differing so widely as the mail, passenger and freight on the basis of ton mileage of such business is, however, unfair, because in the two former an excessive proportion of dead weight must be transported for each ton of paying load, whilst with freight traffic the proportion of dead weight is small. The hauling power of a locomotive is measured not by revenue ton miles, but by ton miles of gross weight, it making little difference to the locomotive as to what this gross ton mileage is composed of, the gross tonnage and the speed at which it must be moved being the factors that consume the energy of the locomotive.
A computation has been made of ton mileage on each individual mail route by multiplying weight carried by length of route; to the sum of these we add the dead weight of cars. The report of the Second Assistant Postmaster-General for year ending June 30, 1908, page 32, gives the number of cars engaged in mail service, which we have multiplied by the average mileage made by the average car, based on experience of the Union Pacific and Southern Pacific Systems, to ascertain total car mileage for the United States. Multiplying this by the dead weight of a car gives the ton mileage of dead weight, which, added to the ton mileage of mails, gives the gross ton mileage, measure of work and cost imposed on the railroads in return for the pay they receive for handling the mails. These computations are shown in the following statements, the results being conservative, as for want of accurate data it has been necessary to omit some work which the railroads do, which, if ascertainable, would increase the cost. For example, we have made no charge for the dead weight of that portion of baggage cars devoted to the handling of pouch mail, such pouch service, according to the Postmaster-General's report, covering annually on railroads and express trains 122,027,597 miles; nor for the dead weight of storage mail cars provided by the railroads. Neither has any account been taken of the value of transportation given mail clerks, which, based on the Postmaster-General's report of 1908, amounted to 629,778,443 miles, which at 2 cents a mile would be $12,500,000; nor for the value of transportation or postal commissions of Postoffice Department officials; nor does it take into account special service rendered by the railroads, such as delivering mail at stations, value of space furnished by the railroads and required of them by the Postoffice Department at important junction and terminal points for mail distribution and accommodation of government transfer clerks.