Mr. EASTMAN. I cannot tell you.

Mr. HOUSTON. Six months, I think.

Mr. EASTMAN. No.

Mr. JOHNSON. It would depend on whether or not you got on to a sand shoal or not.

Mr. STARNES. Considerable traffic has developed on the Tennessee River now, which has come from the Gulf, the Midwest, Ohio, and also from the Great Lakes region.

Mr. EASTMAN. Yes. They have got, I understand, quite a lot of traffic on that, and of course they have on the Illinois waterway that goes up to Chicago.

Mr. STARNES. And the strange thing about it is, those people are making some money down there in the savings in transportation charges to the consumers on items that had never been considered by the engineers or other governmental agencies in figuring what commerce would develop in that region.

That is all, Mr. Chairman.

Mr. MILLER. Mr. Chairman, I would like to add to the record the statement, here, in regard to the Bureau of Valuation, if I may put it in the record.

Mr. WOODRUM. Yes; I would be very glad to have you do that. Mr. MILLER. I do not want to trespass on your time.

Mr. WOODRUM. Yes; or anything else that you, Mr. Eastman, or Mr. Bartel, think you would like to amplify for the record.

Mr. HOUSTON. The way the transportation system is functioning, I do not see any justification for the Government taking over the railroads to operate, if they should continue to operate as they have in the past.

Mr. EASTMAN. As long as it keeps going on the way it is now, I should not think so.

Is that all?

Mr. WOODRUM. Yes, sir.

(The memorandum presented for the record by Mr. Miller is as follows:)

VALUATION OF PROPERTY OF CARRIERS

MEMORANDUM PRESENTED BY CARROLL MILLER, COMMISSIONER IN CHARGE, BUREAU OF VALUATION, INTERSTATE COMMERCE COMMISSION

The recommendation of the Director of the Budget for the appropriation for the Bureau of Valuation is $652,405. This provides for a continuation of the $640,000 which has been appropriated for the last 4 years and carries $12,405 to cover (1) rents that have fallen on the Bureau as it has been required to vacate quarters in certain Government buildings, and (2) automatic increases in salary under the Ramspeck Act.

I am here to support the need of the recommended appropriation and to assure you that we shall need every dollar of it.

As a matter of record, I should inform you, inasmuch as the Congress has imposed certain duties, of the status of the valuation inventories and records, and of the necessity of maintaining them on a practical working basis, and to call to your attention the fact that we are falling behind currency in this work to such an extent as to place it in jeopardy.

The appropriations for carrying on the valuation of railroads, pipe lines, and allied common carriers subject to the act, and keeping the property records,

inventories, data, and information as near current as possible with the staff permitted by appropriations during the past decade, have been as follows:

The primary valuation of the railroads was completed and the repeal of excess earnings provision of the act of 1920 occurred at the beginning of the decade and accounts for and justifies—the heavy cut of appropriations in the first half of the decade.

In 1913, when Congress enacted the valuation section of the Interstate Commerce Act, and in 1920, 1933, and 1940, when it reviewed and continued it, Congress foresaw that the great amount of money and energies expended in inventorying the vast properties subject to the act and gathering their records would not be justified if such inventories, data, and records were not continued and maintained at approximate currency, promptly available for use. It declared in 1933 that it was thus providing "a practical working tool and guide for the Commission in its many regulatory duties, and to Congress itself when the railroad situation is becoming more acute." In enacting the Transportation Act of 1940, last fall, Congress did not change its mandate to the Commission:

"Upon completion of the original valuations herein provided for, the Commission shall thereafter keep itself informed of all new construction, extensions, improvements, retirements, or other changes in the condition, quantity, use, and classification of the property of all common carriers as to which original valuations have been made, and of the cost of all additions and betterments thereto and of all changes in the investment therein, and may keep itself informed of current changes in costs and values of railroad properties, in order that it may have available at all times the information deemed by it to be necessary to enable it to revise and correct its previous inventories, classifications, and values of the properties

* * * ""

The wisdom of that provision is registered emphatically in the fact that the railroads of the country, taken as a whole, have practically been rebuilt since they were originally inventoried. In other words, the original railroads have disappeared through reconstruction and the same thing is happening to pipe lines and other transportation facilities and equipment subject to the act.

The Bureau of Valuation is the Commission's agency-the Government agency -that keeps the property records of the railroads, pipe lines, and other facilities subject to section 1 of the Interstate Commerce Act.

The task is Nation-wide and of greater magnitude than is generally appreciated. In 9 of the years since 1916, the total changes have been more than a billion dollars a year, and in the tenth year, lacked only $12,000,000 of reaching a billion. During the 1930-40 decade the "in" and "out" capital account changes, ranging between approximately $400,000,000 and $900,000,000 per annum, have totaled $6,187,305,030, or an average of $618,730,500, of which average $325,474,423 is capital property "in" (added), and $293,256.379 "out" (retired). Since the basic inventories of the railroads were made in 1914-20, the aggregate of changes has been $20,000,000,000.

To meet the congressional mandate "to have available at all times the information deemed by it to be necessary to enable it to revise and correct its previous inventories, classifications, and values," the Commission has evolved a system of continuous records and inventories which is designed to enable its Bureau of Valuation to introduce, without delay, valuation exhibits, data, and information in the various cases coming before it. Such valuation records and exhibits, and the testimony based on them, must be of approximate currency for practical uses and to carry probative weight. They must carry the assurance of integrity, that is, they must be properly policed and checked; otherwise they are vulnerable to attack. The door is open for error when, to bridge periods for which the checked records of property changes are not available, the Bureau has to have recourse to unchecked reports and the routine annual reports of the carriers, and bridge such gaps bv "statements of money changes."

Exhibits are introduced in various sorts of proceedings before the Commission. Among them are rate and cost analyses cases; divisions of switching and terminalcharge adjustments; joint-rail and barge-rate adjustments; reorganization of

carriers involved in, or coming out of bankruptcy or receivership; adjusting deficit settlements with carriers under section 204; making studies of maintenance and depreciation; adjusting oil gathering charges and trunk-line transportation rates by pipe lines, etc.

The valuation exhibits and testimony referred to above generally present lumpsum figures. The work necessary to produce them does not reduce the procedures necessary in connection with determining costs, values, etc., broken down by primary accounts as referred to hereafter.

We should keep approximately current in posting inventories and carrying forward the details of changes. Up to this time the Bureau has felt that it is on safe ground-at all events, its exhibits have not been seriously challenged by anyone and on subsequent check of later and more complete reports they are seldom found to be materially out of line. However, the greater the lag in posting inventories and records, the greater is the element of possible error and challenge and there is a lessening of probative weight. We are now saying that the impairment line is in sight. Unless something is done to meet the situation that confronts us, that which has been gained by expenditure of years of work and money will, at least, be greatly impaired.

Another consideration: When records are not kept posted there is often a duplication of work-i. e., (1) current short notice use, sometimes requiring special hurried and expensive field checking and, later, (2) going over the same reports again in posting inventories and records.

Since original estimates were made in May new duties have been added and calls on the staff have greatly increased, principally in connection with nationaldefense work.

On June 16, 1941, in the Chicago Great Western Railway reorganization case the Commission issued an order on the carriers setting forth requirements of the manner in which books of new companies, resulting from merger, sale, or reorganization, shall be opened. One of the requirements is that it shall be on the basis of original cost broken down by primary accounts; another, that the difference between original cost and acquisition cost shall be set up on the asset side and, on the liability side, shall be shown accrued depreciation reserve, with depreciation based on original cost. As a result of this order the Bureau of Valuation is called on to ascertain the original cost and other necessary information. Already more than 70 carriers are at, or approaching this stage of reopening books resulting from receiverships, bankruptcy proceedings, reorganizations, mergers, or voluntary active movements on the part of individual carriers to set up their books on the basis prescribed in the Chicago Great Western case. This work will continue as companies reorganize.

Under another order of the Commission, the Bureau of Valuation is now preparing valuations of the 800 operating railroads in the United States, including the properties of lessors which raises the total to more than 1,500 corporations. Such valuations are to be used as a substitute for the carriers' investment as a basis for calculating earnings and return. Carriers' investment, or book value, does not take into consideration depreciation and in many cases continues the defects that were largely responsible for the Valuation Act of 1913. If value is substituted as the basis for estimating carriers' earnings, annually, it would add a considerable amount of work and equally important—should require current information and records.

Consideration is being given to the adoption of a depreciation order requiring all operating companies to set up depreciation reserve on road accounts (equipment depreciation has been required for some years). Depreciation is based on original cost broken down by primary accounts, ownerships, and uses. This will require bringing all original cost records to date a tremendous task for both field and office staffs.

Up to May 1 the Bureau of Valuation had 14 calls from War, Navy, and other national-defense agencies for valuation services, conferences, and appraisals. That number has been greatly increased and the increase is continuing. The War and Navy Departments have called for and have been given a list of all Bureau of Valuation field employees and they are drawing on them for services of all kinds. The Bureau is reimbursed for salaries and expenses but the time that these men are taken away from their work is lost and adds to, and accelerates, the accumulating lag in posting continuous inventories and records. Under date of July 8, requirements were issued on all railroad carriers to bring their records of property changes to currency by December 31, 1942-currency in this instance meaning up to January 1, 1942. The carriers are cooperating and it would be a

tremendous discouragement if the bureau is unable to keep pace with the carriers in bringing these records to the current dates indicated.

The Bureau of Valuation is one of the principal sources drawn on in the Commission's "Cost work"-the ascertainment of the cost of providing, maintaining, and rendering service. It is called on for exhibits showing recognized elements of value, analyses of maintenance and depreciation, and other studies, and, finally, for recommended values for cost analyses of rates under investigation and in prescribing rates for the future. This is one of the growing major activities of the Commission and the calls on the Bureau of Valuation are heavy.

The Bureau of Valuation has also become keenly alive to the fact that already in this fiscal period its cost of operation is increasing. It is called upon to absorb certain salary increases and adjustments granted by the Civil Service Commission. Our salary situation has become deplorable. More than half of our people have not had a salary readjustment for more than 10 years. They are becoming more or less desperate. Some who have left us are getting double the salaries that we have been and are able to pay under restricted appropriations during the last few years. In addition to holding per diem down to $4 as compared with 85 generally prevailing in field work of the Government, we have been forced to create subheadquarters. When a man is in a subheadquarters he is deprived of per diem and travel allowance notwithstanding that he has to maintain a "home headquarters" when he is away from home. These are glaring injustices and inequalities that will not be corrected by the Ramspeck automatic increases.

WEDNESDAY, DECEMBER 10, 1941.

NATIONAL ADVISORY COMMITTEE FOR AERONAUTICS STATEMENTS OF DR. JEROME C. HUNSAKER, CHAIRMAN; DR. GEORGE W. LEWIS, DIRECTOR OF AERONAUTICAL RESEARCH; JOHN F. VICTORY, SECRETARY; E. H. CHAMBERLIN, ASSISTANT SECRETARY; AND RALPH E. ULMER

GENERAL STATEMENT

Mr. WOODRUM. We will take up the items for the National Advisory Committee for Aeronautics. Before taking up the specific items_in the bill, we shall be glad to have a general statement from you, Dr. Hunsaker, if you wish to make one.

Dr. HUNSAKER. Yes, sir. Your committee is, of course, familiar with the organization and functions of the National Advisory Committee for Aeronautics and with its facilities for research at its three major research stations at Langley Field, Va., Moffett Field, Calif., and Cleveland, Ohio. Full justifications of the estimates for 1943 have been submitted to members of your committee.

The course of war today and the parallel course of American preparedness are a result of the proven effectiveness of air power. Patrol bombers and torpedo planes are disabling surface ships, long-range bombers are disrupting industrial activity and military operations, and pursuit fighters have the responsibility of reducing the effectiveness of enemy air operations. The strategic importance of air power is reflected in the prominent place of aircraft production in this country's national-defense program.

It is perhaps less generally appreciated that, with regard to combat aircraft, the question "How good?" is just as important as "How many?" The need for technical superiority of aircraft types was recognized by the German nation in the establishment there of five

large aeronautical research stations. The National Advisory Committee for Aeronautics, with three stations, has been expanding its research facilities and has, since the emergency began, devoted an increasing proportion of its available effort to the immediate problem of increasing, in all respects, the performance of American military aircraft.

The number of types of military airplanes referred to the Committee by the Army and Navy has been increasing steadily, and the complexity of each individual project has increased markedly on account of the air speeds and engine powers that are involved, and the degree of refinement that is necessary to meet military demands for the highest attainable performance. The result is that almost all of the Committee's effort is now applied to urgent military projects. An increase in personnel and in research facilities is essential to carry the work load that is being imposed by the military services and to maintain some progress on fundamental researches of the type that has paid such large dividends in the past. A continuation of fundamental aeronautical research is essential for improvement of whole classes of aircraft, as differentiated from specific types, and for the development of even more advanced ideas that should materialize into greater technical advantages in the next 2 or 3 years.

The estimates submitted herein are a form of insurance that the aircraft to be produced by this country will be the best it is possible to build. That the task is great and that the cost of providing the required results is modest, is indicated by the value of aircraft authorized for our military services and for defense aid, and by the fact that the expenditures for research, including construction of additional research facilities, represent a fraction of 1 percent of this

sum.

SALARIES AND EXPENSES

Mr. WOODRUM. We will take up first your general item for salaries and expenses, which is as follows:

For scientific research, technical investigations, and special reports in the field of aeronautics, including the necessary laboratory and technical assistants; contracts for personal services in the making of special investigations and in the preparation of special reports; traveling expenses of members and employees, including not to exceed $2,500 for expenses, except membership fees, of attendance upon meetings of technical and professional societies; transfer of household goods and effects as provided by the Act of October 10, 1940 (Public, Numbered 39), and regulations promulgated thereunder; office supplies and other miscellaneous expenses, including technical periodicals and books of reference; equipment, maintenance, and operation of the Langley Memorial Aeronautical Laboratory, the Ames Aeronautical Laboratory, and the aircraft engine research laboratory at Cleveland, Ohio; purchase and maintenance of cafeteria equipment; purchase, maintenance, operation, and exchange of motor-propelled passengercarrying vehicles; personal services in the field and not to exceed $274,273 for personal services in the District of Columbia, including one Director of Aeronautical Research at not to exceed $10,000 per annum; in all, $8,993,328.

JUSTIFICATION OF ESTIMATE

Dr. HUNSAKER. May I submit the following justification statement covering our activities? It duplicates in small part my general statement, and goes into some detail without disclosing confidential information.