Report of Chief of Engineers, U. 8. Army.

I. C. C. Statistics of Railways, 1937, p. S 205, barrel-miles converted to ton-miles.
Average of 3 independent estimates.

III).

Estimated by dividing freight revenue by revenue per ton-mile of small steam railways (classes II and

Air Commerce Bulletin No. 11, May 15, 1938, p. 276.

? Federal Coordinator's Passenger Traffic Report, 1933. Figure adjusted to 1937 on basis of registrations. Report of committee to the President of the United States Dec. 23, 1938.

We shall now turn to this third sheet, and you will see that the performance is very significant in terms of ton-miles and passengermiles. Of course, these are approximations. This is not accurate to the billion ton-miles at all; but it is enough to give you an idea as to how much is involved in a consideration of the transportation of this country.

The total ton-miles in 1937 is estimated at 550,000,000,000, with 363,000,000,000 railroad ton-miles, 110,000,000,000 water ton-miles, 46,000,000,000 pipe-line ton-miles, and about 30,000,000,000 truck ton-miles.

That 30,000,000,000 truck ton-miles is not all intercity. Some of that is urban. Yet the estimate of the truck ton-miles is the least satisfactory of any of those given on that sheet. One authority has estimated it at 44,000,000,000. To the best I can make out the computation made by Dr. C. S. Morgan, of the Interstate Commerce Commission, in 1932, brought down to 1937, by considering the total registrations of trucks in that year, would be 44,000,000,000 truck ton-miles. Then Dr. Hale got out an estimate, and he computed it at some 26,000,000,000. I asked M. O. Lorenz, the director of our Bureau of Statistics, to make a computation, and he arrived at a figure of about 21,000,000,000. This figure of 30,000,000,000 is an average of the three.

Mr. BULWINKLE. Is that in billions or millions?

Commissioner SPLAWN. Billion ton-miles. That is billions. Mr. BULWINKLE. Your exhibit shows it in millions. Commissioner SPLAWN. Yes. Millions of thousands. If you look at the passenger-miles you will see that the total is 275,000,000,000 passenger-miles; but notice that there are 228,000,000,000 of private automobiles-private passenger-car miles. Only 24,000,000,000 are train passenger-miles, and a very significant figure is the intercitybus passenger-miles of 19,000,000,000. That was surprising to me, that the busses have come up to three-fourths of the railroad passengermiles, if that estimate is correct.

The importance of transportation agencies in the United States as economic factors is shown by the fact that in 1937 they charged or paid for expenses, depreciation, and taxes over $22,000,000,000, as detailed by the following table:

Operating expenses and taxes of transportation agencies 1

Fifty-second Annual Report of the Interstate Commerce Commission, p. 33.
Includes interurban and urban electric railways and bus operations associated therewith.

The above includes the activities of motor vehicles in cities. If the table were recast by confining it to intercity operations, the relative importance of railways would be increased.

Turning from this service, which is beyond our imagination, these billions of ton-miles, which are figures like those of the astronomers as to light-years to some distant planet, the next is sheet 4, which is Just as staggering. It runs into billions. It is an effort to estimate how much the American people spend in operations, taxes, and depreciation each year on their transportation in this country.

When we bear in mind that our national income is something over $60,000,000,000 a year and here we have for transportation operations, depreciation, and taxes twenty-two and a quarter billion dollars-equal in amount to a third of the national income-that indicates of how much importance transportation is to the American people and to what extent they expend their income and energies in getting around and in moving things about. More than half of this twenty-two and one quarter billions is accounted for by private passenger automobiles. And then there is another very big item, three billion eight hundred thirty million by the not-for-hire truck. Most of that is local, short haul.

Then, there is the common carrier and the contract carrier, by truck, $708,000,000. That is quite a sizable sum and is 3.18 percent of the total. All motor vehicles on the highways account for threefourths of the total annual transportation expense.

You will observe that most of that is private passenger cars and private trucks, not for hire.

Then, the waterways at less than a billion, and the pipe lines a very small fraction, six-tenths percent, and the airways at present a mere speck in the sky, two-tenths percent-but so far as their competition with the high-class passenger trains are concerned, it is of some consequence.

Mr. Chairman, you reminded me of the gross revenues of these regulated common carriers and contract carriers in the aggregate. You had estimated it to be something near $7,000,000,000 per annum.

The second exhibit is financial and deals only with the railroads. As you turn to it, do not think, please, that, because this series of tables deals merely with the financial statements of railroads, your only problem is a railroad problem. Your problem is that of coordinating and correlating the entire transportation set-up: working out a national policy under which the peculiar advantages of each form of transportation will be preserved, under which desirable forms, economical forms, may not be destroyed through cutthroat competition because some competitior may have the longer purse; doing justice and fairness to all these many companies, competing for traffic; in the aggregate furnishing the finest set-up of transportation that men have yet developed.

The reason that you are limited here to railroad statistics is because in 1887 you began primarily to regulate railroads and you started your gathering of statistics from those companies and you have been gathering them through your Commission throughout half a century, and you have them. These other companies in other forms of transportation are newer. They are just beginning to come under and to seek the protection of regulation, and the data as to them are very difficult as yet to get. There is no disposition to neglect any type of agency, but it is because we are in the dark and the data are not satisfactory data and not always available; but we will bear in mind. that when we find that some of these railroad companies are in dire distress, as shown by these figures, that there are other companies engaged in other forms of transportation which could come in and make a similar showing of financial difficulties.

REVIEW OF RAILWAY FINANCES

The capitalization of all the railways is a complicated system of wheels within wheels. If one wishes to view them as one system with all intercorporate holdings eliminated, it appears that the net capitalization on December 31, 1937, was $18,319,000,000, of which $7,069,000,000 was stock and $11,250,000,000 unmatured funded debt. These totals exclude $3,045,000,000 of stock and $2,759,000,000 of funded debt held by some railway companies as investments or as a means of controlling their subsidiaries.

The class I line-haul companies collect over 96 percent of the total steam railway revenues. The par value of their stock on December 31, 1937, was $8,123,000,000. Their funded debt was $10,150,000,000, mostly mortgage bonds. The equipment obligations amounted to $549,724,000. The sum of the stock and debt was $18,273,000,000, of which the debt was 55.5 percent. Their total corporate surplus was reported as $3,126,000,000, but this, of course, was not available in cash. It is mostly invested in the railway property.

In recent opinions the Commission took the value of the property used by class I railways as being $19,972,000,000 at the beginning of 1937 (226 I. C. Č. 41) and $19,882,000,000 at the beginning of 1938 (227 I. C. C. 451). The rates of return represented by the net railway operating income compared with these values were as follows:

The net revenue after fixed charges was much less than the net railway operating income for which the above rates of return are computed. In 1937 there was a net income after charges of $99,000,000, and in the 12 months ended with October 1938 there was a deficit of $153,000,000. The income accounts for these periods are shown in the following table:

The shrinkage in net income since 1929 is striking:
Net income after fixed charges, class I steam railways

Although in 1937 only the western district showed a deficit, in 1938 all districts except the Pocahontas showed a deficit.

The totals by districts are the net results of incomes and deficits of individual systems within each district. Thus for the first 10 months of 1938, 47 systems reported net incomes above charges, their total net incomes being $76,977,000, while 85 systems reported net deficits aggregating $229,594,828. At the present time, 39 class I railways are in the hands of the courts, 11 of them in receivership, and 28 in trusteeship. There were only a few roads strong enough to continue dividends in the depression year 1938. They declared dividends of $114,687,000 during the 12 months ended with October 1938.

The causes for the decline in net returns of the railways are in larger part to be explained by the loss of traffic but this has been accompanied by the retention of a high level of wage rates and decline in the average revenue per unit of traffic both in the freight service and in the passenger service, the reduction in average charges being chiefly the result of competition with other transport agencies. In connection with the decline in average ton-mile and passenger-mile revenues it should be noted that many individual rates have been held up to their predepression levels.

The recovery in business that has taken place since May 1938, as shown by the following index numbers, offers hope for a considerable amelioration of the railroad difficulties: