interstate commerce, by holding that the Interstate Commerce Commission must look at the total operation of the Milwaukee road in the State of Illinois.

In the Utah case, it carried it a step further, where there was a general freight revenue case before the Interstate Commerce Commission, it said that the Commission had to make a finding as to all operations within the State of Utah. In other words, they applied the Milwaukee doctrine, where only commutation fares were in question, to a general freight-rate increase.

Mr. O'HARA. Did they state in the Utah case that they had to take an overall survey of all the railroads operating within the State of Utah?

Mr. LOOMIS. That would be the effect of it, as I understand, Mr. Congressman.

Mr. ROBERTS. Are there any further questions from the subcommittee?

Mr. WOLVERTON. Mr. Chairman, I was unable to be present yesterday and, therefore, I am not as familiar with the statement made by this witness as I would like to be.

I will ask just 1 or 2 questions in order that I may understand this situation that he has presented.

I have in mind the Smathers bill. Did you, in your statement yesterday, indicate in what respect you agree with that bill and in what respect you disagree with it?

Mr. LOOMIS. Yes, sir. That was with particular reference to the three matters covered by this hearing notice. I can repeat it very briefly.

Mr. WOLVERTON. Relating to the abandonment of service and interstate rates, construction reserve, and competitive rates?

Mr. LOOMIS. That is right.

We support the Interstate Commerce Commission's jurisdiction over abandonment of service and intrastate rates.

We support the Smathers proposals.

On the construction reserve I introduced the proposal that had originally been submitted to the staff of the Senate committee, but also stated that we support the proposal in S. 3778, and with respect to the ratemaking feature of competitive rates I stated that while we favored the bill before the House committee on which hearings were held in the spring of 1957, we support the proposal of the Senate committee in S. 3778.

Mr. WOLVERTON. In any particulars in which you have different viewpoints have you submitted prepared amendments to carry out whatever you have in mind?

Mr. LOOMIS. No; I think the position now, Mr. Congressman, is that we support S. 3778 as it stands.

Mr. WOLVERTON. Without any change whatever?

Mr. LOOMIS. Yes, sir.

Mr. ROBERTS. The gentleman from Maryland.
Mr. FRIEDEL. I have no questions.

Mr. ROBERTS. The gentleman from Minnesota.

Mr. O'HARA. Mr. Loomis, it is quite obvious from the comments we get that one of the highly controversial proposals is this proposal to change the ratemaking procedure to meet the carriers who file a

rate which they think is commensurate with their operations, not as to what their competitors think.

It is quite obvious that is going to be one of the highly contested provisions of this legislation and I wonder if you would care to make any further comments, Mr. Loomis?

Mr. LOOMIS. No; I will be followed by two witnesses who are much more expert on the ratemaking feature, who will go into greater detail on that.

Mr. O'HARA. Very well.

That is all, Mr. Chairman.

Mr. ROBERTS. The gentleman from Maine.

Mr. HALE. There is nothing in this Utah decision which should induce you to change the language of S. 3778?

Mr. LOOMIS. At first blush it would appear not, but I would have to say that our lawyers are giving that very careful study right now to see whether the proposal in S. 3778 fully covers the effects of the Utah decision, so that I can only give you a tentative answer because it is under concentrated study at the moment.

Mr. HALE. It is obviously very important to this committee to have the most expert and considered opinion on that point.

Mr. LOOMIS. That is correct. That is why I hesitate to express more than a tentative view today.

Mr. ROBERTS. The gentleman from California.

Mr. YOUNGER. As I understand, your organization is in accord with the general policy, transportation policy, as set forth in the act? Mr. LOOMIS. Yes.

Mr. YOUNGER. And that you believe that the inherent rights of each mode of transportation and the benefits of that mode should be preserved?

Mr. LOOMIS. Right.

Mr. ROBERTS. The gentleman from Kansas.

Mr. AVERY. No, thank you, Mr. Chairman.

Mr. ROBERTS. Thank you, Mr. Loomis, for your appearance.

Mr. LOOMIS. Thank you, sir.

Mr. ROBERTS. The next witness is Mr. Arthur Williams, chairman of the Railway Progress Institute and president of Standard Railway Equipment Manufacturing Co. of Chicago, Ill.

STATEMENT OF R. ARTHUR WILLIAMS, CHAIRMAN, RAILWAY PROGRESS INSTITUTE, AND PRESIDENT, STANDARD RAILWAY EQUIPMENT MANUFACTURING CO., CHICAGO, ILL.

Mr. WILLIAMS. Mr. Chairman, my name is R. Arthur Williams. I am president of the Standard Railway Equipment Manufacturing Co., with headquarters in Chicago, Ill., and plants in Hammond, Ind., Little Rock, Ark., and Cicero, Ill.

I am appearing here today as the chairman of the Railway Progress Institute, the national organization of the railway equipment and supply industry.

Perhaps I should explain that the Railway Progress Institute represents a fair cross-section of the large, medium, and small manufacturing companies which supply the railroads with most of their needs for efficient, economical, and safe operation.

28621-58-18

interstate comma equipment and supply industry, including the hunmission must companies which provide the railroads locally with State of Illined services undoubtedly affords employment for as many In the Utste tien are employed by the railroads themselves and, general frente a major segment of our national economy. mission, it sets offices, and warehouses of our companies are located in operations are the Limon and in most of our industrial cities. the Milwaukrit is also relevant to these hearings to mention a fact tion, to a g More in the consideration of railroad problems. Mr. O'H www.the builders of our first railroads decided to conan overall to the cendering of a transportation service, and to Utah? ent and facilities they needed from independent is applied not only to locomotives, cars, rail, and ng but also to all the thousands of other things mid, maintain, and operate the railroads.

ing of rail transport in this country, the supintegral part of the economic entity known

red years the supply industry has had a very extensive technological research and to be inand the prosperity of the railroads. hat has contributed tremendous growth hroughout the country, for the railBeton together with ties of steel, they nasty that later grew into the in

stependence of railroads, suptinued. And it continues to

of these hearings to cover three we made in connection with what has

A state Commerce Commission over

Tap the been called a construction reserve

that directly affects the railway equipwould like to devote most of my time A particular point.

A the equipment and supply industry As its fuctuates widely according to the wr instance, the annual purchases of materials expenditures for additions and improvements by suding fuel have ranged from $389,271,000 7700hows clearly the "feast and famine" character Wine I would like to submit for your consideraSom 1923 to 1957-for the past 35 years. Dowed here as an integral part of my statement, or 3 sppendix, whichever is most convenient for

Mr. ROBERTS. Without objection, the statement will be included in the record.

Mr. WILLIAMS. Thank you, sir.

(The material referred to follows:)

Railway purchases, class I railroads

[In thousands of dollars]

Mr. WILLIAMS. I call your attention to the fact that during the 8 years from 1923 to 1930, inclusive, railroad purchases for additions, betterments, materials, and supplies-the fourth column from the left on this tabulation-ran at the rate of about $134 billion a year.

But even in that relatively stable period, the yearly fluctuations were sizable. For instance, there was a drop of almost $383 million in 1924, with another drop of $68 million in 1925, a reduction in the 2 years of more than $451 million.

A year later, in 1926, purchases increased almost $362 million. But again, 2 years later, in 1928, the annual total had dropped more than $407 million.

Thus, even in so-called good times, railway purchases have ranged widely in volume.

The great depression of the early thirties hit the railroads, as it did all business and, as a result, their purchases were promptly cut almost in half, a precipitous drop of more than $792 million from 1930 to 1931.

As the depression deepened, further curtailments in purchases were made so that, by 1933, they were almost $11 billion below the 1930 level, and more than $11 billion below the 1923-30 average.

Beginning in 1933, annual railway purchases gradually climbed to a level of more than a billion dollars in 1937, but still almost $600 million below the 1923-30 average.

Then came another famine year, 1938, when purchases were again drastically reduced by 52 percent, dropping back to the 1934-35 level of about one-half billion dollars.

Again we had a stable period of railway purchases, from 1940 to 1946, inclusive, when the volume averaged about $1.4 billion a year, ranging from slightly more than $1 billion in 1940, to more than $112 billion in 1944.

However, railroad expenditures during this period of World War II were almost entirely for minimum maintenance and operations because expenditures for capital improvements were held to a minimum consistent with the wartime need for conservation of critical materials.

In 1947, railway purchases increased almost $503 million over the 1946 figure, or more than a half billion dollars above the average of the previous 7 years. This was due primarily to an effort to catch up on capital improvements postponed during the war.

For the ensuing 11 years, to and including 1957, these annual purchases have averaged more than $2 billion a year. Yet again we encounter significant fluctuations in annual dollar volume.

For instance, there was an increase of more than a half a billion dollars in purchases in 1948 as compared with 1947; a drop of similar proportions between 1948 and 1950; an increase of $771 million in 1951, as compared with the previous year; a drop of more than onehalf billion dollars between 1953 and 1955, and, an increase of almost two-thirds billion dollars between 1955 and 1957.

A concrete illustration of the ups and downs of railway purchases can be found in the postwar record of freight-car orders. In 1947, the railroads ordered from freight-car manufacturers and their own shops a total of 120,163 freight cars.

Two years later, in 1949 only 6,223 freight cars were ordered.

But in the following year, 1950, a near record high of 155,732 freight-car orders were placed. Within 2 years the situation was again on the downward side of the roller coaster with only 4,369 freight cars ordered in 1952, and on down to 21,976 such orders in 1954.

This was followed by a staggering rise to 163,033 freight-car orders in 1955. This is "feast and famine" with a vengeance.

I submit, gentlemen, that variations of this magnitude from one year to the next cannot be "kissed off" as an inevitable manifestation of a free-market society. They are too large; too important a segment of our overall economy to be ignored, if we want national economic stability. They serve to intensify every economic adjustment in our national business life, and this is particularly true-and dangerous-when recessions such as we are now experiencing set in.. The impressive figures I have quoted include only the direct purchases and expenditures made by the railroads.