In any event, I do not know of any form of transportation that itself wants to make its rate based on fully distributed costs. I think they would love to see the railroad make rates based on fully distributed cost because it would be an artificial basis that would help them in their competition against the railroads and would mean that the railroads could not maximize their net revenues in a great many instances based on the volume of traffic.

So they probably would like to see us subject to that test, but I don't think they want it themselves.

Mr. YOUNGER. That is all, Mr. Chairman.

Mr. ROBERTS. The gentleman from New Jersey.

Mr. WOLVERTON. Mr. Langdon, I was not here in time to hear all of your statement. I have tried to familiarize myself with it.

Do I understand that the general overall thought that you wish to express is that railroad rates could be, or would be lowered if paragraph 3 in section 5 on page 7 of the Smathers bill was adopted?

Mr. LANGDON. Sir, what we really are objecting to is a test that the Commission applies in reviewing our competitive reductions, the test of a proper balance with the rates for the competing mode. If that test is eliminated, then I think it will be possible for the railroads to make more competitive rates in circumstances where they will serve the end of increased net revenues.

In other words, if we can get rid of that test, of having a proper balance with the rates of a competing mode, I think that it will encourage the making of more competitive rates.

Mr. WOLVERTON. I have in mind that frequently there have been increased rates granted to the railroads on their application. Now, would that be to build up a competitive system, or would that be a necessity because of lack of revenue?

Mr. LANGDON. Yes, sir; I think to the extent that we are allowed to spread our increased expenses over more and more competitive traffic, to that same extent our revenue needs from the traffic which is remaining on the rails will be reduced.

So that the long-range effect, it seems to me, would be to hold down the efforts that otherwise we are going to have to continue to make to get increased revenue from this diminishing aggregate of traffic that remains on the rails.

If, instead of getting increased revenues from this constantly diminishing aggregate of traffic on the rails, we can spread our revenue needs over competitive traffic and have an easier time in getting these competitive rates in, then to that same extent our rate increases will be held down in the future.

Mr. WOLVERTON. Is it your idea, then, that the adoption of this proposed amendment in the Smathers bill would have the tendency to increase the traffic on the railroads?

Mr. LANGDON. Yes, I think it would help us immeasurably. I do not mean by that to infer that we could perhaps do anything more than to stabilize the present competitive situation because there are enormous quantities of freight on the highway that are always going to be there.

There are enormous quantities of freight that are moving on the waterways that are always going to be there. But I think that we probably could stabilize our present competitive situation.

I am wondering, sir, if you mind if I distribute at this time a chart which shows the trend of railroad ton-miles since the war in relation to total ton-miles for the country as a whole, and show the critical trend that gives all of us in our industry such tremendous alarm.

Mr. ROBERTS. Would you like to introduce this to be made a part of the record?

Mr. LANGDON. If I may, sir; I would appreciate it.

Mr. ROBERTS. Without objection, it may be made a part of the record.

Mr. LANGDON. You will see, Congressman Wolverton, that that top line represents the total ton-miles for the country as a whole since 1947 up to and including 1956, and that trend beyond is made by the method of least squares and extends to 1967 as a projection of the total traffic trend in the country.

Now, this top trend line is everything that is moving-rail, water, air, and on the highway, pipeline everything that is moving in the way of freight traffic.

You will notice, if the trend that has existed and been in effect since the war continues, that in 1957 the total ton-miles for the country will be 125.7 percent of those in 1956.

You drop down to the middle of the page and you will see what a sorry situation the railroad picture is.

There, despite this increasing trend of total ton-miles in the country as a whole, we have not been holding our own. Not only have we not been holding our own, but we have been actually slipping in the magnitude of our ton-miles.

And if our present trend continues for the next 10 years we will be down in 1967 to 93.3 percent of our actual ton-miles in 1956.

The last trend line is the relation of rail to the total and you will see how much we have been slipping. And if that same slippage continues for the next 10 years, we will be down to 35.9 percent of the total ton-miles in 1967.

Now, the point at which it becomes impossible to maintain the railroad transportation system because of this falloff in proportionate 'business, of course, I don't know. It may come 2 or 3 years from now unless these trends are at least arrested and, if possible, reversed.

We cannot stand this trend, with mounting expenses all the time. Obviously we cannot stand this falloff and unless this situation is reversed, or at least arrested, and we are permitted to continue to go with the country as a whole, the end of private ownership is just a matter of time.

Mr. WOLVERTON. Mr. Langdon, this chart which you have given is significant, particularly if the trends would continue in the same direction as they have been over the period of years that has already occurred.

What I would like to know from you is whether that trend downward, which is in the last part of your testimony, whether that is due, in your opinion, to rail rates being too high or is it due to the fact that other modes of transportation, trucks particularly, have provided a service more in accord with what the shippers wanted.

Mr. LANGDON. I think both of them have been potent influences, sir, particularly the latter. I think they have taken traffic that we will never see again, no matter how much freedom we have to make rates and I think the same is true of the water carriers.

But I do feel, sir, that if we can have the right, unquestioned right, to make our rates based on our conditions, that at least it can never be said that if the railroads do drop off and private ownership comes to an end, that they did not have a fair chance.

As it is now, this result may occur and the argument may well be that in effect the railroads had to tie their rates or, at least, have regard to the rates of the other competing forms of transportation and were not able to exploit or assert their inherent advantage in their

ratemaking and they really never had a fair shake. At least that point of view could be argued.

All we can ask, sir, as I see it, is the right to make rates based on our conditions. Then if we survive, fine.

If we don't, at least it will be something that is just inevitable and the railroad service will have become obsolete.

Mr. WOLVERTON. The reason I asked this question is because it would seem from your testimony that you would rather take the viewpoint that rates would cure the whole situation. It is for that reason I asked whether if this provision were adopted and it is applied in the way you would like it to be, would the rates of the railroads go up, or would they come down.

In other words, I am trying to find out how the application of that particular section which you have referred to in that statement would help the situation with respect to the railroads, just how would it operate in your opinion or could operate to be helpful to you?

Mr. LANGDON. Well, sir, first I want to say that this ratemaking provision, while important, is by no means the 100-percent answer to the railroad problem. There are a lot of other problems as you are But it is one of the answers we think and, by answers, I

well aware. mean this:

I think that if we have the unquestioned right to assert our inherent competitive advantage of lower costs in those situations where it exists it does not exist all over, but it does exist in certain situations-we then can improve our competitive situation and I think the tendency then will be for the railroads to make relatively lower rates.

If they have the right to do it and if they can improve their competitive position by doing so, I think the tendency will be in that direction, but again, sir, it is just one of the troubles that we have in our industry. But it is a very important trouble and we feel, as I said before, I don't want to keep repeating myself, that we should have the unquestioned right to use our inherent advantage of lower costs wherever it exists and to the extent of trying to make rates based on our conditions, to our net revenue advantage.

Mr. WOLVERTON. Well, if you have in mind that the railroads can increase their traffic by a readjustment of their rates, would that not necessarily require that they reduce rates and how do you justify that in view of the fact that the railroads over so long a period have been asking for increased rates?

Mr. LANGDON. You would reduce, sir, only in those situations where you could increase your net revenues by the reduction, in other words, by attracting traffic that otherwise you would not have.

You can get a contribution to your net revenues that otherwise you would not have. If you are a smart businessman, of course, you only would reduce your rate in the circumstances where, because of the business that was attracted by that reduced rate, your net revenues were increased, the alternative being to forego the traffic and the increase to your net revenues.

Mr. WOLVERTON. Now, you have drawn a distinction between the attitude of the ICC as it originally was expressed and what it more recently has taken as a basis for its ratemaking.

Is it your position that in the matter of the transportation policy as originally adopted in this act that if what you considered to have

been the intent of Congress was carried out there would not be any necessity for this particular legislation?

Mr. LANGDON. That is right, sir.

Mr. WOLVERTON. You said you have made a study of those decisions of the Interstate, Commerce Commission over a period of years, I assume, since the act of 1940 was passed, and you have referred to statements that have been made at the time that bill was introduced, at the time it was debated and in the conference report, to justify what you consider to be the proper interpretation of that clause; is that right?

Mr. LANGDON. Yes, sir.

Mr. WOLVERTON. Now, with that reading of the decisions that you have made could you say when the ICC changed its attitude and began to go in a different direction than what you had assumed was intended by Congress?

When I say what you assume to have been the intent of Congress, I have been here long enough and I have been in other legislative bodies before I came here, and that question of the intent of Congress or intent of a legislature is a very interesting one to me.

That is one of the reasons that this so-called Oversight Committee was adopted by resolution last year to provide a study to be made to ascertain how far the several regulatory commissions were carrying out what was supposed to be the original intent of Congress and how it is now construed as the intent of Congress.

I have been perfectly astounded at times when legislation has come before this committee, with reference to regulatory bodies over which we have legislative jurisdiction, to find that so often there has been an administration of the act by a regulatory commission on the basis that they were interpreting the will of Congress.

Well, if they had interpreted the will of Congress in some instances, then I never knew what the intent of Congress was when we passed the act originally.

It would seem to me this particular situation that you are pointing out, where you feel that the original intent of Congress has not been carried out by the ICC in these latter years, that is an excellent illustration, if you are correct, in their interpretation of the present act as showing that the present regulatory bodies have had the intention of making up their own minds as to what they think the intent of Congress was.

If their interpretation of this particular matter is what you have said, at one time one way, and another time another way, certainly both cannot be right with respect to what is the intent of Congress.

Congress does some funny things at times, I admit, but I have not quite understood how they could have had one intent that would guide a regulatory body when the act was originally passed and which the commission carried out, according to your study, and then subsequently adopted a different interpretation which does not in your opinion carry out what was the intent of Congress.

I don't know whether we can ever get anywhere by adoption of language to do what Congress intended they do.

It would seem to me just as easy to violate the thought expressed in this amendment suggested in the Smathers bill as it was to get away