nitely subject to the inflation of prices or the ordinary progression upward that costs take over a long period of time.

There is no subsidy in either proposal. The Government is not being asked to contribute 1 cent in the form of subsidy. It would be a form of tax deferral, and spreading out the period of payment by the railroads, that it would be at no cost to the Government in the form of subsidy or in any other form.

Now to summarize very briefly, Mr. Chairman-and I might say that I have tried to confine myself to a few suggestions that we feel are suceptible of prompt consideration by the Congress, and have not attempted to present an entire legislative program on behalf of the railroads.

To summarize the suggestions I have made: The repeal of the excise taxes on amounts paid for transportation would be of great assistance to common carriers, and would constitute action which could be taken very quickly by the Congress.

Other matters on the tax side include the 30 percent depreciation reserve to correct an existing inequity; the proposal for depreciable life not in excess of 20 years for railroad property. That would cure this 50-year thing that I was talking about, if the law would provide that railroad property would have a depreciable life not to exceed 20 years.

And also the proposal for the construction reserve income tax reduction that I outlined.

Secondly, we earnestly hope that the Congress will give careful consideration to the views of the railroads with respect to competitive ratemaking, those bills that are now pending in the House of Representatives, and to the matter of removing the existing restriction on the right of the railroads to engage in other forms of transportation.

Third, we hope that prompt consideration can be given to pending bills dealing with the agricultural commodity exemption. I refer to S. 1689, resulting from the Interstate Commerce Commission recommendation, and S. 2553, introduced by the chairman.

Fourth, we hope that prompt consideration can be given to the proposal made by the railroads during the hearings on S. 1677, having to do with the redefinition of private carriage, and the adoption of the primary business test before the Commission in dealing with private carriage.

Fifth, early action could be taken on the proposal that I have advanced with regard to giving the Interstate Commerce Commission jurisdiction in the field of discontinuance or consolidation of train service and stations. We are hopeful that the Congress will give early attention to the subject of adequate charges for the use of publicly provided transportation facilities, such as highways, improved waterways, airways, and airports.

And finally, we hope that the Congress will bear in mind that any additional costs saddled upon the railroads through adverse legislation, can greatly increase the prospect of deterioration in the railroad situation, which is the subject of these hearings. And we hope that no such legislation will be enacted by the Congress.

That completes my statement.

Senator SMATHERS. Thank you very much, Mr. Loomis, for a very lucid and informative statement.

Senator Magnuson, do you have any questions to ask?

The CHAIRMAN. Mr. Loomis, during your testimony you referred to and used the word "we" on many occasions. Do I understand that all of the railroads that belong to the association have, in general, approved your recommendations, or some of them?

Mr. LOOMIS. That is correct.

The CHAIRMAN. Was that the result of a meeting with the railroads or communications with them?

Mr. LOOMIS. Communication and action by the board of directors of the association. And I should say that I appear by special authorization of the board.

The CHAIRMAN. For the purpose of the record, how many railroads are members of the association?

Mr. LOOMIS. Approximately 128.

The CHAIRMAN. And how many railroads are there in the United States?

Mr. LOOMIS. I believe, counting the short lines, something over 300. The 128 roads that I mentioned as being members of the AAR, however, are more than 90 percent of the

The CHAIRMAN. Of the mileage?

Mr. LOOMIS. Of the mileage, of the revenues, the expenses, or any other measure by which you apply it.

The CHAIRMAN. I want the record to show that.

Mr. LOOMIS. I can furnish the actual statistics for the record.
The CHAIRMAN. I think you should.

(See Mr. Loomis' letter following his statement.)

The CHAIRMAN. You mentioned a great many things which are of great interest to the subcommittee, and that is the reason I suggested we have early hearings on this matter to the distinguished Senator from Florida. One thing that last year the committee had a number of hearings on which directly affected of course the revenue of the railroads, was the modification or the repeal which I happen to favor, of section 22.

Do you have any opinions on that to give the Congress? It is a pending matter before the Congress.

Mr. LOOMIS. I think, Senator, that the railroads feel that the situation with respect to section 22 should be left just as it is.

The CHAIRMAN. Are you satisfied with the compromise that was made, or the adjustment that was made in last year's legislation? Mr. LOOMIS. I think the answer would be "Yes."

The CHAIRMAN. So therefore your recommendation on that very important thing which of course the Government is interested in, is that the matter be left as it is, and there are no further recommendations on section 22?

Mr. LOOMIS. That is right.

The CHAIRMAN. There has been a great deal of talk in view of the overall economic situation, of the railroads, and some suggestions made regarding mergers of some major railroads in the United States, all of which I think would include members of your association.

Mr. LOOMIS. Yes.

The CHAIRMAN. Do you have any statement to make on that, or will some other witness make a statement on that subject?

Mr. LOOMIS. I think other witnesses who are directly concerned in some of those studies will have comments to offer.

The CHAIRMAN. Has your legal staff made a study of the possibili

ties of mergers?

Mr. LOOMIS. To some extent, yes. Our present opinion is that the existing law appears to be workable and all right.

The CHAIRMAN. That is what I wanted to bring out, whether or not you felt the legal staffs of the railroads and your own-that legislation would be necessary in order to accomplish a merger if it was deemed desirable?

Mr. LOOMIS. No, we do not at present see that legislation would be necessary. Of course the approval of the Interstate Commerce Commission must be obtained. But the machinery is there.

I think a kind word might be said in favor of the efficacy of the mergers and consolidations. But as far as the machinery of the law is concerned, it appears to be sufficient as it stands.

The CHAIRMAN. Another important matter: You did mention the proposal of setting aside reserve funds for the purpose of buying new equipment, such as, rolling stock?

Mr. LOOMIS. Correct.

The CHAIRMAN. And you suggested that legislation be enacted to allow the railroads to do that? Would you be willing to go on record by making a statement, or do you have some opinion as to whether or not that legislation should apply only to the railroads, or to other forms of transportation as well.

Mr. LOOMIS. Our present thinking-we had proposed it as a railroad proposition. We understand, however, that heavy industry generally is studying the proposition of depreciation.

The CHAIRMAN. I would like you to limit yourself to other forms of transportation.

Mr. LOOMIS. Presently it is proposed for the railroads alone. There is quite a considerable difference, and I am not sure that I can give you the details, but as I understand it the depreciable life on airplanes is somewhere in the neighborhood of 5 years. As I understand it, subject to correction.

The CHAIRMAN. Sometimes 5 days.

Mr. LOOMIS. The depreciable life on motortrucks is somewhere in the neighborhood of 7 years.

The CHAIRMAN. I appreciate that there is a different economic problem involved in the different forms of transportation. But I do hope that you can give us some opinion.

Mr. LOOMIS. I will say that that is a question that we haven't really discussed. We have been talking about it as a railroad proposition. I don't know that we would have any objection to its being spreadThe CHAIRMAN. You have an open mind on it?

Mr. LOOMIS. Yes. And I don't see how we could object to its being applied to all forms of transportation.

The CHAIRMAN. Just one other question, and I ask this as the chairman of the Interstate Commerce Committee and as the chairman of the Independent Offices Subcommittee of the Appropriations Committee, handling appropriations for the ICC: Do you find that lack of appropriations for the administration of the Interstate Commerce Act has had a lot to do with some of the delays entailed in some of the things the railroads think would be better for the economy? I am speaking of manpower, for example.

Mr. LOOMIS. Yes. I am afraid that I am a little too new here to have an opinion on that, Senator.

It may be that some of the other witnesses could express one.

The CHAIRMAN. You mentioned one other thing in which I am interested-the 3 percent freight excise tax as having a practical discriminatory effect upon shippers with long hauls. By that do you mean the West and the Southwest markets?

Mr. LOOMIS. Unquestionably; the Pacific coast, Northwest.

The CHAIRMAN. And you have statistics to prove that, I understand?

Mr. LOOMIS. They are available; yes.

The CHAIRMAN. Would you put those in the record for us?

Mr. LOOMIS. I think there will be some testimony coming in along that line.

The CHAIRMAN. Thank you, Mr. Chairman.

Senator SMATHERS. Thank you, Senator Magnuson.

Senator Bricker.

Senator BRICKER. I have no questions at this time. I will defer to the members of the subcommittee.

Senator SMATHERS. Senator Schoeppel, do you have any questi

Senator SCHOEPPEL. Just a few at the present time. I want to commend the gentlemen who are making their appearance here for one thing, that this is most helpful to the committee members, and that is furnishing as you have, in advance, your statements that you intend to use or to summarize. It is most helpful to us as members of the committee.

Mr. LOOMIS. Thank you, Senator.

Senator SCHOEPPEL. In your statement that you have filed as you have stressed here in your summary today, under the railroad situation today you say "The financial situation of the railroads has seriously worsened in recent months and it is plainly evident from current reports on traffic, and earnings." It does present an alarming picture.

For the benefit of the record, I expect we may as well admit that we are seeing a tipoff in the economic situation in this country. Is this only applicable to your railroads? Or does it pertain to other means of transportation, such as airlines, the trucking industry, and the water transportation methods?

Mr. LOOMIS. I do not have up-to-date figures on which to give a specific answer to the question. I would suppose that it must apply to airlines in some degree from what I have read about their pleas to the Civil Aeronautics Board for rate increases, and their need for funds.

There is of course this difference: Generally speaking, in the operation of forms of transportation, the trucking industry can simply drop trucks, and their expense to some degree ceases. The railroad industry, with its fixed right-of-way, and its very large fixed plant, cannot reduce those expenses correspondingly with a dropoff in business. So that it has a different effect on the railroad industry in any decline in business than it does on other forms of transportation.

Senator SCHOEPPEL. In other words, Mr. Loomis, the impact, as you see it, is greater upon the railroads, for the reasons that you have mentioned

21278-58-pt. 1—2

Mr. LOOMIS. That is right.

Senator SCHOEPPEL. In the days when we have heretofore had these tipoffs or recessions, have you noticed this same initial situation developing, or do you have as a historical background evidence of these tipoff's in your traffic, in your income, and all of those similar statistics, such as you are enumerating today.

Mr. LOOMIS. We had them during the 1930's.

Senator SCHOEPPEL. Is it worse now, at this stage of the game, or more alarming than it was in those days?

Mr. LOOMIS. Presently I would not think that it was. The signs are there, but you have, I think, a different situation today. In the thirties everything dropped correspondingly. I think in the comparative picture today the signs indicate a worsening of the railroad situation more than other forms of transportation or industry generally.

There is also the fact, too, that with the 10 years of growth and general prosperity in the country, the railroads did not share in that to any great degree, and were not able to acquire what we sometimes referred to as "fat" on which to meet a downturn in business.

Senator SCHOEPPEL. You mentioned the mater of consolidations which seemingly is pretty much in the news nowadays. You have indicated that that may be most helpful at times, and you have indicated further that you thought, in your opinion, that sufficient legal authority presently exists for consolidations and mergers. In your judgment why has that matter not been pressed, if adequate legal machinery exists for it, and if mergers may have been of great help? Mr. LOOMIS. I don't know that I can give you a very good answer. Consolidations and mergers are long, difficult things to work out, making these adjustments. Some of these proposed mergers of course, have been under study for a year or a couple of years. I think that they also depend on the individual situation.

And I suppose the real answer is that one is inspired to look for drastic remedies the darker the horizon looks. When the horizon is not quite so dark, the drastic remedies may not come in for as great

attention.

Senator SCHOEPPEL. Mr. Loomis, in the interest of permitting other questioning here, I am going to defer to the other members of the committee. I want to ask, would you have any objection if, after further consideration on the part of some of us who, as committee members, are charged with this responsibility, if we submit additional questions to you? You would not have objection to submitting answers?

Mr. LOOMIS. I would be very happy to.

Senator SCHOEPPEL. I would very much like to submit a series of 7 or 8 questions to you later, for the benefit of the record.

Mr. LOOMIS. I would be very happy to have it.

Senator SMATHERS. Mr. Loomis, I might say for the benefit of the record, without objection we will make your full statement a part of the record.