in order to stay in business and provide the new equipment that we are talking about.

Senator MONRONEY. My impression is that if you are considering the location of a steel mill in Oklahoma, and you ask for a commodity rate which is enjoyed by the official territory, and by some in the South, that is competitive with other locations of industry, that despite the willingness of the regional railroads to give a profitmaking rate because they would like to generate new traffic, and would welcome the tonnage, that there is a power that exists with the other ratemaking conferences to say, "I am sorry, Mr. Santa Fe, you just can't do it," whether it is back here in the official territory or otherwise.

You know and I know that when the trains cross the Mississippi River you get on a higher rate plateau. It goes back to the time when they had 1 bridge or 2 bridges. I have shipped too much freight in my time to not know the difference when you cross the Mississippi or the Ohio to the South. It still is a high freight rate plateau that we inherited. It bears no relationship to the present-day transportation operating costs.

Mr. MARSH. When you find the fellow who wants to launch a steel mill down there, let me know. I will put our traffic department on it and I think we can fix him up with a rate pretty fast. I am not a rate man myself. I wish I could discuss some of those pros and cons more intelligently and in more detail with you. But I think that we could find that fellow a rate if we could get a steel mill in Oklahoma. Senator MONRONEY. I was impressed by the wisdom and logic of Mr. Loomis, the head of the AAR, when he clearly defined in neon letters that the 3-percent tax on freight transportation put an exceptionally high penalty on those who are already on a high freight rate plateau. It magnified the inequities by adding 3 percent in the tax, and I agree with that.

I would like to see the whole 3-percent tax abolished because I think it is inflationary and adds a markup all the way through. I am in your corner on that. I don't think it produces revenue enough to justify the extra penalty.

But our staff tells me that we have had a 108-percent increase across the board in freight rates, that there was no consideration given by the railroads or by the ICC to what this is going to do to magnify inequities. For example, if you have a commodity rate in my home State of Oklahoma of $2 a hundred, if you get a 108-percent increase your new rate becomes $4.16 instead of $2. If you had a raise of $2.16, or $2, across the Mississippi River, or north of the Ohio, if you had a $1 hundredweight commodity rate-and that is rather comparable, believe me, in the original rate-then the new rate, with the 108-percent increase that has taken place in steps and stages, your new rates becomes $2.08 and those shippers have paid an increase of $1.08 on their

rate.

And so as the 3 percent magnifies the inequities, the 108 percent progressively has compounded the inequities.

I don't think the Santa Fe has been anxious to penalize the great bulk of their shippers that lie west of the Mississippi River. But the net effect, in this meat-ax approach, is that the ICC and the railroads have been using in making the poor poorer, and making those

who pay the higher rates pay a compounded higher rate on a percentage increase.

It seems to me that something must be done to reverse this trend because you are forcing out this great territory which you so ably serve and which you helped-as I said in the beginning to create by bringing early settlers in. You are keeping us behind the eight-ball because apparently you haven't taken off your coat to pick a perfectly moral fight in these ratemaking conferences.

Mr. MARSH. Well, sir, what you say is true as to the percentage increases, and I was trying to point out awhile ago that were it not for all of the improvements that have been made by all of the money that has been spent to hold down the cost of doing the railroad business, those rates would be considerably higher.

Senator MONRONEY. I am not complaining about or questioning the 108-percent increase that might be necessary to produce the revenue. I am questioning the method by which this was put on. It would be like the Federal Government raising the percentage on the $2,500-ayear worker and reducing it on the man who had the million dollar income, and reducing his rates below that that is paid by the small

merchant.

We are paying more freight, so the freight-rate increase becomes magnified to us, and less in proportion after the raise to further favor the favored territory.

Mr. MARSH. The differential is greater, is what you are saying.

Senator MONRONEY. It is that the $2.16 rate is cumulative on us, and the $1.08 raise is not on those who have already, historically, enjoyed the cheaper freight rates.

Mr. MARSH. The percentage increase is the same, but the differential is widened.

Senator MONRONEY. The percentage on $2 is twice what it is on $1. That is what I am pointing out.

Mr. MARSH. There may be some better way to do it. I don't know. The railroads have struggled with this thing. They have had the need for greater revenue right along. You take the railroad that operates only in the West, its costs, the increase it applies per hour on the fellow who is running the train, is no less than it is anywhere else. It is a national pattern and it is applied universally without regard to shelter it is in this part of the country or that, and without regard to whether the railroad is in the black or in the red.

But the additional money to meet those things has to come from somewhere. There is no magic way to produce it other than the economies we have been able to effect to hold down those costs. We think we have done a pretty good job.

There is no place to find it other than the prices we charge for the services we perform. It has to be distributed over those services in some way. And as I say, there may be some better way to do it. But whatever the effect is, this 3 percent is just that much more. We have found that it has been the difference between rail service and a privatetrucking operation. Many former customers of the railroad have gone into private trucking, and the 3 percent has been a substantial influence in bring them around to that.

Senator SMATHERS. Mr. Marsh, we are going to try to hear one more witness before we recess for lunch. So if you have any concluding remarks, will you please make them?

Senator LAUSCHE. May I ask a question?

Senator SMATHERS. Senator Lausche.

Senator LAUSCHE. Does the Santa Fe have any equipment under lease and rental arrangement?

Mr. MARSH. No, sir; we do not.

Senator LAUSCHE. Áre there other railroads that do?

Mr. MARSH. I think so; yes, sir.

Senator LAUSCHE. Are you able to tell, when equipment is held under such an arrangement, who pays the ad valorem tax? Is it the lessor or the lessee?

Mr. MARSH. I wouldn't be able to answer that question, sir.
Senator LAUSCHE. You can't answer?

Mr. MARSH. We have none of that. answered by some other witness.

I think that question might be

Senator LAUSCHE. The purpose of the question

Mr. MARSH. I assume you have in mind equipment leased under these various leasing plans, such as the insurance company plan and so on?

Senator LAUSCHE. Yes. What I have in mind, if the agency recommended by Mr. Symes is put into existence, and the Government becomes the owner of the equipment, and the railroad merely a lessee, that the tax which is normally collected on that item would be lost? Mr. MARSH. You may be right.

Senator LAUSCHE. That is, the Government would not have to pay the tax, the railroad being the lessee would not have to pay the tax. To that extent those revenues would be lost. Are you able to express an opinion on the statement I have just made?

Mr. MARSH. No, I am not. I have not

Senator LAUSCHE. If you are not, that settles it.

Mr. MARSH. As I say, we did not support that plan.

Senator LAUSCHE. Let me ask you: You are not in favor of that plan?

Mr. MARSH. No, sir; I am not. I don't agree with either the principle of it, or the arithmetic. The plan would cost more. The presentation in the exhibit points that out very clearly, that it is not a low-cost plan. It is probably a high-cost plan. We are not looking for ways to increase costs. We are looking for ways to reduce them.

Senator LAUSCHE. Aside from the economic phase of it, are you against the proposal because it would be putting Government into this

business.

Mr. MARSH. Yes, sir.

I am against the principle of Government into business. Transportation is a business in this country, and I don't think the general taxpayer should be required to pay a part of the cost of any transportation business. I don't see how the farmer out in the middle of Kansas or down in Texas, why he should be required to pay through taxes, either directly or indirectly, the cost of people flying between Chicago and California 20,000 feet over his head, or the cost of improving the Mississippi River for a barge to go up there, or the cost that would be involved in an appropriation for railroad equipment. I don't think that the general taxpayer should have that load. I think taxes are already high enough on the taxpayers.

Senator LAUSCHE. Then it is your opinion that the Government entering into this business of leasing railroad equipment would be

to put it in private business and in violation of the general principles underlying our economy from the time our Nation was created? Is that in substance correct?

Mr. MARSH. I think that is right. I think it has already been done in connection with some other forms of transportation.

Senator LAUSCHE. Let me pursue this a bit further. The principle which you are applying to the Santa Fe you want to apply to others in the railroad business, and to the air carriers, the barge lines, and the truck carriers; is that correct?

Mr. MARSH. Yes, sir. You are asking a very profound question. I think my answer is that I don't believe in subsidies for anyone. I think that everybody should be on an equal basis for competitive opportunity. They should all pay their own way.

Senator LAUSCHE. I believe in your testimony you said that the airlines are now being subsidized by the hundreds of millions. Will you elaborate on that?

Mr. MARSH. I think, although I don't have the precise figures before me, that it is commonly known that the Government has appropriated earlier this year some $410 million for airways.

I would like to reconstruct that. I have before me here a statement which shows the unreimbursed cost to the Federal Government for providing of domestic transportation and postal facilities and services. In that statement it shows Federal airways in 1956, $108,285,000; 1957, an estimated $193 million plus; 1958, an estimated $320 million. And grants-in-aid for civilian airports, $18 million, $45 million, and $75 million in 1958.

Cash subsidies to domestic airlines, $33,870,000 in 1958. And if my understanding is correct, something like a half billion dollars has already been spent on the airways by the Federal Government.

Senator LAUSCHE. Did I understand you to say a half billion dollars?

Mr. MARSH. A half billion dollars, yes, sir, in that area; $500 million to $550 million. I could have those figures developed if you would like it?

Senator LAUSCHE. This may sound elementary, but I would like to hear from you what impact that has on your ability to continue in the operation of the passenger business?

Mr. MARSH. I directed myself to that briefly a while ago with reference to the impact that it has. The airlines have speed; that is a considerable advantage over anything that runs on the ground, of course. They should be commanding a substantial premium, I think, for the thing they have to offer of value.

Senator LAUSCHE. With conditions as they are now, having in mind the advantages of transportation by airlines through speed, and probably comfort, considering the existing laws and regulations, what is your opinion of what the ultimate destiny of the passenger-carrying business is in the railroads?

Mr. MARSH. Sir, I think it depends upon governmental action to some extent.

Senator LAUSCHE. My question is submitted considering regulations and laws to continue as they are now.

Mr. MARSH. Without any change?
Senator LAUSCHE. Yes.

Mr. MARSH. Without any change, I have an idea that we would get around to the point where no one could carry passengers as a private proposition because we have costs going up year after year, but rates not going up on the airline carrier. And that is the competition we are up against. If that continues-and I assume your question meant a continuation of the present policies-if that continues, and the people that use the airlines are carried at the rates of 1940-41-and that is what we have today, that is the situation we have I think that the airlines will be giving away their services, and somebody has got to foot the bill, and I suppose ultimately it will be the Government.

Senator LAUSCHE. Is there anything that you can do to improve your railroad service and keep for yourself a part of the business that is now being taken away by the private automobiles and by the airlines?

Mr. MARSH. We have done a great deal in that direction.

Senator LAUSCHE. Do you see anything more that you can do?

Mr. MARSH. No; not in the way of improved service. There might be some development in connection with equipment that would give a better service, but I don't think we should try to compete on a speed basis. We are now trying to compete on the basis of comfort and convenience and room to move around, and a scenic route, and trying to talk to people on the basis of going there, rather than being there.

Senator LAUSCHE. The changes which you think should be made are set forth in your written testimony and were given in substance by your oral presentation?

Mr. MARSH. Yes; pretty much in substance, although I didn't cover everything that is in my statement by any means. I think briefly we have to get around to where there are user charges proportionate to the cost of the facilities and the use made of them, and put everybody on his own feet, let him pay his own way, and then we would find out where the cost is greater and what it should be in relation to the type of service the customer wants, and let the customer decide to put it on an equal basis of cost.

Senator LAUSCHE. About a week ago there appeared, before the Aviation Subcommittee of this main committee, witnesses who testified that the airlines will, by 1960, spend $22 million for jet equipment. They gave testimony about the need of extending landing lanes to a length of 10,000 feet. May I have your opinion on what impact that will have upon your passenger business?

Mr. MARSH. I think perhaps it would have some impact upon it. As I understand the question, it will speed up the schedules of the airlines still further. I think today that the speed of the airlines is the attraction. And if they make it even faster there will be even more attraction there. I don't think it will help us any.

Senator LAUSCHE. I tried to learn what the cost to the Federal Government will be of modernizing the airports so that they will be able to accommodate these jet planes, and that information, I am informed, is not yet available.

You made one statement that is susceptible of two interpretations, and I would like to clarify it. You dealt with a statement which

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