A difference of only 1 per cent in ash content in locomotive fuel requires twenty-five thousand 50-ton cars per year to haul the coal to locomotive coaling stations, with the consequent effect upon combustion efficiency and the disposal of the additional burden of refuse still to be considered. These facts indicate the nicety of judgment required in securing such splended economies as the performance record of the railroads indicates.

(IV) As to freedom in exercise of flexible, experienced judgment essential: The conditions set forth in the preceding statement demonstrate the need for the free exercise of a flexible, experienced judgment on the part of the rail carriers in the purchasing of their coal. This applies both to the existing sources of coal, i. e., the mines. now operating, and to potential sources of supply. It constitutes a convincing objection both to the provisions of section 7 cited and to section 11 of this bill.

Long experience in the handling of this problem has enabled the railroads to meet satisfactorily the situation and to produce a transportation service which to-day is the best in their history. Any interference in the fields of purchase, as contemplated by the provisions of this bill cited above, that have been carefully selected by the railroads, could result in nothing but an interruption to the present efficient railroad operation.

The record of railroad operation during recent years shows the improvements which they have been able to make in the performance of their transportation service. Transportation and car shortages now belong to past history. This is true with respect to the car service to coal mines as well as for other commodities. Shippers throughout the country have testified to the tremendous advantage which adequate transportation service has been to them. It is not believed that the shippers of the country would willingly see legislative action taken that would imperil the high standard of transportation service which is now being rendered them.

(V) As to public interest involved: In view of the foregoing considerations, the railroads respectfully submit these objections to Senate bill 4490.

They believe that, in the light of their record during recent years of economical and efficient service, no need now exists for such provisions as those referred to herein. Ample authority for supervision of railroad management now exists in the interstate commerce act. The administration of the provisions of this act are vested in the Interstate Commerce Commission. No further legislative action, therefore, is now required.

They further believe that the enactment of such provisions would be detrimental not only to the interests of the carriers in impairing adequate standards of transportation but would, likewise-and this is a matter of paramount importance-be adverse to the general interests of the country as a consequence thereof. The railroads are public-service corporations. They have the duty and responsibility under existing law of serving all the public honestly, adequately, economically, and efficiently, without favor or discrimination. The provisions referred to in this bill are obviously discriminatory and favor special interests. It follows that in the public interest the railroads should not be handicapped in performing their duty and responsibility in any such way as is proposed in this bill.

The specific objections to the provisions of this bill, from the standpoint of the carriers under their legal obligations, are as follows: It would interfere with the supply of railroad fuel. The carriers are responsible for safe and continuous operation regardless of any inadequacy that may exist in the supply of coal. In making purchases, therefore, the first consideration must be continuity of supply. So far, as Senate bill 4490 is concerned, the railroads' experience during the World War and subsequently leads to the conclusion that, since the allocation of the purchases of coal by carriers which require a suitable character of coal would be beyond the control of railroad management, the operation of this bill would interfere seriously with the continuity of their fuel supply.

It would increase railroad operating costs; no one will dispute that this bill aims to increase the cost of coal and therby increase the cost of railroad operation. It takes from railroad management its right to purchasse this commodity without restrictions, a freedom in the exercise of managerial judgment which the carriers have with respect to all other commodities that they buy. The language of this bill is very indefinite, but, as we understand it, it is intended to give to the contemplated coal commission the right to dictate to the carriers at which mines they may secure their coal. This would place the buyer at the mercy of the seller and would, no doubt, result in exorbitant demands and continuously increasing prices for railroad coal. It is to be observed, furthermore, that there is no provision here requiring the coal producer to sell to the railroad, thus limiting and restricting the power of the carriers as purchasers of coal, while leaving other purchasers and the seller free.

With the carriers as a whole earning considerably less than the rate of fair return established by law, the resulting increase in cost of fuel would, no doubt, have to be made up by an increase in the rates.

We are also advised that the provisions of the bill constitute an invalid invasion of the carriers' freedom of contract. The attempted restriction in this bill on the right of purchase has no such relation with legitimate regulation as to bring this bill within the power of Congress to regulate commerce.

I thank you gentlemen for your kind attention.

Senator COUZENS (presiding). Mr. Greever, have you anybody else to present at this time?

Mr. GREEVER. Mr. Chairman, the witness that we expected to put on next was expected to follow the gentlemen who represent the United States Chamber of Commerce. As I understood it. Senator Wheeler, when acting as chairman of the committee, agreed to give the United States Chamber of Commerce to-morrow to be heard, so that the gentleman we expected to put on for the National Coal Association went home last night. If it would not inconvenience the committee, and we only have 20 minutes more this morning, we would rather postpone our further showing until after the United States Chamber of Commerce's witnesses have been before the committee.

Senator COUZENS (presiding). Very well. The committee will now stand adjourned until 10 o'clock to-morrow morning.

(Whereupon, at 11.40 a. m., Wednesday, January 16, 1929, the committee adjourned to meet at 10 o'clock a. m. the following day.)

BITUMINOUS COAL COMMISSION

THURSDAY, JANUARY 17, 1929

UNITED STATES SENATE,

COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C. The committee met at 10 o'clock a. m. in room 335, Senate Office Building, pursuant to adjournment on yesterday, Senator James Couzens presiding.

Present: Senators Couzens, Wheeler, and Black.

Senator WHEELER. Gentlemen, I am going to take it upon myself to call the meeting to order so that we may get the hearing started, because we want to get through at some time. There are a number of Senators who are ill and can not be present, among them being Senator Goff, who has written a letter to Chairman Watson [reading]:

Hon. JAMES E. WATSON,

Washington, D. C.

JANUARY 16, 1928.

MY DEAR SENATOR WATSON: I regret very much that illness prevents me from being present at the hearings on S. 4490.

I am writing this letter to say that I had felt that it would be helpful to the committee, in considering the questions involved in said bill, to have the benefit of a statement by an economist of recognized standing and ability, feeling, as I do, that some very serious economic questions are involved. I discussed this matter with some interested friends and we learned that Dr. Gus Dyer, professor of economics of Vanderbilt University, made a speech some months ago at the University of Virginia upon the general subject of the intervention of government in business. Not only are there economic questions involved in this bill, but in other bills now pending before our committee. Doctor Dyer is a man of high standing as an economist. He has given particular study to the phases of economics affected by government intervention in business. At my suggestion, Doctor Dyer was invited to come here and appear before this committee. I do not know what he is going to say; in fact, I never met him. He is present in response to that invitation and I, therefore, request that the committee hear him. Undoubtedly the opinions of an economist will be a valuable contribution to the record of discussion on the subject at issue.

I am sending a copy of this letter to your office, so that it may be presented to you or the acting chairman at the session at which Professor Dyer appears, and also am sending a copy to the executive secretary of the National Coal Association.

Very sincerely yours,

GUY D. GOFF.

I understand the first witness will be Mr. Felix M. McWhirter, president of the Peoples State Bank of Indianapolis, Ind. Senator Couzens, I turn the chair over to you. Senator COUZENS (presiding). You may proceed.

STATEMENT OF FELIX M. McWHIRTER, PRESIDENT PEOPLE'S STATE BANK, INDIANAPOLIS, IND.; MEMBER BOARD OF DIRECTORS, CHAMBER OF COMMERCE OF THE UNITED STATES

Mr. McWHIRTER. I appear before you as a representative of the Chamber of Commerce of the United States, under instructions to present to you the opinion of its membership on the principles underlying Senate bill 4490.

The national chamber, a federation of hundreds of local chambers of commerce and trade associations, and representing the broadest kind of cross section of American business, is not interested in this bill solely because of its effect upon the coal industry. There is a principle involved which is of vital importance to all American business. This bill raises the question whether or not the enterprising American citizen, working against odds and struggling with varying circumstances, will be free to go ahead and work out his problems. Our present American system-the envy of the worldis the product of forces working under the safeguards of constitutional government. Anything that adds unnecessary harassment makes it more difficult for business to plan and operate the commercial enterprises of the country.

The bill now before this committee would set a new precedent. We, as business men, view this bill with disfavor, We believe that if the Federal Government takes control of the bituminous-coal industry it might logically follow ultimately that the same course would be taken with respect to many other industries. Therefore, we are not speaking from an interest in coal, nor in behalf of the coal industry itself, but as business men who want to preserve a sound relationship between the Government and the business activities of its citizens.

The Chamber of Commerce of the United States stands for the principle of self-government in industry and business, believing that if we are to progress in our industrial development, human ingenuity and energy must be encouraged by affording the highest opportunity for individual initiative.

This position of the national chamber is based on the repeatedly expressed opinion of its membership during the 16 years of its existence. Let me read to you a resolution adopted 10 years ago at our seventh annual meeting:

The very essence of civilization is that there be placed upon the individual only that degree of restraint which shall prevent his encroachment upon the rights of others, thus releasing to the utmost, individual initiative in every proper direction.

Our form of government most effectively expresses and maintains this principle. Within our basic law exists ample provision for such changes as may from time to time be necessary to safeguard our people. It is, therefore, essential that our Government should scrupulously refrain from entering any of the fields of transportation, communication, industry, and commerce, or any phase of business, when it can be successfully undertaken and conducted by private enterprise. Any tendency of government to enter such fields should be carefully weighed in the light of its possible effect upon the very genius of our institutions.

Senator WHEELER. Let me ask you a question right there: What was the occasion for the adoption of that resolution in 1919?

Mr. McWHIRTER. It was on the occasion of the annual meeting of the Chamber of Commerce of the United States, which was held in Washington.

Senator WHEELER. Do you recall that at that time any particular legislation was under consideration?

Mr. McWHIRTER. I think not, but I could not answer you definitely. While I was present at the meeting, yet I have no specific memory as to that matter.

Senator WHEELER. All right.

Mr. McWHIRTER. Resolutions of similar tenor have been adopted at a number of subsequent meetings. For example, in 1926 the following resolution was adopted:

Regulation and control of the coal industry are proposed in divers ways by bills which are pending before Congress. We therefore consider it appropriate to reiterate the position of the Chamber of Commerce of the United States in opposition to proposals which have for their object the control of industries by governmental agencies.

In taking this position we must not be understood to object to reasonable legislation affecting industry where the public interest requires it, within the scope of constitutional limitations, nor do we, at this time, base our objections upon the power of Congress to enact such bills however doubtful that may be. We object in principle to legislation which gives to government such control either through bureaus, commissions, licenses, or other agencies as will in effect amount to Government operation of industry.

The objection to this bill is that it goes beyond Government regulation and practically substitutes Government operation in the great bituminous coal industry of the country.

The bill affects all who are engaged in mining and shipping bituminous coal in interstate commerce. Since practically all producers do an interstate business, it is obvious that the bill is designed to cover the entire bituminous-coal-producing industry.

Under severe penalties these corporations are required to take out licenses if they are to continue in business. Thus the right to produce coal is transformed into a privilege subject to the restrictions of this bill and such rules and regulations as may be promulgated in the future.

The licensees are placed under the jurisdiction of a commission endowed with broad powers.

The commission is instructed to supervise the mining operations with particular attention to the methods employed, machinery and equipment used, production costs, employee relations, wages paid, capital invested, and grades and quality of products.

The commission is instructed to supervise the distribution of bituminous coal. It can allocate markets, both domestic and foreign, and decide what grades and qualities of coal are to be made available in each locality.

The commission is given jurisdiction over sales. It shall have authority to fix and to change the maximum prices at which the various products of the mines are sold.

The commission is given jurisdiction over nearly one-third of the consumption of coal. Thirty per cent of the bituminous-coal production is consumed by the railroads, according to the Bureau of Mines. The commission is instructed to make rules and regulations govern