In 1923, after a period of 11 years, we had in use in this country 410,716 miles of railroad track for all purposes, an increase of only 11 per cent. Our railroad trackage in this country for all purposes since 1890 shows an increase of 106 per cent, while our railroad tonnage shows an increase of 443 per cent.

Mr. President, since 1920 there has been an actual decrease of 2,107 miles in what is called first-track railroads. Since 1912 there has been an increase of 8,522 miles in our double-track roads, and in yard tracks and sidings there has been an increase of 21,975 miles, which makes up the increase of 11 per cent in the number of miles of track since 1912, a period of 11 years. It is now estimated that motor vehicles are handling 50 per cent as many tons of freight each year as our steam railroads. This tremendous increase in the use of motor vehicles has saved this country from a total collapse.

I have prepared two tables which I next submit showing the number of loco motives and freight cars in service at the close of the year of 1921 and 1923 on eight of the transcontinental lines and on the total of all the western carriers. Number of locomotives in service at the close of the year

The eight lines increased their locomotives only 0.03 per cent and the freight cars only 8 per cent, the total of all the western lines increased their locomotives only 1.3 per cent and their cars 3 per cent; contrast this with the increase in tonnage on the eight transcontinental lines of 70,800,000 tons and on all of the western lines an increase of 167,456,628 tons, an increase of 45 and 34 per cent, respectively. It is my judgment that the welfare of the country may best be preserved encouraging water transportation for our low-grade commodities and commodities that can and do move by water, and by removing the discrimina

tion from the interior points allowing such interior territories to build up, all of which will result in increased prosperity not only to the railroads but to the territories served by them.

Mr. FRENCH. The next gentleman is Mr. Hugh H. Williams, of Santa Fe, N. Mex., a member of the New Mexico Corporation Commission. I yield him 15 minutes.

STATEMENT OF MR. HUGH H. WILLIAMS, OF NEW MEXICO

Mr. WILLIAMS. Mr. Chairman and members of the committee, I am here representing the people of the State of New Mexico and as a member of the corporation commission of our State, which is a constitutional body, a commission composed of three men elected by the State.

I want to offer in evidence for part of the record here a copy of the joint memorial No. 1, which was passed by our legislature recently and which has been sent to this committee.

I have prepared a statement which, to save time, I will not read. My name is Hugh H. Williams. I am appearing at this hearing as a member of the State Corporation Commission of the State of New Mexico, for and on behalf of the people of New Mexico at the request of the governor of my State, Hon. Arthur T. Hannett. I appear also in behalf of the Intermediate Rate Association, of which I am one of the vice presidents, and which has a considerable membership among the shippers and receivers of freight in New Mexico. I am also a member of the legislative committee of the National Association of Railroad and Utilities Commissioners, but to avoid any misunderstanding will state that I am not appearing at this time as a member of that committee, although the national association has gone on record in favor of an ironclad or absolute long-and-short-haul rule. While serving as a public official I live at Santa Fe, the capital of New Mexico, but my legal residence is Deming, N. Mex.

In order to make such comments and arguments as I deem advisable within the short space of time allotted to me, I have prepared a statement setting forth my views regarding the Gooding bill (S. 2327) here under consideration, and the reasons why in my opinion there is urgent necessity for the passage and approval of same at this session of Congress.

The fourth section of the interstate commerce act giving the Interstate Commerce Commission discretionary powers to relieve the railroads from the longand-short-haul provision for the purpose of meeting water competition has the effect of legalizing unjust discrimination against certain localities and in favor of others. Fourth-section violations in the past, with or without the approval of the Interstate Commerce Commission, have enabled certain favored communities to secure low freight rates while other communities located at interior points were forced to pay higher rates, notwithstanding the fact that they were nearer the sources of supply or points of consumption. This is a prejudicial situation which the Gooding bill seeks to correct so far as so-called water competition is concerned.

It is, of course, proper that the rail and water carriers shall be allowed, within reasonable bounds, to compete with each other whenever and wherever circumstances and conditions permit. As a safeguard against unfair or destructive competition, I believe that the boats engaged in domestic commerce as common carriers should be placed under the jurisdiction of the Interstate Commerce Commission for rate-making purposes. It is manifestly unjust to permit the water carriers to make rates on the basis of what the traffic will bear regardless of the cost of the service, while the rates of the railroads they compete with are subject to the scrutiny of a governmental agency which can change such rates if and when those rates are found to be unreasonable, unjustly discriminatory, or otherwise unlawful. On the other hand, it obviously is not in the public interest for the railroads to make rates to meet water competition which barely cover the out-of-pocket cost, while maintaining higher charges on like kinds of freight at directly intermediate points, either of origin or of destination. Such a practice on the part of the railroads inevitably casts a burden upon traffic to and from the interior points where no water-transportation service is available.

At this juncture I would like to quote an excerpt from the decision of the Interstate Commerce Commission in the transcontinental cases of 1922 (74 I. C. C. 48), decided October 30, 1922. I am quoting from page 71 of the commission's report, as follows:

"It clearly would defeat the intent of Congress to foster transportation by rail and water in full vigor if the rail carriers were permitted, at practically little or no profit to themselves, to operate so as to deprive water carriers of traffic which the water carriers would naturally handle. Moreover, it must be borne in mind that were the out-of-pocket theory used as a rate basis, there is inevitably thrown upon the rest of the traffic the task of providing the bulk of the net return contemplated in section 15A. Too wide an extension of the out-of-pocket theory would transpose the entire burden and meeting other fixed charges upon only a part of the traffic carried."

I also wish to refer to the case of coffee from Galveston and other Gulf Ports (64 I. C. C. 26), in which the commission said that in granting fourth-section relief it was necessary to consider not only the letter but the spirit of the law and the interests of the destination territory; also that the tendency of both Congress and the commission has been to restrict more and more the granting of fourth-section relief.

It has been contended that no undue preference is given to the lower-rated points or convesrely that no undue prejudice is thrust upon the higher-rated intermediate points by allowing the railroads to charge less for a greater service and more for a lesser service on account of water competition at the farther distant points. I am unable to agree with this line of reasoning. While the cost of service to the railroads is not the sole element to be taken into consideration in rate making, it in my opinion along with the value of the service to the shippers should be the controlling factors. The cost of the service fixes the minimum reasonable charge and the value of the service fixes the maximum reasonable charge for the transportation of freight, whether by land or water, or through the air.

If a rate is not compensatory per se, it is obviously unfair to the carrier and if it is execssive the consumer, who in the final analysis invariably pays the freight, is taxed unjustly. If the railroad hauls certain freight at noncompensatory rates or at rates that do not bear their just proportion of the overhead expense, it stands to reason that other classes of freight must pay rates in excess of what would be necessary if the transportation charges were all reasonable in and of themselves, and as related to each other.

Assuming for the sake of argument only that the railroads ought to have the right to haul freight from the Atlantic seaboard ro the Pacific coast, where water competition actually exists, without observing the long-and-short-haul rule, they certainly should not be permitted to transport divers and sundry commodities from an interior point like Chicago to seaports like Los Angeles and San Francisco at lower rates than charged to intermediate points of destination like Albuquerque, Deming, and Gallup, N. Mex., yet that is precisely what the midwestern rail carriers propose to do in an application for fourth-class relief which has been pending before the Interstate Commerce Commission for two years or more. Not only do the railroads want to do that, but I fear that unless some of the members have recently changed their minds on the subject, a majority of the commission will authorize them to do so if Congress does not in the meantime take away the discretionary powers now vested in that tribunal whereby it can legalize such violations in "special cases."

Why, may I ask, are shippers at Chicago, for example, entitled as a matter of right and justice to lower freight rates to the Pacific coast than they pay on like shipments destined to points in the Rocky Mountain region. Their only justification is what may be called market competition, which, in my judgment, is no valid reason or sufficient excuse for discrimination in freight rates; and it is high time that Congress recognized the self-evident fact that there is something radically wrong with rate structures that are making certain industrial centers bigger and bigger at the expense of the country at large. If it is a practical proposition to give Chicago preferential rates to the Pacific coast, we in New Mexico could with equal propriety insist upon the railroads hauling our grain, livestock, lumber, coal, ores, and other basic commodities to the Atlantic seaboard at lower rates than apply on the same commodities to Chicago, which is located approximately the same distance west of the Atlantic Ocean as Albuquerque is east of the Pacific Ocean. However, we are not asking for any special privileges or preferred treatment. All we want is a square deal and the opportunity to work out our destinies and develop our wonderful resources along natural, normal lines without having to shoulder the burden of an arbitrary, artificial adjustment of freight rates which runs counter to economic law.

As I stated in the testimony I gave before the Senate Committee on Interstate Commerce at the hearings on the Gooding bill a year ago, I believe it is a step in the right direction in regulating rates of common carriers and if enacted into law will do much to encourage the industrial and commercial development of the West, and particularly that portion embraced in the Rocky Mountain region. I am more convinced of this now than I was then. As is commonly known, industries are drawn to communities where the rate situation is favorable on both inbound and outbound freight. While there are comparatively few authorized fourth-section violations in transcontinental rates by reason of water competition in effect at the present time, there is, as I have said, an application pending on a long list of commodities which may or may not be granted. The Interstate Commerce Commission is evidently holding this application in abeyance until it learns what disposition will be made of the Gooding bill. The examiner who conducted the hearings in the case recommended in his report that the application be denied and exceptions to this report filed by the railroads seeking the "relief" were orally argued before the full commission several months ago. Even though the commission should refuse to grant fourth-section relief in this case, I submit that the Gooding bill should be passed in order to remove for all time the menace of discriminatory freight rates hanging over the interior West like the sword of Damocles, liable to descend without warning at any moment and cut off the source of revenue of a profitable business. It is difficult under existing circumstances to get new industries to locate in the West away from the seacoast as long as the fate of such industries is in the hands of 11 men having such broad discretionary powers as now vested in the Interstate Commerce Commission. In these days of keen competition, a difference of a cent or two in freight rates may mean the difference between doing business at a profit and going into bankruptcy. Capital will not ordinarily take any chances in new enterprises where the rate situation is not stabilized and is left to the caprice of railroad traffic officials or the Interstate Commerce Commission so far as fourth-section violations are concerned.

Nature provided this land of ours with a magnificent system of inland waterways. Congress has appropriated millions upon millions of dollars to make and keep them navigable. However, discriminatory freight rates of the railroads have driven the privately owned steamboats from the Mississippi, Missouri, and other rivers as effectively as though those streams had actually dried up, and the vast sums of money expended upon these waterways has virtually been wasted. It is just about as sensible to carry water in a sieve as it is to spend sums of money greatly in excess of a king's ransom in improving these rivers and at the same time allowing the railroads by a system of discriminatory freight rates to prevent their practical use as arteries of commerce such as they were in the old days before Uncle Sam became wet nurse for the rail carriers and abandoned the water carriers to their fate.

Now, I don't want to convey the impression that I am antagonistic to the railroads of this day and age, and it is not my purpose to hold the sins of bygone days against them, because I know that the present day executives would not countenance some of the pernicious practices of the dark ages of railroading. In my opinion fourth-section violations on account of water competition are relics of the days that are gone and the provisions of the act that permits such violations should be consigned to the limbo of secret rebates, cutthroat competition, and other outlawed practices.

I want to see the railroads in a prosperous condition. They should have rates that are fully compensatory and by that I mean rates that will enable them to earn the return upon investment to which they are entitled under the law of the land. I realize full well that when the railroads are prosperous it is an infallible index of the prosperity of the country generally because transportation is the very life blood of commerce and without adequate transportation facilities business is bound to suffer.

The Santa Fe system, which is one of the greatest railroads in the country, extending from Chicago to the Gulf of Mexico and the Pacific coast, doesn't seem to be in any great need of fourth-section relief, if it is a fact as reported in a recent press dispatch from New York that the annual dividend on its common stock of 6 per cent, which has been paid as regular as clockwork for 14 years, has been increased to 7 per cent and that a matter of $60,000,000 had been set aside to take care of the 1925 budget for improvements and betterments. This is indeed gratifying news to me because the Santa Fe system operates about 1,400 miles of main and branch lines in New Mexico, and I hope that several of these millions will be expended in my Staté.

The Southern Pacific, another transcontinental carrier which traverses New Mexico and recently absorbed the El Paso & Southwestern system, also appears to be in a healthy financial condition and is double-tracking its lines west of El Paso, Tex., to the coast to take care of its constantly increasing freight and passenger business. I am likewise pleased to observe these unmistakable signs of prosperity. The Southern Pacific does not seem to be in need of fourthsection relief any more than does the Santa Fe.

Then there is the Union Pacific system which I believe manages to worry along with the usual 10 per cent dividend, in spite of the alleged inroads made upon its transcontinental traffic by the steamships operating in the intercoastal trade through the Panama Canal.

Water competition is not, as a matter of fact, making any appreciable difference in the revenues of the rail carriers which are seeking fourth-section relief. Generally speaking, they are hauling all of the traffic they can conveniently handle with existing transportation facilities, and the fact that the steamships may also be doing a good business ought not to peeve the railroads. Under the circumstances, while I hold no brief for the water carriers, as my lawyer friends would say, I don't think it is fair or right to allow the railroads to take the cream of the transcontinental traffic away from the steamships, leaving the latter to get along as best they can on skimmed milk. What is applesauce for the aquatic goose should not be converted into apple pie with cheese on the side for the dry-land gander. Neither should the goose that lays the golden eggs of commerce be sacrificed to provide additional "gravy" for the gander in the fatuous belief that the gander can produce the aforesaid golden eggs single handed and unaided. We really need them both in our business and they should live in peace and harmony together, as I believe they will when they realize that it is to their own interests to do so.

In all seriousness, rail and water transportation service should be so coordinated and unified under a system of rates that will build up all sections of the country to the extent that geographical location and natural resources will permit. Fourth-section violations should be legalized only when they are undeniably in the public interest and not otherwise.

For these reasons I favor the passage of the Gooding bill because in my opnion it is a piece of constructive legislation, designed to effectively carry out the declared policy of Congress to foster, promote and encourage transportation by both rail and water in full vigor, and at the same time ro prevent unjust discrimination in freight rates at intermediate points. I confidently believe that if it becomes law it will not be long before steamboating on the Mississippi and other navigable streams will be revived; prosperity will be more widely diffused over the country, and a constant source of irritation in intermediate territory of the South and West will be eliminated.

The railroads put the Mississippi River steamboats out of business and they can and will do the same thing with our American merchant marine engaged in domestic commerce if permitted to make rates without observing the long-andshort-haul rule.

[Seventh Legislature, State of New Mexico. House Joint Memorial No. 1, introduced by R. C. Woods] A JOINT MEMORIAL Petitioning the House of Representatives of the Sixty-eighth Congress to pass S. 2327, the Gooding long-and-short-haul bill, now pending therein

To the honorable Speaker and Members of the House of Representatives of the Sixtyeighth Congress:

Whereas the Gooding bill (S. 2327), now pending before the Sixty-eighth Congress of the United States, seeks to amend section 4 of the interstate commerce act so as to prohibit violations of the long-and-short-haul provision thereof on account of so-called water competition; and

Whereas it appears that such measure is of vital importance to the country at large and will, if enacted into law, prevent carriers by railroad from imposing unjust discriminations in freight rates upon New Mexico and other States of the Rocky Mountain region, a practice which prior to 1918 seriously interfered with and retarded the growth and development of such States, and which practice the transcontinental railroads desire to reestablish in the hope of increasing their tonnage by diverting water-borne traffic from steamships of American registry engaged in intercoastal trade via the Panama Canal; and

Whereas it is the declared policy of the Congress of the United States to promote, encourage, and develop water transportation service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor