(2) A provision that individual roads which earn more than 6 percent on the value of their property should share the excess with the Government--this being commonly known as the recapture clause.
(3) Added powers were given the Interstate Commerce Commission in dividing through rates between the several carriers involved. This provision recognized that the relative distance over which freight was hauled by each road should no longer be the primary consideration in dividing revenues, but should be subordinated to the relative costs of performing service.
Plan for a Number of Systems
(4) The Commission was directed to prepare a plan for the consolidation of all railroads in the United States into a limited number of systems with which plan future consolidations must be in harmony. These systems are to be arranged, so far as possible, so that the cost of service under uniform rate scales shall be the same, but, where practicable, existing routes are not to be disturbed and competition is to be maintained.
(5) The creation of a Railroad Labor Board as a final court of appeal by railroad managements and employees. No arrangement was made for enforcing decisions of the Labor Board except through the weight of public opinion.
Judged alone by the developments since the passage of the Act, it has not been entirely successful. In August, 1920, the Commission fixed rates which, it was expected, would yield the railroads 6 percent on their value. If there had been no depression in business this result might have been attained, but in 1921 the aggregate return was only slightly in excess of 3 percent. The recapture provision has not yet been an issue as few roads have earned in excess of 6 percent. The provision as to rate divisions has been the subject of
much controversy, and a decision of the Commission in the New England Divisions Case is now awaiting review by the Supreme Court. The outcome of the labor provisions as a whole have satisfied neither the railroad management nor their employees.
The year 1922 gave promise of improved conditions, but the loss in revenue due to the coal strike and extra expense incident to the shopmen's strike have proved severe handicaps. Present indications are that with reasonable freedom from labor troubles, and with a normal volume of traffic, the railroads in general may eventually earn the 5 3-4 percent return which the Interstate Commerce Commission have now fixed as a fair rate of income. There is danger, however, that at the least sign of improvement there will be a general demand for further rate reductions. Lower transportation costs are greatly to be desired in common with lower costs of all commodities, but premature rate reductions which tend to restrict railroad earnings are likely, in the long run, to defeat their purpose, for unless the railroads are permitted sufficient net income not only to meet expenses but to provide credit for financing improvements, they will be unable to bring about the operating economies which are necessary to an ultimate and permanent reduction in transportation charges.
Period of Amendments Likely
The next phase of the railroad problem is likely to be a period of amendments or attempted amendments to the Transportation Act. The so-called "Farm Bloc" object to what they contend is a guaranty of earnings. Many of the states are chafing under the curb which the Transportation Act has placed on their powers of regulation. The labor organizations, in common with many business organizations and some railroad managements, are anxious for different reasons to abolish the Labor Board. Others advocate the strengthening of the Labor Board by the compulsory enforcement of its decisions and the prohibition of strikes. Senator Cummins, who was jointly responsible for the Transportation Act, has indicated his intention of attempting to make consolidations compulsory as was originally provided in the Senate Bill which preceded the enactment of the Transportation Act.
Serious Danger From Politics
Although the benefits predicted on the passage of the Act have not been fully realized, and while amendments will, no doubt, be necessary in due time, there is serious danger that in attacking individual provisions the entire Act will be nullified and the whole question thrown into politics. The alleged guaranty is merely an affirmative declaration of what had been a constitutional right, and has proved powerless to insure fair return under adverse traffic conditions. Indications are appearing that labor representatives and railroad managements can get together just as well under present conditions as without a Labor Board. As to consolidations, there is no reason to be impatient because a process which has been going on practically since the first railroads were constructed has not been completed for all time within a period of two years.
For years prior to the passage of the Transportation Act, every tendency had been toward Government ownership or operation. The experiment during the war resulted in a sharp reaction in favor of private operation which was general, except on the part of railroad employees who believed that they would continue to benefit under Government control. The Transportation Act, therefore, with all its restrictions, was the foundation upon which private management was given a new opportunity. If this Act cannot be altered without a radical change in the general policies which it established, it is far better to leave it alone, for the steady trend toward Government ownership, which was halted by the war, may easily be resumed