Railroad Subsidies

Report Outline
Worsening plight of american railroads
Government Operation of the Railroads
Railroad Efforts to Improve Position
Special Focus

Worsening plight of american railroads

Worry Over How to Rescue Hard-Pressed Lings

American railroads, with revenues declining and competition from other forms of transportation rising, are caught in a financial squeeze more severe than any since the Great Depression. As in the 1930s, doubt about the ability of the rail carriers to survive without public assistance is widespread. In fact, the outlook for the railroads is viewed more gloomily in many quarters today than it was & quarter-century ago.

Jervis Langdon, Jr., president of the Baltimore & Ohio, asserted recently that nationalization of the railroads could not be avoided unless there was “pretty rapid action by the government.” A joint statement on Nov. 8 by James M. Symes, chairman of the Pennsylvania, and Alfred E. Perlman, president of the New York Central, announcing their intention to seek a merger of the country's largest and second largest rail systems, said ominously: “Time to assure maintenance of rail transportation as a private enterprise is running out, and we have no choice but to try every means at hand to help our companies better their ability to compete more effectively in the transportation field and to avoid government ownership.”

Inadequacy of Current Railroad Earnings

The Association of American Railroads pointed out last spring that current railroad earnings were “not adequate to service the cost of the capital invested in them, let alone to provide the supplements to depreciation charges necessary for essential capital improvements.” As the table on the following page shows, the combined net railway operating income of the country's 108 Class I railroads—those with gross annual revenues of $3 million or more—exceeded $1 billion as recently as 1956 but had fallen below $600 million by 1960. Similarly, the average rate of return for Class I roads dropped in the same period from almost 4 per cent to barely more than 2 per cent. The figures for the first nine months of 1961 indicate continuation of this steady downhill march.