The Government and the Railroads

Report Outline
Current Efforts to Solve Rail Problems
Financial Condition of the Rail Carriers
Measures in Congress for Aid of Railroads
Special Focus

Current Efforts to Solve Rail Problems

Present Legislative Program vs. Public Ownership

Government action to assist the railroads in solving serious financial problems, made more acute by the failure of the carriers to earn fixed charges in 1938, moved a step nearer realization when the Senate gave its approval to a bill subjecting competing water carriers to regulation by the Interstate Commerce Commission, and effecting other changes in the Interstate Commerce Act, and to a bill designed to speed up reorganization of railroad companies in financial difficulties. While doubt has been expressed as to House approval of the latter bill, final passage of the former measure at the present session of Congress is currently anticipated.

Eastern railroads, meanwhile, have moved to stimulate passenger traffic by announcing wide reductions in round-trip fares. The suffering experienced by the rail carriers in recent years, however, derives primarily from the relatively low level of the much more important freight traffic. Traffic losses have resulted partly from the depression and partly from the increased competition of other forms of transportation. While the government can do nothing directly to create traffic for the railroads, it can, by subjecting other carriers to the same kind of regulation, help to equalize competitive conditions and give the rail carriers a fair chance to obtain whatever traffic may be available. Motor carriers were brought under the regulation of the Interstate Commerce Commission in 1935. The pending bill will do the same in the case of water carriers, and it contains additional provisions aimed at the development of a unified national transportation policy.

The current legislative program is of a long-range nature. Its sponsors do not anticipate that it will immediately afford the railroads substantial financial benefits. The Roosevelt administration, on the other hand, has not looked favorably on proposals for extension of emergency aid in the form of subsidies or of new loans on easy terms for equipment purchases and maintenance work. In its last annual report, made public January 3, 1939, the Interstate Commerce Commission observed that “basically, the financial condition of the railroads can be improved, apart from a government subsidy, only by an increase in revenues or a decrease in expenses, or both.”