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GIFT OF 
 
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 Mail Carrying Railways 
 Underpaid 
 
 A Statement by the Committee 
 on Railway Mail Pay representing 
 214,275 miles of Railway in the 
 United States, operated by 268 
 companies, containing facts and 
 figures which prove that Railway 
 Mail Pay does not equal the oper- 
 ating expenses that it makes nec- 
 essary, leaving nothing for return 
 upon the value of the property. 
 
 THE COMMITTEE ON RAILWAY 
 MAIL PAY 
 
 J. KRUTTSCHNITT, Chairman 
 
 Director of Maintenance and Operation, Union and 
 Southern Pacific Systems 
 
 RALPH PETERS, Vice-Chairman 
 President, Long Island Railroad 
 
 CHARLES A. WICKERSHAM 
 
 President and General Manager, Western Railway 
 
 of Alabama 
 
 W. W. BALDWIN 
 
 Vice-President, Chicago, Burlington & 
 Quincy Railroad 
 
 W. W. ATTERBURY 
 Vice-President, Pennsylvania Railroad 
 
 GEORGE T. NICHOLSON 
 Vice-President, Atchison, Topeka & Santa Fe Railway 
 
 E. J. PEARSON 
 First Vice-President, Missouri Pacific Railway 
 
 E. G. BUCKLAND 
 
 Vic-President, New York, New Haven 
 
 & Hartford Railroad 
 
 C. F. DALY 
 
 Vice-President, New York Central Lines 
 
 W. A. WORTHINGTON 
 
 Assistant Director of Maintenance and Operation, 
 Union and Southern Pacific Systems 
 
 W. F. ALLEN, Secretary 
 H. T. NEWCOMB, Statistician 
 
Mail Carrying Railways Underpaid 
 
 A STATEMENT 
 
 By the 
 
 Committee on Railway .Mail Pay 
 
 representing 
 
 214,275 miles of Railway in the United States, 
 operated by 268 companies, 
 
 containing facts and figures which 
 prove that 
 
 RAILWAY MAIL PAY 
 
 does not equal the operating expenses that it makes 
 
 necessary, leaving nothing for 
 
 return upon the value 
 
 of the property. 
 
 October, 1912. 
 
,** 
 
 TABLE OF CONTENTS. Page 
 
 I. Scope of this Pamphlet 3 
 
 II. Railway Mail Pay Is About to be Forced Still Further Below the 
 Level of Just Compensation, Unless Payments are Promptly Read- 
 justed, on Account of the Additional Volume of Mail that will 
 Result from the Inauguration, on January 1, 1913, of the Parcels Post. 3 
 
 III. The Postmaster-General's Erroneous Assertion that the Railways 
 were Overpaid "About $9,000,000.00" in the Year 1909, Rests Primarily 
 Upon His Adopting an Unprecedented Theory which Allows Nothing 
 for a Return Upon the Capital Invested in Railway Property 4 
 
 IV. The Mail Service Supplied by the Railways Costs Them More in 
 Operating Expenses and Taxes than They Are Paid For It, and Leaves 
 Nothing for Return on the Property 6 
 
 V. The Postmaster-General's Apportionment of Space Between the Mail 
 Service and the Other Services Rendered on Passenger Trains Did 
 Not Allow to the Mails the Space which They Actually Require and 
 Use and this Had the Result of Unduly Reducing His Estimates of 
 the Cost to the Railways of the Mail Service 9 
 
 VI. The Postmaster-General Ignored Data which He Had Obtained Show- 
 ing Expenditures on Account of the Mails Largely in Excess of the 
 Direct Expenses for that Service which He Reported 11 
 
 VII. The Month of November Is Not a Fair Average Month in Any Rail- 
 way Year or One that Is Typical of a Year's Business and Its Use as 
 the Sole Basis of the Postmaster-General's Calculations was So Un- 
 favorable to the Railways as to Deprive tlje Results of Any Value 
 Even If in All Other Respects His Methods were Beyond Criticism 13 
 
 VIII. A Commission of Senators and Members of Congress which, Be- 
 tween 1898 and 1901, Most Fully and Carefully Investigated the Sub- 
 ject, Ascertained and Declared that Railway Mail Pay was Not Then 
 Excessive; Since Then there Have Been Many and Extensive Reduc- 
 tions in Pay Accompanied by Substantial Increases in the Cost and 
 Value of the Services Rendered by the Railways 14 
 
 IX. The Administration of the Post Office Department Has Not, in the 
 Last Twelve Years, Effected any Reduction in the Annual Total of Its 
 Expenses for Other Purposes than Railway Transportation or in the 
 Proportion of Its Revenues Required for Such Other Expenses, but 
 the Whole Saving Which Has Nearly Eliminated the Annual Deficit 
 of the Department Is Represented by the Reduced Payments, Per Unit 
 
 of Service, to the Railways 17 
 
 X. The Continuous Refusal of the Post Office Department to Order Re- 
 weighings of the Mails Except After the Maximum Interval of Four 
 Years which the Law Allows, the Demands for Station and Terminal 
 Services that Are Rendered Without Any or Without Adequate Compen- 
 sation and the Unjust Discrimination Against Compartment Cars Used 
 as Railway Post Offices Are All Abuses, Seriously Injurious to the 
 Railways, Which Have Grown Up Under the Present System of Pay- 
 ment and Ought at Once to" Be Remedied 18 
 
 XI. The Postmaster-General's Proposed Plan of Payment Based Upon 
 Operating Cost and Taxes, to Be Ascertained by the Post Office Depart- 
 ment, Plus Six Per Cent. Is Seriously Wrong in Principle and Would 
 Encourage and Perpetuate Injustice 20 
 
 Appendices. 
 
 A. Extracts from the Postal Laws and Regulations 23 
 
 B. Classification of Operating Expenses ... 27 
 
 C. Receipts from Passenger and Freight Traffic by Months 28 
 
 D. How Railway Wages Have Increased 29 
 
 E. How Railway Taxes Have Increased 30 
 
 F. Letter dated September 11, 1912, from Hon. Jonathan Bourne, Jr., 
 
 Chairman, Senate Committee on Post Offices and Post Roads 31 
 
 G. Reply made thereto by the Committee on Railway Mail Pay 32 
 
I. SCOPE OF THIS PAMPHLET. 
 
 The Committee on Railway Mail Pay, representing railways whose 
 lines include ninety-two per cent, of the aggregate length of all railway 
 mail routes in the United States, believes that the payments to the rail- 
 ways for the services and facilities furnished by them to the Post Office 
 Department are, and for a long time have been, unjustly low. This 
 pamphlet contains a concise statement of the facts which prove that this 
 belief is warranted and, incidentally, a refutation of the estimates made 
 by the Postmaster-General, and reported to the Congress (House Docu- 
 ment No. 105, Sixty-second Congress, first session), which led him to 
 conclude that the basis of payment could now properly be changed so 
 as to accomplish a present reduction of about twenty per cent. It will 
 be shown that although the insufficient data and the erroneous methods 
 employed by the Postmaster-General resulted in his making estimates of 
 cost to the railways that are far bejow the real cost, his own figures and 
 calculations, when properly analyzed and supplemented, demonstrate that 
 the mail service has not been fairly remunerative to the railways. 
 
 Before proceeding to this demonstration it should, however, be noted 
 that 
 
 II. RAILWAY MAIL PAY IS ABOUT TO BE FORCED 
 STILL FURTHER BELOW THE LEVEL OF JUST COMPEN- 
 SATION, UNLESS PAYMENTS ARE PROMPTLY READJUSTED, 
 ON ACCOUNT OF THE ADDITIONAL VOLUME OF MAIL 
 THAT WILL RESULT FROM THE INAUGURATION, ON JANU- 
 ARY 1, 1913, OF THE PARCELS POST. 
 
 Congress has provided for a vast and incalculable extension of mail 
 traffic by creating a "Parcels Post," to be inaugurated on January 1,. 
 1913, which, by opening the mails to many articles not previously ac- 
 cepted at the post-offices and by materially reducing the rates on mailed 
 merchandise, is expected enormously to increase the volume of the ship- 
 ments which it covers. The Government seems to have assumed that, 
 under existing contracts, which were made before the meaning of the 
 word "mail" was thus extended, the railways can be compelled, until 
 these contracts expire, to carry this great additional volume of mail 
 traffic WITHOUT ANY COMPENSATION WHATEVER. If the 
 former practice of the Post Office Department is followed, no new con- 
 tracts will be made until after the next quadrennial weighings in each 
 
 327588 
 
of the four weighing sections., s,o that the position of the Government 
 amounts to un assertion that the whole added volume of the Parcels Post 
 mails will have to be carried without any compensation by the railways 
 of New England for four years and six months (these railways are in 
 the first weighing section but the weighing for the adjustment to be 
 made on July 1, 1913, has begun and will be completed before the 
 Parcels Post is inaugurated), by those of the second weighing section for 
 three years and six months, by those of the third weighing section for 
 two years and six months, by those of the fourth weighing section for 
 one year and six months, and by those of the first weighing section, not 
 located in New England, for six months. No presentation of the injus- 
 tice of the mail pay received in former years suggests even the approxi- 
 mate extent of the losses which the railways will thus incur in the 
 next four and one-half years, unless readjustments are promptly made 
 on account of the Parcels Post. 
 
 III. THE POSTMASTER-GENERAL'S ERRONEOUS AS- 
 SERTION THAT THE RAILWAYS WERE OVERPAID "ABOUT 
 $9,000,000.00" IN THE YEAR 1909, RESTS PRIMARILY UPON 
 HIS ADOPTING AN UNPRECEDENTED THEORY WHICH AL- 
 LOWS NOTHING FOR A RETURN UPON THE CAPITAL IN- 
 VESTED IN RAILWAY PROPERTY. 
 
 The Postmaster-General assumed that the railways would be pro- 
 perly compensated if they received a sum equal to the operating expenses 
 and taxes attributable to the carriage of the mails plus six per cent, of 
 the sum of those expenses and taxes. The calculation by which he ob- 
 tained the sum which he assumed would have been proper compensation 
 for the single month covered by his investigation was as follows: 
 
 His estimate of operating expenses and taxes on 
 
 account of mail service (Document No. 105, p. 
 
 280) for one month $2,676,503.75 
 
 Six per cent, of above 160,590.22 
 
 Total, assumed to represent just compensa- 
 tion for one month $2,837,093.97 
 
 The railways having been paid, for the month selected, $770,679.16 
 in excess of the sum resulting from the above calculation, the Post- 
 master-General assumed that this excess over expenses and taxes plus six 
 per cent, constituted excessive profit for that month. He multiplied this 
 assumed excess by twelve to get his estimate of annual excess and stated 
 the result, in round figures, as "about $9,000,000." 
 
 The mere statement of this method discloses the fact that it makes 
 no allowance for any return upon the fair value of the railway property 
 
 4 
 i 
 
employed in the service of the public. This omission is, of itself, suffi- 
 cient wholly to destroy the Postmaster-General's conclusion. Everyone 
 recognizes that a railway is entitled to at least a reasonable return upon 
 the value of its property devoted to the public service. The Postmaster- 
 General ignored this universally accepted principle and adopted a theory 
 which, if applied to the general business of the companies, would render 
 substantially every mile of railway in the United States immediately and 
 hopelessly bankrupt. The recently published report of the Interstate 
 Commerce Commission on the railway statistics of the year that ended 
 with June 30, 1910, contains data by which this statement is easily 
 demonstrated, as follows: 
 
 Operating expenses of all United States rail- 
 ways, for the year $1,822,630,433 
 
 Taxes of all United States railways, for the year 103,795,701 
 
 Total $1,926,426,134 
 
 Six per cent, of above total 115,585,568 
 
 Total gross receipts permitted by Post- 
 master-General's plan $2,042,011,702 
 
 But if this plan had been in force, the railways would have had, for 
 interest on mortgage bonds, a reasonable surplus as a margin of safety, 
 dividends on stocks, unprofitable but necessary permanent improve- 
 ments,* rents of leased properties, etc., etc., only the six per cent, or 
 $115,585,568. This figure may be compared with the following, among 
 others : 
 
 Interest obligations (on funded debt only) of 
 
 all United States railways, for the same year. . $370,092,222 
 
 Rentals of leased properties, all United States 
 
 railways, for the same year $133,881,409 
 
 Plainly, the Postmaster-General's proposal is equivalent to an asser- 
 tion that the railways would make a fair profit if they were enabled to 
 collect the sum of $115,585,568 in addition to their operating expenses 
 and taxes, but the figures given by the Interstate Commerce Commission 
 
 * The necessity for providing, out of income, for some kinds of improve- 
 ments is commonly admitted. The public constantly demands greater comfort 
 and convenience which can be supplied only by improvements in property and 
 equipment that bring in no additional income. A present example in the mail 
 service, itself, is the great expense which the railways are now undergoing in 
 substituting steel mail cars for those formerly in use. The old cars, which 
 thus become a total loss were fully up to the most advanced standards of con- 
 struction when built and they could continue for a long time to serve the 
 purposes of the service except for the public demand for stronger cars. 
 
show that this would be less than one-third of the sum necessary to meet 
 interest charges which must be paid in order to prevent foreclosures of 
 mortgages and, if bond interest could be ignored, is much less than the 
 rentals that must be paid if the existing systems are not to be broken 
 up. And, of course, it would allow nothing whatever for legitimate 
 demands upon income for dividends, permanent improvements or surplus. 
 
 It is unnecessary to dwell upon the consequences of such a theory 
 of "compensation" to railroad credit and to the public interest in effi- 
 cient transportation service, to say nothing of the consequences to owners 
 of railroad stock and bonds. Such a theory is not a theory of compen- 
 sation it is a theory of oppression and of destruction. 
 
 The fact that the Postmaster-General has found it necessary to 
 justify his attack upon the present basis of railway mail pay by a theory 
 so unprecedented and so unwarranted in principle and in law, raises a 
 strong presumption against all his opinions and conclusions upon this 
 subject. 
 
 IV. THE MAIL SERVICE SUPPLIED BY THE RAILWAYS 
 COSTS THEM MORE IN OPERATING EXPENSES AND TAXES 
 THAN THEY ARE PAID FOR IT, AND LEAVES NOTHING FOR 
 RETURN ON THE PROPERTY. 
 
 It cannot be too strongly emphasized that the railway mail pay at 
 present is insufficient to pay even its proper share of operating cost and 
 taxes and does not produce any return upon the property. This will 
 be demonstrated by any fair inquiry, as will now be shown. Reports 
 submitted to the Postmaster-General by railways operating 2,411 mail 
 routes, with a total length of 178,710 miles, showed that their gross 
 receipts, per car-foot mile*, from services rendered on passenger trains 
 during November, 1909, were as follows: 
 
 From mail 3.23 mills 
 
 From other services. ." 4.35 mills 
 
 Thus it appears that the space on passenger trains required for the 
 mails is proportionately less than three-quarters as productive as that 
 devoted to passengers, express, milk, excess baggage, etc., etc. As it is 
 the general belief of railway managers, whose conclusion in this respect 
 has rarely if ever been challenged, that the passenger train services, as 
 a whole, do not produce revenues sufficient to meet their fair proportion 
 of the operating costs and the necessary return upon investment, and 
 
 * A car-foot mile is a unit equal to moving one foot in car length (re- 
 gardless of width or height) one mile. Thus to move a car sixty feet long one 
 mile results in sixty car-foot miles ; to move the same car three miles results 
 in 180 car-foot miles, etc. 
 
 6 
 
therefore are not reasonably compensatory, it is evident that the mail 
 service, the pay for which is more than twenty-five per cent, below the 
 average for the other services rendered on the same trains, must bring in 
 much less than reasonable compensation. Certainly railroad revenues 
 as a whole could not be reduced twenty-five per cent, without destroying 
 all return upon the property. If so, it must be true that there can be 
 no compensation in a rate of mail pay that is twenty-five per cent, less 
 than the rate of pay for passenger traffic which, as above shown, is rela- 
 tively unprofitable. 
 
 No merely statistical comparison can, however, reveal the whole 
 story for the railways are required to furnish many incidental facilities 
 and to perform many additional services for the Post Office Department, 
 which render the mail service exceptionally arduous and costly. These 
 extra services include calling for and delivering mails at a large propor- 
 tion of the post offices located at railway towns; supplying rooms, with 
 light, heat and water, in railway stations for the use of the mail clerks : 
 placing cars, duly lighted and heated, on station tracks for' advance 
 distribution, often many hours before the departure of trains; carrying 
 officers and agents of the Post Office Department as passengers but with- 
 out compensation to the extent of more than 50,000,000 passenger miles 
 annually (this bsing, of course, in addition to the railway mail clerks on 
 duty), etc., etc. Extracts from the "Postal Laws and Kegulations" defin- 
 ing and demanding these services are given in Appendix A. No one can 
 examine this appendix and not be convinced that the mail service is the 
 most exacting among all those rendered by American railways. 
 
 The fairness of railway mail pay can also be tested by apportioning 
 operating expenses between passenger and freight traffic, and then mak- 
 ing a secondary apportionment of the passenger expenses between mail 
 and other kinds of traffic carried on passenger trains. This method in- 
 volves charging directly to each kind of traffic all expenses pertaining 
 exclusively thereto, and the apportionment, on some fair basis, of those 
 expenses which are common to more than one kind of traffic. 
 
 In accordance with the request of the Postmaster-General, the 
 railways estimated the cost of conducting the mail service in the manner 
 just explained and reported the results to the Postmaster-General. After 
 first charging to each service the expenses wholly due to it they appor- 
 tioned the common expenses between the passenger and freight services, 
 following (with inconsequential exceptions) the method most generally 
 employed for that purpose, namely the apportionment of these expenses 
 in the proportions of the revenue train mileage of each service. Having 
 estimated, in this way, the operating expenses attributable to passenger 
 trains, the railways assigned to the mails the portion of this aggregate 
 indicated by the proportion of the total passenger train space required 
 
for the mails. Using this method, 186 railways, operating 2,370 mail 
 routes, with a total length of 176,716 miles, ascertained and reported 
 that for November, 1909, the operating expenses (not including taxes), 
 for conducting the mail service were $4,009,184. The Postmaster-Gen- 
 eral states (Document No. 105, page 281), that all the railways repre- 
 sented in the foregoing, and enough others to increase the mileage rep- 
 resented to 194,978 miles, were paid for the same month only $3,607,- 
 773.13. It thus appears that the pay was far below the operating ex- 
 penses, without making any allowance for taxes or for a return upon the 
 fair value of the property employed. 
 
 While different methods are in use for ascertaining the cost of 
 passenger train service and the results produced by such methods may 
 show considerable variation, yet the mail pay is so far below reasonable 
 compensation, from the standpoint of the cost of the service and a return 
 upon the value of the property, that no method can be reasonably urged 
 which would not demonstrate the non-compensatory character of the 
 present mail pay. This is illustrated by the method which the Post- 
 master-General himself employed, as the character of that method is such 
 that it necessarily produces the very lowest estimate of cost for the 
 passenger train service. 
 
 The Postmaster-General, by his method of 
 apportionment arrived at a cost of $2,676,503.75 
 
 But this must be increased (as will be shown 
 below, on account of his erroneous appor- 
 tionment of car space (page 10), by 800,802.00 
 
 And also on account of his refusal to as- 
 sign expenses directly incurred in the mail 
 service (page 12) 401,126.00* 
 
 Total, according to the Postmaster- Gen- 
 eral's method of apportioning costs be- 
 tween passenger and freight traffic $3,878,431.75 
 
 Thus even the Postmaster-General's method of apportioning costs 
 between freight and passenger traffic produces an operating cost in excess 
 of the total pay received by the railways, leaving nothing whatever for 
 return upon the fair value of the property or necessary but non-income 
 producing improvements. 
 
 There is no allowance, in any of these estimates of cost, for the large 
 volume of free transportation supplied to officers and agents of the Post 
 Office Department, when not in charge of mail, although this amounts to 
 
 * There may be some duplication in this item, but to eliminate it would 
 require an elaborate computation which, in view of the broad margin of ex- 
 penses over receipts, is wholly superfluous. Whatever duplication exists must 
 be small in comparison with this margin. 
 
 8 
 
over 50,000,000 passenger miles annually and, at the low average rate of 
 two cents per mile, would cost the Post Office Department more than 
 $1,000,000 per year. 
 
 Moreover, as will presently be shown (pages 13-14) all the figures 
 here discussed are for the month of November, a month which, because 
 of the abnormally low ratio of passenger traffic to freight traffic, sub- 
 stantially understates the cost of the passenger train services, when fig- 
 ures derived from it are applied to an entire year. 
 
 It thus becomes evident that any inquiry which takes into consider- 
 ation the necessary elements of the situation will demonstrate that rail- 
 way mail pay is too low. It is only by ignoring essential elements of 
 the service and of expense and the fundamental element of a return on 
 the value of the property that any argument to the contrary can be 
 constructed. 
 
 Thus the mail traffic does not pay its operating cost. That traffic 
 is a substantial percentage of the total public service performed by the 
 railroads. It should con-tribute a substantial proportion to the taxes 
 which the railroads have to pay and to the return on railroad property 
 which its owners are entitled to receive. Clearly no fair method can be 
 devised which will fail to show that the existing mail pay is far below 
 a fairly compensatory basis. Certainly this condition ought not to be 
 intensified by adding the injustice of still further reductions. On the 
 contrary, the unjust reductions of recent years should be corrected for 
 the future, and the railroads should be relieved from the strikingly 
 unjust methods by which they are at present deprived of anything ap- 
 proaching fair compensation. 
 
 V. THE POSTMASTER-GENERAL'S APPORTIONMENT 
 01' SPACE BETWEEN THE MAIL SERVICE AND THE OTHER 
 SERVICES RENDERED ON PASSENGER TRAINS DID NOT 
 ALLOW TO THE MAILS THE SPACE WHICH THEY ACTU- 
 ALLY REQUIRE AND USE AND THIS HAD THE RESULT OF 
 UNDULY REDUCING HIS ESTIMATES OF THE COST TO THE 
 RAILWAYS OF THE MAIL SERVICE. 
 
 Detailed reference will now be made to the methods and controlling 
 effect of the Postmaster-General's apportionment of passenger train 
 space between the mails and the other services rendered on passenger 
 trains. Such an apportionment was a necessary step in the calculations 
 reported in Document No. 105. Having obtaine<J certain estimates of 
 the cost of the passenger train services, considered together, by methods, 
 producing the lowest results, the next step shown in Document No. 105 
 was to apportion a part of this cost to the mail service. The accepted 
 method for such an apportionment is to distribute the total cost in pro- 
 portion to the train space required by each of the respective services. 
 The Postmaster-General obtained from the railways statements which 
 
he might have used in applying this method and these statements showed 
 that 9.32 per cent, of the total space in passenger trains was required by 
 the mails, but, instead of using the data showing this fact, he substituted 
 figures of his own which reduced the space credited to the mail service 
 to 7.16 per cent, of the total. The total of passenger train costs which 
 the Postmaster-General estimated should be apportioned among pas- 
 sengers, express and mail, on the basis of space occupied, was 
 $37,074,172.* He therefore assigned to the mail service 7.16 per cent, of 
 the last-named sum or $2,654,510.69. If, however, he had used the 
 proportion of space, 9.32 per cent., resulting from the reports he had 
 obtained from the railways, the amount apportioned as cost of the mail 
 service for the month would have been $800,802 greater. Multiplying 
 this by twelve gives an increase in the estimated annual cost of over 
 $9,600,000. 
 
 Thus the Postmaster-General arrived at his declaration that the 
 railways were getting an excess profit of $9,000,000 by means of two 
 fundamental errors, omitting for the present reference to any other 
 errors. He understated the annual mail expenses and taxes of the rail- 
 ways by at least $9,600,000, and he ignored entirely the necessary return 
 on the value of railroad property. 
 
 This examination of his methods shows that the determination of 
 space was of primary and controlling importance and that the changes in 
 space allotment have destroyed the value of his deductions. These 
 changes were due to his refusal to assign to the mail service the working 
 space and temporarily unoccupied space on trains, which were necessary 
 to the mail service and to his actually assigning much of this space to 
 the passenger service rendered on the same trains. 
 
 It is scarcely necessary to note that all kinds of traffic require 
 "working space" in addition to the space actually occupied by the traffic 
 itself, and that this is especially true of the mail traffic, or that where 
 there is a preponderating movement of a certain traffic in one direction 
 there must be some empty space on account of that traffic, sometimes 
 called "dead" space, in trains moving in the direction of lighter traffic. 
 Thus passenger cars must have aisles, vestibules and platforms, and 
 postal cars must have a great deal of space in which to sort the mails 
 while, for mail carried in baggage cars, there must be space in which 
 to reach the pouches and to receive and deliver them through the doors. 
 A through train must also have the full capacity required for the max- 
 
 *This is the sum which was apportioned by the Postmaster General on the 
 basis of train space occupied. He estimated $40,121,294.83 (Document No. 105, 
 page 280) as the total operating expenses and taxes of the passenger train 
 services for the month. Of this total $21,993.06 was charged directly to the 
 mails and $3,025,129.77 directly to the other passenger train services, leaving 
 the sum stated in the text to be apportioned on the space basis. 
 
 10 
 
imum traffic of any kind likely to seek accommodation on any part of its 
 journey, although during much of each trip the actual traffic may be 
 considerably below this limit. The Postmaster- General, however, refused 
 to credit the mail service with much of the space thus required by the 
 Department although his figures for the other passenger train services 
 allowed fully for all such space required by them. In fact in many cases 
 such space, actually required by the mails and so reported by the railways, 
 was taken from the total mail space and, without reason, assigned to 
 the passenger service. These modifications of the data correctly reported, 
 not susceptible of justification upon any sound transportation principle, 
 were carried so far that the tabulations of the Post Office Department, 
 which are stated for railway mail routes having a total length of 
 194,977.55 miles* show only 926,164,459 "car-foot miles" made in the 
 mail service, although certain railways, included therein, and having 
 railway mail routes aggregating only 178,709.96 miles, had correctly 
 reported mail space equivalent to 1,153,110,245 "car-foot miles." Thus, 
 although the Department's figures cover 8.3 per cent more mileage, its 
 reductions of space resulted in assigning to this greater mileage about 
 one-quarter (24.5 per cent.) less mail space. At the same time the De- 
 partment actually increased the space assigned to the other passenger 
 train services, its figures showing 12,014,065,506 car-foot miles in these 
 services for 194,977.55 miles of mail routes which must be compared 
 with 11,222,478,739 car-foot miles reported by the railways for 
 178,709.96 mail-route miles. 
 
 This treatment of the controlling figures as to space, supplementing 
 the other errors of method and omissions of fact, which have been or 
 will be cited, was amply sufficient to turn a real loss into an apparent 
 profit. 
 
 VI. THE POSTMASTER - GENERAL IGNORED DATA 
 WHICH HE HAD OBTAINED SHOWING EXPENDITURES ON 
 ACCOUNT OF THE MAILS LARGELY IN EXCESS OF THE 
 DIRECT EXPENSES FOR THAT SERVICE WHICH HE RE- 
 PORTED. 
 
 As a part of the investigation reported in Document No. 105 the 
 Postmaster-General obtained from the railways statements showing the 
 amounts expended by them for the station and terminal services required 
 by his Department and the amount of free transportation furnished on 
 his requisition for officers and agents of the postal service when not in 
 charge of mail. These data were not used (Document No. 105, p. 6) 
 and, as no adequate allowance was made in any other way for these ex- 
 penses, the omission unjustly reduced the estimates of the cost to the 
 
 * Document No. 105, p. 53. 
 
 11 
 
railways of their postal services. The Postmaster-General's explanation 
 of this omission implies that it was partially offset by the assignment as 
 cost of mail service of its proportion, on the space basis, of all the station 
 and terminal expenses of the passenger train services but these special 
 mail expenses are disproportionately heavy and the amount so assigned 
 was far too low. The expenses for station and terminal services espe- 
 cially incurred for the mails, during November, 1909, and reported to 
 the Postmaster-General, for ninety-two per cent, of the mileage covered 
 by Document No. 105 aggregated $401,136.00, as follows: 
 
 Amount of wages paid to messengers and porters 
 
 employed exclusively in handling mails $79,980.84 
 
 Portion properly chargeable to mail service, pro- 
 rated on basis of actual time employed, of wages 
 paid to station emplo} r ees a part of whose time 
 is employed in handling mails 198,927.01 
 
 Amount expended for maintenance of horses and 
 wagons and for ferriage, etc., in connection with 
 mail service 5,640.98 
 
 Rental value, plus average monthly cost of light 
 and heat, of room or rooms set apart for the ex- 
 clusive use of the mail service 37,258.93 
 
 Rental value of tracks occupied daily for advance 
 
 distribution of the mail 47,029.12 
 
 Average monthly cost of light and heat for postal 
 
 cars placed daily for advance distribution of mail 18,400.57 
 
 Interest at the legal rate upon the value of cranes, 
 
 catchers and trucks required for mail service. . . . 3,895.36 
 
 Total -. .$401,126.00* 
 
 All the foregoing data were reported to the Postmaster-General in 
 response to his request but he made no use of these items, an omission 
 manifestly to the serious disadvantage of the railways and having the 
 effect of unduly reducing his estimates of the cost of the mail service. 
 
 Similarly, the Postmaster-General omitted to use the data he had 
 obtained from the railways showing the volume of free passenger trans- 
 portation, already referred to, supplied to the officers and agents of the 
 Post Office Department and his estimates contain no recognition of the 
 cost of this service although its extent should be a matter of record in 
 the Department as it is furnished only on its requisition. The space 
 
 * This total includes $9,993.19 reported by four companies which gave 
 totals for these items, but did not report the items separately. 
 
 12 
 
in passenger coaches occupied by these representatives of the Post Office 
 Department, traveling free, was not assigned to the mail service but was 
 treated as passenger space. 
 
 VII. THE MONTH OF NOVEMBER IS NOT A FAIR 
 AVERAGE MONTH IN ANY RAILWAY YEAR OR ONE THAT 
 IS TYPICAL OF A YEAR'S BUSINESS AND ITS USE AS THE 
 SOLE BASIS OF THE POSTMASTER-GENERAL'S CALCULA- 
 TIONS WAS SO UNFAVORABLE TO THE RAILWAYS AS TO 
 DEPRIVE THE RESULTS OF ANY VALUE EVEN IF IN ALL 
 OTHER RESPECTS HIS METHODS WERE BEYOND CRITI- 
 CISM. 
 
 All the Postmaster-General's calculations, reported in Document 
 No. 105, and by him relied upon therein, and elsewhere, to substantiate 
 his attack upon existing railway mail pay, depend solely upon data for 
 the single month of November, in the year 1909. It is obvious, therefore, 
 that the validity of his conclusions, if all the rest of his processes were 
 accurate and his deductions otherwise sound, would depend upon whether 
 November is sufficiently typical of the railway year to be safely used as 
 the sole basis for conclusions applicable to a whole year. The truth is, 
 however, that November is not a typical or average month and that all 
 of its deviations from the averages of the year are such as greatly to 
 favor the result which the Postmaster- General was seeking. 
 
 It may well be doubted whether the railway year contains any 
 month that can properly be regarded as typical of the whole period but 
 if it does, the month of November, with four Sundays, two holidays and 
 only twenty-four working days, is certainly not such a month. The 
 Interstate Commerce Commission publishes the monthly aggregates of 
 railway receipts and these official data conclusively prove that Novem- 
 ber, 1909, was the one month for which the data were most strongly 
 favorable to finding, by the Postmaster-General's method, an abnormally 
 low apparent cost for the passenger train services and, consequently, for 
 the mail service. 
 
 It is a month in which substantially Winter conditions prevail in 
 a large part of the country and, on this account, one during which much 
 of the ordinary work of maintenance of way and structures must be 
 suspended. Such work occasions a large fraction of the yearly expenses of 
 all railways and these expenses pertain in a relatively large proportion to 
 the passenger services because the higher speed of passenger trains results 
 in greater relative wear and tear upon road-bed and structures than that 
 caused by the slower trains of the freight service and the requirements 
 of safety to passengers carried at high speed impose more costly stan- 
 dards of maintenance than would otherwise be necessary. Consequently 
 
 13 
 
a month in which these maintenance expenses are necessarily below 
 the yearly average cannot typify the full annual cost of the passenger 
 train services. Figures showing the facts are contained in Appendix B. 
 
 It is, of course, understood that the respective expenses of the pas- 
 senger and freight services must move upward and downward with the 
 fluctuations in the volume of each sort of traffic. No month can furnish 
 a reliable basis for estimating the proportion of the total expenses that 
 is caused by the passenger service unless during that month the volume 
 of passenger traffic bears a normal relation to the volume of freight 
 traffic. But in November, 1909, as will appear from official figures for 
 each month in the year contained in Appendix C, passenger traffic, as 
 measured by receipts therefrom, was much below the average month of 
 the year while freight traffic was far above the average. The November 
 receipts from passengers amounted to only 21.5 per cent, of total receipts, 
 the lowest relation shown for any month in the year. Of course, under 
 these conditions passenger expenses were curtailed and freight expenses 
 relatively enhanced. Certainly the use of data resulting from these ab- 
 normal relations could not possibly produce results fairly typical of a 
 normal period, that is of a whole year. The results so obtained must 
 have diminished the apparent cost of the passenger train services below 
 the true cost, by just as much as the figures for November were below 
 the average figures of the year. 
 
 These considerations fully establish the truth that, if every other 
 feature of Document No. 105 were absolutely beyond criticism, the fact 
 that it rests wholly upon estimates based upon data for the single month 
 of November would render its conclusions illusory, misleading and seri- 
 ously prejudicial to the railways. 
 
 VIII. A COMMISSION OF SENATORS AND MEMBERS 
 OF CONGRESS WHICH, BETWEEN 1898 AND 1901, MOST 
 FULLY AND CAREFULLY INVESTIGATED THE SUBJECT, 
 ASCERTAINED AND DECLARED THAT RAILWAY MAIL PAY 
 WAS NOT THEtt EXCESSIVE; SINCE THEN THERE HAVE 
 BEEN MANY AND EXTENSIVE REDUCTIONS IN PAY AC- 
 COMPANIED BY SUBSTANTIAL INCREASES IN THE COST 
 AND VALUE OF THE SERVICES RENDERED BY THE RAIL- 
 WAYS. 
 
 The Congressional Joint Commission to Investigate the Postal Serv 
 ice, which reported on January 14, 1901, is authority for the fact that, at 
 that time, railway mail pay was not excessive. Senator William B. 
 Allison, of Iowa; Senator Edward S. Wolcott, of Colorado; Senator 
 Thomas S. Martin, of Virginia ; Representative Eugene F. Loud, of Cali- 
 fornia; Representative W. H. Moody, of Massachusetts, and Represen- 
 
 14 
 
tative T. C. Catchings, of Mississippi, six of the eight members of the 
 Commission, then united in the following : 
 
 "Upon a careful consideration of all the evidence and 
 the statements and arguments submitted, and in view of 
 all the services rendered by the railways, we are of the 
 opinion that 'the prices now paid to the railroad com- 
 panies for the transportation of the mails' are not exces- 
 sive, and recommend that no reduction thereof be made 
 at this time." Fifty-second Congress, Second Session, 
 Senate Document No. 89, pp. 19, 22, 25, 29. 
 
 Since the Commission reported, the volume of the American mails, 
 the revenue of the American postal service and its demands upon the 
 railways for services and facilities have greatly increased. The costs of 
 supplying railway transportation have also greatly increased. The neces- 
 sary cost of railway property per unit of service has increased, and in 
 consequence the amount required as a reasonable return thereon, on 
 account of higher wages and prices, the higher standards of service 
 demanded and the higher value of the real estate required for extended 
 and necessary terminal plants. Operating expenses have grown by 
 reason of repeated advances in rates of wages paid to employees of every 
 grade and increased prices of materials and supplies. Taxes have in- 
 creased with the rapidly augmenting exactions of State and local govern- 
 ments and the imposition of an entirely new Federal corporation tax.* 
 Yet during this period of rapidly advancing railway expenses, and in 
 spite of the fact that at its commencement the railway mail pay was not 
 excessive, the rates of payment for railway mail services have been sub- 
 jected to repeated and drastic decreases accomplished both by legislative 
 action and by administrative orders. These reductions have so much 
 more than offset the rather doubtful advantages which the railways 
 might be assumed to have obtained from the increased volume of mail 
 traffic that in 1912 they find their mail service more unprofitable than 
 ever before. The following table shows the facts: 
 
 Fiscal 
 Year 
 
 Total railway 
 mail pay 
 
 Average railway mail 
 pay per $100.00 of 
 postal receipts. 
 
 1901 
 
 $38,158,969 
 
 $34.18 
 
 1904 
 
 43,971,848 
 
 30.62 
 
 1907 
 
 49,758,071 
 
 27.10 
 
 1910 
 
 49,405,311 
 
 22.04 
 
 1911 
 
 50,583,123 
 
 21.26 
 
 * Data indicating some of the increases in wages and taxes are given in 
 Appendices D and E. 
 
 15 
 
The foregoing shows that the Post Office Department expended for 
 railway transportation, in 1901, $34.18 in order to earn $100.00 in gross 
 and that by 1911 this expenditure had been reduced 37.8 per cent, to 
 $21.26. 
 
 This notable reduction was the consequence (first) of the operation 
 of the law fixing mail pay under which the average payment per unit of 
 service decreases as the volume of mail increases; (second) of the Acts 
 of Congress of March 2, 1907, and May 12, 1910, and (third) of admin- 
 istrative changes effected by the Post Office Department which, without 
 decreasing the services required of the railways or enabling those services 
 to be rendered at any lower cost, greatly reduced the payment therefor. 
 Chief among these administrative changes was the Postmaster-General's 
 order known as the "Divisor" order (No. 412 of June 7, 1907, super- 
 seding Order No. 165 of March 2, 1907) radically lowering the basis 
 for calculating the annual payments for transportation. No official 
 estimate of the reduction in the aggregate annual payment produced 
 by the operation of the law fixing the scheme of payment has been made 
 but from time to time the Department has published estimates of the 
 reductions otherwise effected. None of these estimates is now up to date, 
 and to make them comparable with the present volume of mail sub- 
 stantial increases would be necessary, but they are given below as repre- 
 senting an amount substantially less than the lowest possible statement 
 of the total present annual reduction. 
 
 Cause of reduction Amount of annual reduction. 
 
 Natural operation of the law No estimate. 
 
 Acts of March 2, 1907, and May 12, 1910 $2,723,658.90 
 
 Withdrawal of pay for special facilities 167,005.00 
 
 Postmaster-General's divisor order 4,941,940.34 
 
 Other administrative changes 699,544.51 
 
 Total (with no allowance for the first item 
 above) $8,532,148.75 
 
 No one will contend for a moment that there has been any net 
 reduction in the cost of supplying railway mail services and facilities 
 since 1901, the year in which the report of the Joint Commission to 
 Investigate the Postal Service was made. In fact, all changes in railway 
 operating costs, except those due to increased efficiency of organization 
 and management, which can have little if any effect in connection with 
 mail traffic, have been in the opposite direction. During the years charac- 
 terized by these reductions the railways have been called upon contin- 
 ually to improve the character of their postal service and the Post Office 
 Department will not deny that the railways are now rendering better, 
 more frequent, and more expeditious postal service than in 1901, or 
 
 16 
 
any intermediate year, and are doing so at greatly increased cost to them- 
 selves. 
 
 In view of these thoroughly substantiated facts the drastic reduc- 
 tions of recent years afford unanswerable proof that railway mail pay 
 is now too low. 
 
 IX. THE ADMINISTRATION OF THE POST OFFICE DE- 
 PARTMENT HAS NOT, IN THE LAST TWELVE YEARS, EF- 
 FECTED ANY REDUCTION IN THE ANNUAL TOTAL OF ITS 
 EXPENSES FOR OTHER PURPOSES THAN RAILWAY TRANS- 
 PORTATION OR IN THE PROPORTION OF ITS REVENUES 
 REQUIRED FOR SUCH OTHER EXPENSES, BUT THE 
 WHOLE SAVING WHICH HAS NEARLY ELIMINATED THE 
 ANNUAL DEFICIT OF THE DEPARTMENT IS REPRESENTED 
 BY THE REDUCED PAYMENT S, PER UNIT OF SERVICE, TO 
 THE RAILWAYS. 
 
 That the recent savings of the postal service have been wholly at 
 the expense of the railways is shown by the following: 
 
 1901. 1911. 
 
 Postal gross receipts $111,631,193 $237,879,823 
 
 Postal expenses, all purposes; 
 
 Total $115,554,921 $238,507,669 
 
 Per cent, of gross receipts 103.5 100.3 
 
 Railway mail pay; 
 
 Total $38,158,969 $50,583,123 
 
 Per cent, of gross receipts. . . . 34.2 21.3 
 
 Postal expenses other than rail- 
 way mail pay; 
 
 Total '.. $77,395,952 $187,924,546 
 
 Per cent, of gross receipts. . . . 69.3 79.0 
 
 This table shows that in the ten years from 1901 to 1911 the Post 
 Office Department reduced its operating ratio between its total expenses 
 and its gross receipts from 103.5 per cent, to 100.3 per cent., being a 
 reduction of 3.2 points; but it also shows that this improvement was 
 due solely to the fact that the ratio of railway mail pay expenses to gross 
 receipts was reduced from 34.2 per cent, to 21.3 per cent., a reduction 
 of 12.9 points, while the ratio of all other expenses to gross receipts 
 increased from 69.3 per cent, to 79 per cent., an increase of 9.7 points. 
 Thus the improvement of 3.2 points in the ratio for all expenses was due 
 entirely to the greatly reduced ratio of railway mail pay, the heavy re- 
 duction in that respect exceeding by 3.2 points the very substan- 
 tial increase in the ratio of all other expenses. 
 
During the ten years from 1901 to 1911 the Department took up 
 an enormous increase in business at a greatly decreased cost for railway 
 transportation and at a largely increased cost for other purposes. It 
 cost the Department, for purposes other than railway transportation, 
 nearly nine-tenths of $126,248,630 to add that amount to its gross re- 
 ceipts (although for these other purposes it had previously spent less 
 than seven-tenths of its gross receipts) while it required less than one- 
 tenth of the same sum to pay for the added railway transportation that 
 the new business required (although at the beginning of the period 
 railway transportation had cost more than one-third of the gross re- 
 ceipts). This startling comparison fully warrants the conclusion that 
 the power of Congress and the Department has been exercised to force 
 upon the railways, by reducing the payments for their services, the 
 burden not only of the effort to eliminate the annual postal deficit but 
 of considerable increases in other forms of postal expenditure. No ref- 
 erence to rural free delivery will serve to explain away the conclusion 
 suggested by this comparison especially since only a fraction of the cost 
 of that service represents really an additional net outlay. This service 
 has permitted a reduction of one-third in the number of post offices and 
 has been in many cases substituted for star route service and the savings 
 thus permitted ought to be credited to it before determining its cost. 
 
 That increases in postal expenditures were necessary, between 1901 
 and 1911, is not denied. The period was one in which steady and exten- 
 sive increases in the cost of living made necessary considerable increases 
 in the salaries of postal employees and in the cost of postal supplies, 
 precisely as the railways were impelled to increase the salaries and wages 
 of their employees and were obliged to pay higher prices for their sup- 
 plies. In other words, the purchasing power of the American dollar, 
 and of standard money everywhere, greatly decreased and this decrease 
 affected the Post Office Department as it has affected every business 
 undertaking. But the purchasing power of the railway dollar decreased 
 exactly as that of all other dollars and it was unreasonable and unjust 
 that while this change was in progress, the losses which it entailed in 
 the postal service of the Government should be shifted, as it has been 
 shown that they were, to the railways which were, at the same time, 
 suffering far greater losses from the same cause. 
 
 X. THE CONTINUOUS REFUSAL OF THE POST OFFICE 
 DEPARTMENT TO ORDER REWEIGHINGS OF THE MAILS 
 EXCEPT AFTER THE MAXIMUM INTERVAL OF FOUR 
 YEARS WHICH THE LAW ALLOWS, THE DEMANDS FOR STA- 
 TION AND TERMINAL SERVICES THAT ARE RENDERED 
 WITHOUT ANY OR WITHOUT ADEQUATE COMPENSATION 
 AND THE UNJUST DISCRIMINATION AGAINST COMPART- 
 
 18 
 
MENT CARS USED AS RAILWAY POST OFFICES ARE ALL 
 ABUSES, SERIOUSLY INJURIOUS TO THE RAILWAYS, WHICH 
 HAVE GROWN UP UNDER THE PRESENT SYSTEM OF PAY- 
 MENT AND OUGHT AT ONCE TO BE REMEDIED. 
 
 In addition to the inadequacies in the rates of pay provided under 
 the present law, which result in payments that do not leave any balance 
 for taxes or return upon property and indeed do not even meet oper- 
 ating expenses, there are certain conditions which have grown up in 
 the application of the existing basis of pay that ought to be rectified. 
 This is especially necessary in view of the tendency, herein shown, of 
 the Post Office Department to apply the system so as to reduce its ex- 
 pense for railway transportation, and to look to this item as the chief 
 or sole source of economies. 
 
 The transportation pay received for each railway route is deter- 
 mined, under the practice of the Department, for a period of four years 
 on the basis of the average daily weight carried during a period of 
 about three months duration prior to the beginning of the period for 
 which it is fixed. Thus, by the terms of the law, the Government upholds 
 the principle that weight should be the basis of payment but, by 
 an inconsistent practice, denies that principle and creates a condition 
 under which it is practically certain that the weight actually carried 
 will differ materially from the weight paid for. Congress, surely, never 
 intended this result for the provision of law is, merely, that the mail 
 shall be weighed "not less frequently" than once in four years and clearly 
 implies an intention that it should be weighed whenever a substantial 
 change in volume has taken place. But the Post Office Department 
 controls, subject to the provision of law, the frequency of the weighings, 
 and naturally seeks those reductions in its expenses which can be effected 
 without loss anywhere except in railway revenues. Consequently, it long 
 ago ceased to order new weighings, except when compelled to do so by 
 the expiration of the statutory limit. It thus happens that while the 
 railways are paid on the basis of a certain average daily weight they are 
 frequently carrying a much greater weight and with no compensation 
 whatever for the increase in the weight. In other instances the change 
 is in the opposite direction but with increasing national population and 
 wealth it is obvious that most of these changes must be to the injury 
 of the railways. However, the element of uncertainty thus introduced 
 into each contract is unbusinesslike and in fairness to both parties ought 
 to be removed. No railway would make a four years' contract to carry, 
 for a definite sum, the unlimited output of any manufacturing plant 
 and if it attempted to do so the contract would be void under the Inter- 
 state Commerce law. The terms of the mail contracts are substantially 
 
 19 
 
dictated by the Postmaster-General and by Congress and the latter 
 ought, in justice both to the railways and to the Government, to require 
 the former to make annual weighings in order that the scheme of pay- 
 ment provided in the law may be fairly and accurately applied. 
 
 Eailways are required to transfer the mails between their stations 
 and all post offices not more than a quarter of a mile distant from the 
 former and, at the election of the Post Office Department, to make 
 similar transfers at terminals. For the former no compensation is 
 accorded, and for the latter the allowances are inadequate. There are 
 numerous instances in which these extra services require expenditures, 
 on the part of the railways concerned, that exceed the total compensation 
 of the mail routes on which they occur. The extent of these require- 
 ments in particular cases is largely subject to the will of the Department 
 and this produces unreasonable uncertainties as to what may be de- 
 manded during the life of any contract. The basis of payment plainly 
 does not contemplate such services, they are a survival from the period 
 when the mails were carried by stage-coaches, which could readily 
 deviate these distances from their ordinary routes, and it is clear that 
 the Government ought to perform these services itself or reasonably 
 compensate the railways therefor. 
 
 Much of the mail moved by the railways is carried in cars especially 
 equipped as traveling post offices in order that it may be accompanied by 
 postal clerks who perform, on the journey, precisely the labor which 
 they would otherwise perform in local post offices. Cars so used can be 
 but lightly loaded and are costly to supply, to equip, to maintain and to 
 move. Their use has greatly increased the efficiency of the postal service 
 and vastly expedited the handling of the mails. In the infancy of this 
 service Congress provided for additional payments for the full cars so 
 required, but when the practice of requiring portions of cars for the 
 same identical purpose was inaugurated no provision for paying for 
 them was made and this condition never has been corrected. Even in 
 Document Njo. 105, the injustice of this situation is recognized (page 
 3) and the Postmaster-General asserts that it is a purely arbitrary 
 discrimination and without logical basis. Obviously a reasonable allow- 
 ance for apartment cars ought to be made. 
 
 XI. THE POSTMASTER-GENERAL'S PROPOSED PLAN 
 OF PAYMENT BASED UPON OPERATING COST AND TAXES, 
 TO BE ASCERTAINED BY THE POST OFFICE DEPARTMENT, 
 PLUS SIX PER CENT. IS SERIOUSLY WRONG IN PRINCIPLE 
 AND WOULD ENCOURAGE AND PERPETUATE INJUSTICE. 
 
 The foregoing discussion makes plain the error and injustice in the 
 Postmaster-General's proposal to pay the railways for carrying the mail 
 
 20 
 
upon the basis of returning to them the operating expenses and taxes, 
 as ascertained by the Post Office Department, attributable to the car- 
 riage of the mails, plus six per cent, of the sum of these expenses and 
 taxes. 
 
 The discussion under heading III above demonstrates that the plan 
 leaves out of consideration any allowance for return upon the property 
 and would be destructive of the universally recognized rights of the 
 railroad companies. 
 
 Furthermore, such a plan is fundamentally erroneous because it 
 involves paying the highest rates to the railroad that by reason of 
 physical disabilities or inefficient methods is most expensively operated 
 and the lowest rates to the railroad which, by reason of the highest 
 efficiency, operates at the lowest cost. A railroad's superior operating 
 efficiency is frequently due to exceptionally heavy capital expenditures 
 to obtain low grades, two, three or four main tracks, and to improve- in 
 other respects the roadbed and tracks to the end that trains may be 
 hauled at the lowest expense. Such a railroad needs, and is entitled 
 to sufficient net earnings to enable it to pay a proper return upon the 
 increased value which is due to such expenditures. But under the Post- 
 master-General's plan, a railroad would be penalized for all the capital 
 expenditures made by it for the purpose of decreasing its operating cost, 
 because the more it decreased its operating cost the more it would de- 
 crease its mail pay. 
 
 The ascertainment of the cost to a railroad of conducting mail 
 service is necessarily very largely a matter of judgment and opinion, 
 because a large proportion of the total operating expenses are com- 
 mon to the freight and passenger traffic and can only be approx- 
 imately apportioned. There is room for a very wide discretion in the 
 making of such apportionments. It would not be right or proper to 
 entrust the Post Office Department with the discretion of making such 
 apportionment, because the Post Office Department has an obvious in- 
 terest at stake, its object always being to reduce the railroad pay to 
 a minimum. 
 
 The last preceding statement is fully justified by the facts disclosed 
 by the foregoing pages, which show how consistently the Post Office 
 Department has relied upon reductions in railway mail pay as the ever 
 available source of desired curtailments of expenses and how unsuccess- 
 fully the railways have resisted this persistent pressure. They show 
 that successive Postmasters-General have taken advantage of every legal 
 possibility, such as taking the longest time between mail weighings 
 which the law permits and the strained interpretation of the statute 
 fixing the basis of payment (page 19), in order to effect reductions 
 
 21 
 
in railway mail pay. Consequently, the facts point irresistibly to one 
 conclusion, namely, that the Post Office Department is a bureaucratic 
 entity with an interest in the reduction of the amounts paid to the rail- 
 ways that is incompatible with an impartial ascertainment of what is 
 fair compensation. This interest, coupled with the brief tenure of the 
 responsible officers of the Department, must always incline the latter to 
 support insufficient standards of mail pay and prevent their recognizing 
 the ultimate necessity of paying fairly for efficient service. It would, 
 therefore, be clearly inexpedient and strikingly unjust to place railway 
 mail revenues wholly at the mercy of the Department by enacting a law 
 which would authorize each Postmaster-General to fix railway mail pay 
 on the basis of his own inquiries and opinions in a field in which so much 
 must be left to estimate and approximation as that of the relative or 
 actual cost of the different kinds of railway service. 
 
 It is conceded that every railway mail contract is between the 
 Government, which is the sovereign, and a citizen, and that the nature 
 and terms of the contract are always substantially to be dictated by the 
 former. But this very condition invokes the principle of primary justice, 
 that the sovereign shall take care to exercise its power without oppres- 
 sion. To this end the determination of the terms on which the Post 
 Office Department may have the essential services of the railways ought 
 to be reserved, as at least partially in the past, to the Congress, or, if 
 delegated at all, they should be entrusted to some bureau or agency 
 of Government not directly and immediately interested in reducing 
 railway mail pay below a just and reasonable compensation. 
 
APPENDIX A. 
 EXTRACTS FROM THE POSTAL LAWS AND REGULATIONS. 
 
 "Railroad companies, at stations where transfer clerks are em- 
 ployed, will provide suitable and sufficient rooms for handling and 
 storing the mails, and without specific charge therefor. These rooms 
 will be lighted, heated, furnished, supplied with ice water, and kept in 
 order by the railroad company." Section 1186, second paragraph. 
 
 "The specific requirements of the service as to ... space 
 required ... at stations, fixtures, furniture, etc., will at all times 
 be determined by the Post Office Department and made known through 
 the General Superintendent of Railway Mail Service." Section 1186, 
 third paragraph. 
 
 "Railroad companies will require their employees who handle the 
 mails to keep a record of all pouches due to be received or dispatched 
 by them, and to check the pouches at the time they are received or dis- 
 patched, except that no record need be kept of a single pouch from a 
 train or station to the post office or from the post office to a train or 
 station which, in regular course, is the only pouch in the custody of the 
 company's employees at that point while it is being handled by them. 
 This is not to be construed as relieving railroad companies from having 
 employees on trains keep and properly check a record of all closed pouches 
 handled by them, without exception." Section 1187, first paragraph. 
 
 "In case of failure to receive any pouch due, a shortage slip should 
 be made out, explaining cause of failure, and forwarded in lieu of the 
 missing pouch. Specific instructions in regard to the use of shortage 
 slips will be given by the General Superintendent of Railway Mail Serv- 
 ice." Section 1187, second paragraph. 
 
 "Every irregularity in the receipt and dispatch of mail should be 
 reported by the employee to his superintendent promptly, and if a 
 probable loss of or damage to mail is involved, or if the cause of failure 
 to receive a pouch is not known, the report should be made by wire, and 
 the superintendent will notify the division superintendent of Railway 
 Mail Service without delay. A copy of the employee's report should be 
 attached to and become a part of the permanent pouch record." Section 
 1187, third paragraph. 
 
"Train pouch records will be kept on file at the headquarters of 
 division superintendents of railroad companies for at least one year im- 
 mediately following the date the mail covered by them was handled, and 
 shall be accessible there to post office inspectors and other agents of the 
 Post Office Department. Station pouch records will be kept on file at the 
 station to which they apply for at least one year immediately following 
 the date the mail covered by them was handled, and shall be accessible 
 there to post office inspectors and other agents of the Post Office De- 
 partment." Section 1187, fourth paragraph. 
 
 "Kailroad companies will require their employees to submit pouch 
 records for examination to post office inspectors and other duly accredited 
 agents of the Post Office Department upon their request and exhibition 
 of credentials to such employees." Section 1187, fifth paragraph. 
 
 "Every railroad company is required to take the mails from, and 
 deliver them into, all terminal post offices, whatever may be the distance 
 between the station and post office, except in cities where other provision 
 for such service is made by the Post Office Department. In all cases 
 where the Department has not made other provision, the distance between 
 terminal post office and nearest station is computed in, and paid for, 
 as part of the route." Section 1191, first paragraph. 
 
 "The railroad company must also take the mails from and deliver 
 them into all intermediate post offices and postal stations located not 
 more than eighty rods from the nearest railroad station at which the 
 company has an agent or other representative employed, and the com- 
 pany shall not be relieved of such duty on account of the discontinuance 
 of an agency without thirty days' notice to the Department." Section 
 1191, second paragraph. 
 
 "At connecting points where railroad stations are not over eighty 
 rods apart a company having mails on its train to be forwarded by the 
 connecting train will be required to transfer such mails and deliver 
 them into the connecting train, or, if the connection is not immediate, to 
 deliver them to the agent of the company to be properly dispatched by 
 the trains of said company." Section 1192. 
 
 "At places where railroad companies are required to take the mails 
 from and deliver them into post offices or postal stations or to transfer 
 them to connecting railroads, the persons employed to perform such 
 service are agents of the companies and not employees of the postal serv- 
 ice, and need not be sworn ; but such persons must be more than sixteen 
 years old and of suitable intelligence and character. Postmasters will 
 promptly report any violation of this requirement." Section 1193. 
 
 24 
 
"Where it is desirable to have mails taken from the post office or 
 postal station to train at a terminal point where the terminal service de- 
 volves upon the company, in advance of the regular time of closing mails, 
 the company will he required to make such advance delivery as becomes 
 necessary by the requirements of the service." Section 1194. 
 
 "When a messenger employed by the Post Office Department cannot 
 wait for a delayed train without missing other mails the railroad com- 
 pany will be required to take charge of and dispatch the mails for the 
 delayed train, and will be responsible for the inward mail until delivered 
 to the messenger or other authorized representative of the Department." 
 Section 1195. 
 
 "Whenever the mail on any railroad route arrives at a late hour of 
 the night the railroad company must retain custody thereof by placing 
 the same in a secure and safe room or apartment of the depot or station 
 until the following morning, when it must be delivered at the post office, 
 or to the mail messenger employed by the Post Office Department, at 
 as early an hour as the necessities of the post office may require." Sec- 
 tion 1196. 
 
 "When a train departs from a railroad station in the night time 
 later than 9 o'clock, and it is deemed necessary to have the mail dis- 
 patched by such train, the division superintendent of Railway Mail 
 Service will, where mail is taken from and delivered into the post office 
 by the railroad company, request the company, or where a mail messen- 
 ger or carrier is employed by the Post Office Department, will direct him, 
 to take the mail to the railroad station at such time as will best serve 
 the interest of the mail service. Such mail will be taken charge of by 
 the agent or other representative of the railroad company, who will 
 be required to keep it in some secure place until the train arrives, and 
 then see that it is properly dispatched." Section 1197, first paragraph. 
 
 "The division superintendent of Railway Mail Service will give 
 reasonable advance notice to the proper officer of the railroad company, 
 in order that the agent or representatives of the company may be prop- 
 erly instructed/'' Section 1197, second paragraph. 
 
 "Railroad companies will be expected to place their mail cars at 
 points accessible to mail messengers or contractors for wagon service. 
 If cars are not so placed the companies will be required to receive the 
 mails from and deliver them to the messengers or contractors at points 
 accessible to the wagon of the messenger or contractor." Section 1198. 
 
 25 
 
"A mail train must not pull out and leave mails which are in 
 process of being loaded on the car or which the conductor or trainman 
 has information are being trucked from wagons or some part of the 
 station to the cars/' Section 1199. 
 
 "At all points at which trains do not stop where the Post Office 
 Department deems the exchange of mails necessary, a device for the re- 
 ceipt and delivery of mails satisfactory to the Department must be 
 erected and maintained; and pending the erection of such device the 
 speed of trains must be slackened so as to permit the exchange to be 
 made with safety." Section 1200, first paragraph. 
 
 "In all cases where the Department deems it necessary to the safe 
 exchange of the mails the railroad company will be required to reduce 
 the speed or stop the train." Section 1200, second paragraph. 
 
 "When night mails are caught from a crane the railroad company 
 must furnish the lantern or light to be attached to the crane and keep 
 the same in proper condition, regularly placed and lighted; but if the 
 company has no agent or employee at such station, the company must 
 furnish the light, and the care and placing of same will devolve upon 
 the Department's carrier." Section 1200, third paragraph. 
 
 "The engineer of a train shall give timely notice, by whistle or other 
 signal, of its approach to a mail crane." Section 1200, fourth paragraph. 
 
 "Kailroad companies are required to convey upon any train, with- 
 out specific charge therefor, all mail bags, post office blanks, stationery, 
 supplies, and all duly accredited agents of the Post Office Department 
 and post office Inspectors upon the exhibition of their credentials."" 
 Section 1184. 
 
 26 
 
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 28 
 
APPENDIX D. 
 . HOW KAILWA Y WAGES HAVE INCREASED. 
 
 In the year 1901 the railways reporting to the Interstate Com- 
 merce Commission received, in gross from operating sources, the sum of 
 $1,588,526,037.00 and expended in wages and salaries the sum of $610,- 
 713,701.00; in 1910 the corresponding totals were $2,750,667,435.00 and 
 $1,143,725,306.00. Computations from these totals show that in 1901 
 the railways expended in wages and salaries $38.45 out of each $100.00 
 of gross operating receipts, while in 1910 the proportion had increased 
 to $41.58 a difference of $3.13 in each $100.00 of gross receipts. This 
 difference does not seem small but it is hardly realized, except when the 
 calculation is made, that on the basis of the gross receipts of 1910 it 
 would amount, as it does, to an additional expense of $86,095,890.72. It 
 is to be borne in mind that this largely increased payment to labor is in 
 spite of the fact that a part of the increase in wage rates has been 
 offset by higher efficiency in method and facilities. Comparisons of 
 rates of wages, from the annual statistical reports of the Interstate Com- 
 merce Commission, follow: 
 
 Average wages per day 
 
 Class of Employees 
 
 1901 
 
 1910 
 
 Increase, 
 percent. 
 
 General office clerk 
 Station agents . . . 
 
 s 
 
 $219 
 
 $2.45 
 2.14 
 1.91 
 4.34 
 2.57 
 3.73 
 2.72 
 3.03 
 2.39 
 2.20 
 1.99 
 1.57 
 2.16 
 2.10 
 1.96 
 
 11.87 
 20.90 
 20.13 
 14.81 
 18.98 
 17.67 
 36.00 
 30.60 
 16.02 
 25.71 
 16.37 
 27.64 
 9.09 
 6.60 
 15.98 
 
 
 1.77 
 
 Other station men 
 
 
 1.59 
 
 Enginemen . . 
 
 
 378 
 
 Firemen .... 
 
 
 2 16 
 
 Conductors 
 
 
 3 17 
 
 Other trainmen 
 
 
 200 
 
 Machinists 
 
 
 232 
 
 Carpenters 
 
 
 206 
 
 Other shop men 
 
 
 1 75 
 
 Section foremen . . . 
 
 
 1.71 
 
 Other trackmen 
 
 
 1 3 
 
 Telegraph operators 
 Employees, account 
 All other employees 
 
 and dispatchers 
 
 1.98 
 
 floating equipment 
 
 197 
 
 and laborers . . 
 
 1.69 
 
 29 
 
APPENDIX E. 
 
 HOW RAILWAY TAXES HAVE INCREASED. 
 (Data from Reports of the Interstate Commerce Commission.) 
 
 Year 
 
 Amount paid 
 
 Average per 
 mile operated 
 
 Per cent, of 
 net receipts 
 
 1900 
 
 $48 332,273 
 
 $251 00 
 
 8.7 
 
 1901 
 
 50 944,372 
 
 260 50 
 
 86 
 
 1902 
 
 54,465 437 
 
 272 12 
 
 8.3 
 
 1903 
 
 57,849 569 
 
 281.76 
 
 84 
 
 1904 
 
 61,696 354 
 
 29069 
 
 90 
 
 1905 
 
 63 474 679 
 
 29255 
 
 85 
 
 1906 
 
 74 785 615 
 
 33636 
 
 88 
 
 1907 
 
 80 312 375 
 
 35309 
 
 89 
 
 1908 (1) 
 
 84 555 146 
 
 36684 
 
 10 7 
 
 1909 (1) 
 
 90 529 014 
 
 38457 
 
 10 1 
 
 1910 (1) 
 
 103 795 701 
 
 43099 
 
 10 3 
 
 
 
 
 
 (1) Not including terminal and switching companies. 
 
 30 
 
APPENDIX P. 
 
 UNITED STATES SENATE 
 
 COMMITTEE ON POST OFFICES AND POST ROADS 
 
 September 11, 1912. 
 My dear Sir : 
 
 I hand you herewith a copy of Senate Bill No. 7371, introduced by 
 me by direction of the Senate Committee on Post Offices and Post 
 Roads, embodying a plan recommended by the Post Office Department 
 for determining the compensation to be paid to railroad companies for 
 transportation of the mails. This general subject has been referred to 
 a joint Committee of Congress. The Committee has not yet organized 
 and probably will not do so for several weeks, but as a member of that 
 Committee and as Chairman of the Senate Committee on Post Offices 
 and Post Roads and under authority of Senate Resolution No. 56, I de- 
 sire to secure immediately such information as may be available for 
 submission to the Committee at its first meeting. I will ask you, there- 
 fore, to answer the following questions : 
 
 (1) Do you deem the present plan of compensation an equitable- 
 one as between the Government and the railroads? If not, in what re- 
 spects and as to what classes of railroads is it inequitable ? 
 
 (2) Is the underlying principle of the plan embodied in the in- 
 closed bill a proper basis for compensation? If not, wherein is it 
 improper, and why? 
 
 (3) What, in your opinion, is a desirable plan for compensating 
 railroad companies for transporting the mails? 
 
 I desire an early reply to these inquiries relating to the general plan^ 
 and, if you are not ready to do so now, shall be glad to have you submit 
 later a detailed discussion of this bill and of House Document No. 105,. 
 62 d Congress, 1st Session, with which, I assume, you are familiar. 
 
 Yours very truly, 
 
 (Sgd.) JONATHAN BOURNE, JE. 
 Chairman Senate Com. on Post Offices and Post Roads.. 
 
 31 
 
APPENDIX G. 
 COMMITTEE ON RAILWAY MAIL PAY. 
 
 October 3, 1912. 
 
 Hon. Jonathan Bourne., Jr., 
 
 Chairman, Senate Committee on Post Offices and Post Roads, 
 Washington, D. C. 
 
 My dear Sir: 
 
 The Committee on Railway Mail Pay, representing 268 roads operat- 
 ing over 214,275 miles of road, has been investigating the subject of 
 mail compensation for about three years, or since the Post Office Depart- 
 ment, in 1909, sent out a series of questions regarding the space fur- 
 nished for mails in passenger trains, and the cost to railroad companies 
 of the service which they perform for the Government in the carriage 
 of the mails. Therefore the Committee has thought it would be of in- 
 terest to you to receive from it an answer to the questions propounded 
 by your letter of September 11, 1912, addressed to the officers of rail- 
 roads throughout the country. 
 
 A response to House Document No. 105 is now in course' of prepara- 
 tion, and will be submitted at an early date. In the meantime, our 
 committee desires to submit the following replies to your inquiries : 
 
 Question 1. Do you deem the present plan of compensation an 
 equitable one as between the Government and the railroads? If not, 
 in what respects and as to what classes of railroads is it inequitable ? 
 
 Answer. The existing law has never worked to the disadvantage of 
 the Government, but has failed to do justice to the railways by reason 
 of infrequent weighing; absence of pay for nearly 4-0 per cent, of the 
 space occupied as travelling post offices; the performance, without pay, 
 of side and terminal messenger service, and the unjustifiable reduction 
 in pay by the Act of Congress dated March 2, 1907, supplemented by 
 Order No. 412 of the Postmaster General, changing the divisor. 
 
 The present law is based upon correct principles, but should be so 
 amended as to provide 
 
 32 
 
(a) For the Eepeal of the Act of March 2, 1907. 
 
 Notwithstanding the large increase in every other item con- 
 nected with the administration of the Post Office Department, the 
 railroads' pay has been singled out as the one element in these oper- 
 ations for concentration of economies. This too, in the face of 
 the fact that the operating expenses of the railroads have been 
 greatly augmented by the requirements of the law with reference to 
 >teel equipment, and a general increase in cost characteristic of all 
 business operations. 
 
 (b) For annual weighings, and a definite and just method for 
 ascertaining daily average weights. 
 
 Under the quadrennial weighing all increased weight of mail 
 during the next succeeding four years is carried by the railroads 
 without any compensation whatever, which is manifestly unfair. 
 
 The railroads must provide car space and facilities for the max- 
 imum weight offered at any time, yet they are paid only for the 
 average weight carried. The Postmaster General's order covering 
 the divisor has unfairly reduced this average. 
 
 This provision is essentially necessary in view of the bill estab- 
 lishing the Parcels Post, effective January 1, 1913, which will re- 
 sult in taking from the express service traffic for which the railroad 
 companies now receive compensation and transferring it to the mail 
 service ; the bill referred to containing no provision for payment to 
 the railroad companies for the increased tonnage to be handled in 
 mail cars, although such provision was made for the star routes and 
 the city wagon service. 
 
 (c) For pay for Apartment Cars on some basis that will com- 
 pensate for the service. 
 
 That the Postmaster General has himself recognized the justice 
 of such a change, is indicated in the following quotation from page 
 3 of House Document No. 105 : 
 
 "* * * an additional amount may be allowed for railway 
 post office cars when the space for distribution purposes occupies 40 
 feet or more of the car length. No additional compensation is 
 allowed for space for distribution purposes occupying less than 40 
 feet of the car length. This distinction is a purely arbitrary one 
 and without any logical reason for its existence." 
 
(d) For a fair allowance to the railroads for the side and 
 terminal messenger service which they perform for the Post Office 
 Department, according to the value of this service to the Post Office 
 Department. 
 
 The necessity for this is also emphasized by the establishment of 
 the Parcels Post which will undoubtedly add greatly to the ex- 
 pense of the service. 
 
 (e) That all rates of pay should be definite and not subject 
 to the discretion of the officers of the Post Office Department. 
 
 Other inequities exist under the present law, but are due to the 
 administrative methods rather than to the law itself. 
 
 Question 2. Is the underlying principle of the plan embodied in 
 the enclosed bill a proper basis for compensation ? If not, wherein is it 
 improper, and why? 
 
 Answer. The underlying principle of the plan embodied in Senate 
 Bill No. 7371 is not correct. Any plan of compensation based upon 
 operating cost and taxes, plus six per cent, for profit, is fundamentally 
 wrong, because it makes no allowance for return upon the property 
 employed. 
 
 Furthermore, such plan is not correct, because it involves paying the 
 highest rates to the railroad that by reason of physical disabilities or 
 inefficient methods is most expensively operated, and the lowest rates 
 to the railroad whose operations are most efficient and whose service is 
 most satisfactory and valuable to the Post Office Department. Under 
 the plan proposed, a railroad would be penalized for all the capital ex- 
 penditures made by it for the purpose of decreasing its operating cost, 
 because the more it decreased its operating cost the more it would de- 
 crease its mail pay, although by making this improvement in operating 
 cost it would have incurred an additional capital charge upon which 
 it would have to pay dividends or interest. 
 
 The ascertainment of the cost to a railroad of conducting the mail 
 service is necessarily very largely a matter of judgment and opinion, 
 because a large proportion of the total operating expenses are expenses 
 common to the freight and passenger traffic and can only be approxi- 
 mately apportioned and there are various formulas existing for such 
 apportionment. It would not be right or proper to entrust to the Post 
 Office Department the discretion of selecting the formulas by which to 
 ascertain these costs, because the Post Office Department has an obvious 
 interest at stake, its object always being to reduce the railroad pay to a 
 minimum. 
 
 34 
 
The estimated cost of a specific service is not a proper basis for fixing 
 rates for transportation of any commodity. The railroads are entitled 
 to receive a full and fair return for the value of the service performed, 
 and the ascertainment of cost of such service is principally of value as 
 a protection against the establishment of confiscatory rates. 
 
 Question 3. What, in your opinion, is a desirable plan for compen- 
 sating railroad companies for transporting the mails? 
 
 Answer. The existing law has been in effect for nearly forty years. 
 and those who have worked under it are more or less familiar with its 
 operations. If it were amended to correct serious inequities, as sug- 
 gested in the answer to Question 1, and fairly and impartially admin- 
 istered by the Post Office Department, it would be preferable to any 
 untried or theoretical plan that could be proposed. 
 
 Very respectfully yours, 
 COMMITTEE 0^ RAILWAY MAIL PAY, 
 
 (Signed) RALPH PETERS, 
 
 Acting Chairman. 
 
 35 
 

 , ' 
 
 . 
 
A . 
 
 OVERDUE. 
 
Gaylord Bros. 
 
 Makers 
 
 Syracuse, N. Y. 
 PAT. JAN. 21 ,1908 
 
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