LIBRARY OF THE UNIVERSITY OF CALIFORNIA. "N CLns V THE POSTAL DEFICIT AN EXAMINATION OF SOME OF THE LEGISLA- TIVE AND ADMINISTRATIVE ASPECTS OF A GREAT STATE INDUSTRY BY H. T. NEWCOMB Author of " Railway Economics ; " Expert Chief of Division in the Office of the Twelfth Census ; Secretary of the Section on Economic and Social Science of the American Association for the Advancement of Science ; Member of the American Economic Association ; Fellow of the Royal Statistical Society, etc. WASHINGTON WM. BALLANTYNE & SONS 1900 Copyright, 1900, By H. T. NEWCOMB GENERAL PRESS OF JUDD & DETWEILER WASHINGTON, D. C. PREFATORY NOTE. This paper was prepared early in the year 1900, and in its original form was submitted to the American Association for the Advancement of Science, during the annual meeting held at New York, in June, 1000. The subject was of such interest to the writer and the developments of the controversy concerning railway mail compensation became so important that he de- termined to undertake its revision. The present paper, although considerably increase* 1 in bulk, and including accounts of incidents that have occurred since the original was prepared, is the result of that revision. H. T. N. Census Office, December, 1900. 1 07490 CONTENTS. I. INTRODUCTION A. Extent of the postal service a />. The postal principle. . a IT. The Deficit.. A. si„,uld the postal service be self-supporting?" . 1 1 B. Excess of expenditures over revenue. ........ i •- C. How a deficit can be prevented H III. Railway Mail Pay A. Railway services in connection with mail trans- portation 9 „ a. Postal and compartment car service. . . 32 b. Traveling post-offices 40 c. Messenger service 49 d. Special station services 54 e. Records and reports required 50 /. Free transportation of persons and property 56 g. Risk assumed by railways 58 h. Railway services summarized 60 B. Railway compensation 61 a. Weighing 69 b. Decline in rates for railway mail service. 75 C. The attack on the present system 84 a. Mr. Finlev Acker . . . oc ^ O') b. Mr. James Lewis Cowles §9 D. The investigation ,,l a. The Adams report ()•> b. Fundamental principles 110 c. The principle of public utility li>l d. The principle that density of traffic enables economies i:;o e. Reductions recommended by Professor Adams ];; - ./' Further investigation recommended by Professor A, lam- 14.-, !/. General review of Professor Adams' re- P° rt 147 A. Summary H«, /■:. General conclusions concerning railway mail pay 1 4! , IV. General Conclusions... 1-- i 0-) THE POSTAL DEFICIT. The people of the United States can justly take great pride in the postal system which they have established. The organization of the Post-office De- partment extends over a vast continental territory, throughout which there is practically no community too small and no hamlet too remote from the great centers of population, or from the ordinary means of transportation, to receive regular and reliable mail service. Within recent months there has been a great extension of the postal agencies, and at the present time the two-cent stamp will carry a letter from Manila or San Juan, in the tropics, to the min- ing camps of Alaska, in the vicinity of the Arctic Circle. The extent of the utilization of these postal facil- ities is probably without a parallel elsewhere on the globe, and the figures necessary t<» express it are scarcely within the limits of human comprehension. The following data are from the latest report of the Third Assistant Postmaster General of the United States : 8 the postal deficit. Number of Pieces Mailed During the Year Ended June 30, 1899. -r. ' xr * Numbers Descr.ption. Numbers.* Per CAP1TA-t Letters and other matter sent at letter rates 2,917,000,000 39.42 Letters and other matter as official business, free 98,092,000 1.33 Postal cards 573,634,000 7.75 Newspapers and periodicals paid, at pound rates 1,447,013,000 19.55 Newspapers and periodicals, free within county of origin. 622,417,000 S>41 Newspapers and periodicals, paid at transient rates 104,286,000 1.4L Books, pamphlets, circulars, and miscellaneous printed matter. . 747,695,000 10.10 Merchandise, seeds, plants, etc . . 66,173,000 .89 6,576,310,000 88.86 THE POSTAL PRINCIPLE. The expansion of the postal system in the degree indicated by the foregoing has been accomplished by the observance of the principle which, regarding the object of the postal business as the distribution of intelligence, assumes that it is of the highest social utility and importance, and that consequently it is perfectly legitimate to disregard the cost of the par- *Annual Report of the Post-office Department for the year 1899, page 753. t Calculated from the foregoing on the basis of 74,000,000 population. THE POSTAL DEFICIT. 9 ticular services performed in fixing the specific rate to be applied to each. In the application of this principle, rates vastly in excess of the cost of service have been charged for local services in the more densely populated regions, while mail has been car- ried over great distances and in sparsely inhabited regions at rates so insignificant in comparison with the cost that the relations cannot be expressed in numbers that convev definite meanings. In other words, the people of the United States have deliberately placed a tax upon a very large pro- portion of the mail carried in order that postal facil- ities might be extended and the distribution of in- telligence made cheap and effective in localities where remunerative rates would be prohibitive. It may fairly be assumed that this practice has sub- stantially the unanimous approval of the people, for though it is as thorough! v understood as any of the methods of the Government, there is scared v a scin- tilla of evidence that it is condemned by any one. The citizens of the citv of New York, whose mail traffic is immensely profitable, have never protested because the revenues to which they contribute so generously are diverted to the support of the ex- tremely costly services that are rendered in Alaska and in the panhandle of Texas. The average cost of sending each of the letters composing the first lol of mail sent to Circle City, Alaska, is reported as $450,in return for which the Post-office Department received only the price of a two-cent stamp, the same amount that carries a letter from the Battery to 2 10 THE POSTAL DEFICIT. Harlem, in New York city. On the other hand, while the average amount collected on each pound of letter mail is over eighty cents, the excess over the rate of two cents per ounce, or thirty-two cents per pound, being attributable to the fact that letters rarely reach the prescribed limit of weight, there are dense railway routes on which the payment for mail transportation averages less than thirty-two cents per hundred pounds, or about seven one-thousandths of one cent per letter. Of course this is not all of the expense, but under such conditions the profit on each letter cannot be less than 1,000 per cent. It is this profit which the people willingly divert to the pay- ment of the expenses of mail service in sparsely set- tled regions and those incurred for bulkier and less remunerative kinds of mail traffic. The explanation of this general acquiescence in a system by which the business of many is taxed to provide facilities where they are without commercial justification is not found in any impulse of altruism, but rather in the fact that the amount paid for postal services constitutes a negligible proportion of the aggregate expenses of most industrial enterprises. Whenever this is not the case and the exceptions are absolutely confined to industries which make large use of the mail for forwarding second and fourth class matter, there is probably a very lively appreci- ation of the fact that the rates paid are far below the cost of the service. Those who are thus consciously receiving what amounts to a public subsidy in aid of their business doubtless feel that complete silence THE POSTAL DEFICIT. 11 in regard to the principle which has been, perhaps erroneously, extended s<> as to permit the distribu- tion of the cost of tin- mail service among all class - of matter carried, as well as anions all regions served, without regard t<> specific costs, best serves their own interests. SHOULD THE POSTAL SERVICE BE SELF-SUPPORTING? If the mail service of the United States is to he conducted in accordance with the principle just out- lined, it is a little difficult to understand the grounds upon which it can be urged that the revenues de- rived from it should be invariably equal to the ex- penditures which it requires. If it is proper, as is admitted without perceptible objection, to tax heavily the mail of 90 per cent of the population in order that the facilities supplied to the remainder shall be greatly in excess of their ability or willingness to pay, there would appear to be little harm in impos- ing a small general tax in order to oflfsei ;i slight difference between receipts and expenditures. It is clear that in a business of such magnitude and changing volume it would be impossible to maintain ;iu absolute balance. The choice, therefore, is be- tween a surplus and a deficit, and rather than add to the taxation already laid upon those who contrib- ute mosl n> postal revenues, there -<«'!ii to be many reasons for preferring the latter. Yel it would be unwise noi to recognize the existence of a sentiment which demands that the mail service be made fullv 12 THE POSTAL DEFICIT. self-supporting. In deference to this sentiment, it is well that .the friends of the postal establishment should examine its operations and seek to determine whether any modification of the methods now in vogue which can be adopted without public detri- ment will insure a more generally satisfactory rela- tion between its income and its expenditures. THE EXCESS OF EXPENDITURES OYER REVENUE. The most concise and satisfactory recent statement of the financial operations of the Post-office Depart- ment, with a view of developing the extent of the annual deficit, was presented to the National House of Representatives on March 22, 1900, by Honorable W. W. Moody, of Massachusetts. * The following data are from the statement re- ferred to : Year ended June 30. Eeceipts. Expenditures. Deficit. 1890 $60,882,097.92 65,931,785.72 70,930,475.98 75,896,933.16 75,080,479.04 76,983,128.19 82,499,208.40 82,665,462.73 89,012,618.55 95,021,384.17 $66,259,547.84 73,059,519.49 76,980,846.16 81,581,681.33 84,994,111.62 87,179,551.28 90,932,669.50 94,077,242.38 98,033,523.61 101,632,160.92 $5,377,449.92 1891 7,127,733.77 1892 6,050,370.18 5,684,748.17 1893 1894 1895 1896 9,913,632.58 10,196,423.09 8,433,461.10 1897 11,411,779.65 1898 1899 9,020,905.06 6,610,776.75 * Congressional Record, Fifty-sixth Congress, first session, March 27, 1900, pp. 3612-3613. THE TOSTAL DEFICIT. 13 The foregoing shows the deficit carried upon the books of the Department, but this is considerably lower than the actual deficit, on account of facts thai were fully explained by Mr. Moody. Certain obligations incurred 1>y the Post-nflice Department to the Pacific railroads were not charged against the postal revenues, because they were cred- ited by the Treasury Department on the debts of those railways to the Government. Similarly, the salaries of the employes of the executive department charged with the duty of auditing the accounts of the postal service: and the salaries, contingent ex- penses, printing, and binding of the Post-office De- partment are not. according to the book-keeping methods in vogue, included in the foregoing. The following statement represents more accu- rately, therefore, the true deficit of the years in- eluded : Year ended June 3d. L890... L891... ■ - l-:'7... L899... Book-keep- ing deficit as given. - : - 77,449.92 7, 1U7. 7:::;. 77 6,050,370.18 5,684,748.17 9,913,632.58 10,196,423.09 8,433,461.10 11. til. 77 9,020,905.06 )".77«'..7.", Amounts earned by Pacific rail- way-. -1 1 1 1 1 1 1 1 ,207, .:::;•;. ,627 ,628, ,648, ,558, ..".7:;. • '.in. 101.80 430.91 154.09 »•_'•_'. 1 1 0.09 997.90 898.69 889.08 700.42 941.97 Salaries, etc. $1,631,030.72 [,644,724.00 1,680,670.00 1,690,580.00 1,693,911.00 1,693,151.00 1,644,090.00 1,645,070.00 1,648,840.00 1,662,539.00 Total. $8,215,882. II L0,108,8£ 9,539,194.27 9,002,750.28 13,236,313.67 13,538,571.99 11,636,449.79 L4,63i»,7 11,274,445.48 B,870,257.72 Strictly speaking, even the foregoing totals are lower than the facts, for they include no interesl 14 THE POSTAL DEFICIT. upon the value of the buildings owned by the Gov- ernment and devoted, rent free, to the postal service. There can be little harm, however, in adopting Mr. Moody's suggestion and regarding the rental of these buildings as payment for the mail matter carried without payment of postage, under the official pen- alty envelopes. HOW A DEFICIT CAN BE PREVENTED. There are, at least, three directions in which the solution of the problem thus outlined may be sought. It is conceivable that means might be found for : (a) Increasing the postal revenues without increasing its business or expenditures. (b) Decreasing the expenditures without decreasing the business or the receipts. (c) Either increasing or decreasing the business so as to secure correlative modifications in both receipts and expenditures that would result in an approximate balance between them. It is evident, also, that the adjustment might be attempted by any possible combination of these dis- tinct means. The practicability of the means first suggested does not appear to have received much, if any, attention from the officers of the Post-office Department or the members of the postal committees of the Federal Senate and House of Representatives. It will be THE POSTAL DEFICIT. 15 passed for the present with the mere observation thai it is by no means evident that there would be any material diminution in that portion of the enormous second-class mail traffic which is from every point of view least beneficial and desirable even though the charges were very considerably advanced. The evident satisfaction with which the publishers of the periodicals which make up this portion of the mail receive accessions to their " subscription " lists, which bring no revenue whatever, and the extent in which they make use of sample copies that are clearly not expected to increase their permanent mailing lists. suggest that they could afford to pay somewhat more for the postal facilities which they use so extensively. It is also possible that greater revenue could he se- cured, without reducing the volume of fourth-class matter, by a nearer adjustment of the charges on merchandise carried bv mail to the value of the In services rendered. RAILWAY MAIL PAY. Most of the propositions that have received at all _ oeral consideration have been directed toward the reduction of expenditures. The proposals which in- volve the greatest aggregate curtailment of expendi- tures relate to the payments to railway companies for the transportation of mail. These proposals have the merit of simplicity, and derive some plausibility from the fact that the ex- penditures for railway transportation constitute the 16 THE TOSTAL DEFICIT. largest single item in the annual budget of the Post- office Department. The relation of these expendi- tures to the total for the year ended June 30, 1899, was as follows : * Total expenditures '. . $101,632,160.92 Payments to railways 35,759,343.92 Percentage of total paid to railways 35.19 The following statement shows, according to the best data available, the amount of annual mail trans- portation performed by the railways during each year from 1873 to 1898, inclusive, the total rate of payment for each year, and the average rates per ton per mile . t The following data are from the report rendered to the Joint Postal Commission by Professor Henry C. Adams, and, for reasons connected with the methods of determining weights of mail to be used as the basis of railway pay, which will be fully ex- plained hereafter, invariably understate the actual movement of mail via the railways and correspond- ingly exaggerate the rate of payment per ton per mile. With this qualification, they may be assumed, for the present, to be correct, it being understood, however, that the error makes the showing less favor- able to the railways than would otherwise be the case. *Annual Report of the Postmaster General for year ended June 30, 1899, pp. 26, 27. t Testimony taken by the Commission to Investigate the Postal Service, Part 11, p. 253. THE POSTAL DEFICIT. 17 Year ended June 30. 1873. 1874. 1875.. 1 876. . 1877.. 1878.. 1879. 1 -so. . 1881.. 1 882. . L883.. 1884.. 1 8S5. . 1 886. 1887.. 1 888. . 1889. . 1890.. 1891.. 1892.. 1 893. . 1804.. 1895. 1896.. 1897.. 1898.. Total mail transportation reduced to ton -miles. 24,687,923 31,011,045 34,163,600 36,229,459 37,640,986 39,755,061 44,428,619 -17,11 1,138 55,746,705 63,211,781 72,444,857 80,277,597 89,526,808 06,365,303 104,038,196 112.8:511,405 128,186,659 142,024,571 L6l,989,694 179,062,188 203,105,521 226,021,821 240,638 449 246,062,726 266,305,885 272.714,017 Annual rate of pay- ment to rail- way-. 16,522,725 7,57o,o27 8,15.3,554 S,6S6.35S 9,018,S44 9,210,268 9,562,137 0,703.141 10,574,072 11,203,573 12,915,639 14,185,720 15,383,140 15,888,200 17,236,650 18,356,233 20,060,or,!i 21,258,428 2:;. o54. 25:; 25,881, 003 28,393,738 30,114.725 31,545,392 31. 001.121 33,730,037 34,273,431 Aver;: rate per ton per mile. cte. 26 120 23.732 23.866 23.975 23.060 23.107 21.522 20.596 18 969 17.866 17.828 17.670 17.182 16 487 16.51.7 16.20s 15 14 14 14 656 968 787 45:; 13.073 13.323 13.109 12.001 12.665 12.507 From the foregoing statemenl it appears that, measured in the manner indicated, the amounl of mail transportation annually furnished by the rail- ways increased, from L873 to L898, L004.65 per cent, while the revenue received therefrom by tin* railways increased only 125.45 per cent. In other words, railway mail transportation increased elevenfold and 18 THE POSTAL DEFICIT. railway mail pay but fivefold. The average rate per ton per mile, according to these data, declined 52.43 per cent. From 1890 to 1898 the total transporta- tion increased 92.02 per cent, railway pay 01.22 per cent,, and the average rate decreased 16.04 per cent. These data indicate that the railways at the end of the period named performed for an average payment of 47.57 cents services for which the average pay- ment in 1873 was one dollar, and that the latter sum was paid in 4890, where the expenditure in 1898 was but 83.96 cents. It will be interesting to compare with these reductions those in payments for other railway services. The following presents such a comparison : Average rate per mile carried. A verage rate of 1898 com- pared with — 1873. 1890. 1898. 1873. 1890. Passengers per pas- senger Freight per ton Mail per ton cts. 2.851 1.850 26420 cts. 2.167* .941 14.968 cts. 1.973 .753 12.567 % 69.20 40.70 47.57 % 91.05 80.02 83.96 If the units adopted in the foregoing accurately measure the services to which they are respectively applied, it appears that the average charge for car- rying mail has declined much more rapidly than that for carrying passengers and a little less rapidly THE POSTAL DEFICIT. 19 than that for carrying freight. In this connection, the fact that mail is always carried at the speed adopted for passenger service, and a large proportion upon trains especially provided for mail service, which take little or no other traffic, should not be forgotten. The best that can be said for the ton-mileage unit as applied to mail service is that under current con- ditions of postal development it establishes the mini- mum limits of the increase in the aggregate of the services performed. These services are not suscepti- ble of accurate measurement bv such a unit, and the results of such measurements cannot be com- pared with statements of freight movement expressed in ton-miles with sufficient precision to warrant very definite conclusions. It would be impossible to ex- press too strongly the fact, which has apparently been overlooked by some of those who have discussed railway mail pay, that the ton-mileage unit is a verv different thing when applied to mail transportation than the unit known by the same name that is ap- plied to freight traffic. The nominal similarity is nothing more than a source of confusion, for the re- quirements of the different services are so diverse that only the most general comparisons can be at- tempted with safety. The ton-mile of mail inmlies, usually, among other things, a passenger mile trav- eled by a postal clerk, and from one-third to an entire car-mile tracer— d by a postal car. These are its nearly invariable adjuncts, ami. with others they are multi- plied in almost exact proportion to the multiplication 20 THE POSTAL DEFICIT. of this kind of ton-mileage. The foregoing compar- isons do show, however, that an argument in favor of the reduction of the compensation now accorded to railway companies for the carriage of mail cannot properly be based upon the contention that there has not been a decline in the rate paid for such serv- ice that is at least equal to that which has taken place in the average charges for passenger and freight serv- ices. They do not show that, if accurate comparisons were practicable, it would appear that, for equal services, the average freight rate has declined more rapidly than the average mail rate, nor that the re- verse is not the case. Much less do they indicate anything in regard to the relative justice of the charges imposed upon the different services. RAILWAY SERVICES IN CONNECTION WITH MAIL TRANSPORTATION. In order to furnish a basis for further examination of the conditions of railway mail service and for intelligent conclusions concerning what constitutes reasonable compensation for those services, it is de- sirable to explain in some detail the character of the facilities which the railways supply, the nature of the services which they perform, and the extent of the requirements of the Post-office Department in con- nection therewith. What are the services represented by the 272,714,01 7 ton-miles that represent the railway mail transporta- tion of 1898 for which the railways received more THE POSTAL DEFICIT. 21 than $34,000,000, or an average of twelve and one- half cents per ton per mile? In order to throw additional light upon the char- acter and extent of these services, the Post-office De- partment conducted a special weighing throughout the United States, which was continued during a period of thirty-five consecutive days. On the hasis of this weighing it was estimate* I that the total amounts of the different classes of mail sent to rail- roads during the year were as follows : Character. Pounds. Per cent, of all mail of same class. First class , 72.637,586 401,790,269 125,838,025 86,466,748 652,063,970 8,348,582 76.5.1 Second class. 94.06 Third and fourth classes Government matter 86.26 89.! )4 Equipment Foreign mail M.34 100.00 Total 1,347,145,180 Si i.04 While this quantity of mail, amounting in the ag- gregate to 1)7:5,572 tons, is a relatively small portion of the total traffic annually carried by American rail- ways, the manner in which it is transported, the facil- ities required for its accommodation, and the extra- ordinary services performed in connection with it make it a very significant factor in railway business. All mail delivered to railways is carried on pas- senger trains or on special mail train- inn ;it p 22 THE POSTAL DEFICIT. senger-train speed, and may be regarded, from the point of view of the postal service, as of two classes, viz., that which is distributed previous to delivery to the railways and carried in closed pouches, and that which is distributed during the process of transpor- tation. With regard to the latter class, there is an important classification depending upon whether the distribution is performed in compartments in bag- gage cars, or in full postal cars run exclusively for the transportation of mail. According to Mr. Victor J. Bradley, Superintendent of Railway Mail Service for the Middle States, an ac- tual computation, covering 221 railway mail routes in the Middle States division, being all routes on which postal or compartment cars were run, showed in 1897 that 80.26 per cent, of the total weight of mail car- ried over those routes was carried in cars provided w T ith space and facilities for its distribution while in transit. On this basis Mr. Bradley estimated that seventy -five per cent of the mail carried in that divis- ion was carried in postal or compartment cars, and that, as there is more closed pouch mail in the second division than elsewhere, the percentage for the entire country must be about eighty-five. The following statement shows the mail traffic car- ried on certain important routes, reduced to pounds; carried the full length of each route per day, and the proportions carried in each manner : THE POSTAL DEFICIT. •_':; Poii n d s carried full length of route daily. Per cent, carried— Rout«' between- In closed pouches in baggage cars. Subject to distribu- tion in transit in — Apartment cars. Full postal New York and Philadelphia 309,294 183,876 105,007 84,517 83,058 14.7 5.1 .3 1.5 .5 3.4 3.1 .9 .8 .8 81 9 Philadelphia and Pittsburg 9] 8 Pittsburg and Columbus 98 8 Columbus and Indianapolis 97 6 Indianapolis and East Saint Louis... 98.7 In spite, however, of the preponderance of mail in postal and compartment cars, the diffusion of the balance among numerous trains makes the closed- pouch service one which involves considerable labor upon the part of railway officers and employes. Some idea of the extent of this diffusion can be ffath- ered from the fact that in the Middle States, in 1897, when the number of mail trains per diem was 4.. "76, but 617 of this number included postal or compart- ment cars, leaving 3,959 daily trains on which the mail was carried in baggage cars. During the year 1897, 2,654,597 pouches of mail were handled by railway employes <>n the Chicago, Burlington and Quincy railroad. Similar data regarding other routes arc nol avail- able, bul it is in evidence that 14.2 percent of pas- senger-train space <>n the Atchison. Topeka, and Santa Fe railroad is occupied by mail; 12 per cent on the Gulf, Colorado, and Santa Fejll per cent on 24 THE POSTAL DEFICIT. the Santa Fe Pacific, and 10 per cent on the Southern California. One-quarter of the space in each baggage car leaving the Grand Central station, in New York city, according to Mr. Van Etten, of the New York Central and Hudson River railroad, is occupied by mail. The Government asserts the right with regard to all classes of mail, whether letters, newspapers, mer- chandise, weekly, monthly, or quarterly periodicals, to the best service which it is physically possible for the railways to render. Mail must be carried on any train selected by the Post-office Department regard- less of any inconvenience entailed upon the carrier or any difficulties that must be overcome. No state- ment of this fact can be stronger than the language of the law, which is as follows: . " The Postmaster General shall, in all cases, decide upon what trains and in what manner the mails shall be conveyed." . . . . " Every railway company carrying the mail shall carry on any train which may be run over its road and with- out extra charge therefor, all mailable matter directed to be carried thereon, with the person in charge of the same." .... ''And if any railroad company shall fail or refuse to transport the mails, when required by the Post-office Department upon the fastest train or trains run upon said road, said compan)' shall have its pay reduced fifty per centum of the amount pro- vided by law." It naturally follows from the application of the principles which form the basis of the legislation quoted that the postal service makes use of every train which can in any way promote the rapid hand- ling of the mail. This involves the utilization of almost every passenger train traversing any part of THK POSTAL DEFICIT. 25 the 176,727 miles of railway that have been desig- nated as constituting postal routes. Thus there were, in 1897, 140 trains per day carrying mail on the route between New York an«l Philadelphia; 111, between Philadelphia and Pittsburg; 85, between Philadel- phia and Washington; 68, between New York and Dunkirk: 58, between Long Island City and Green- port, and 87, between Philadelphia and Bethlehem. This dispersion of mail traffic among numerous trains has been a marked feature of the development of the postal system. The following statement, in which all trains traversing less than the entire routes have been reduced to their equivalents in trains passing over their entire length, shows its progressive character : Between — Number of round trips per week. ■ 1875. 1897. New York and Philadelphia 74 40 20 299 New York and Dunkirk 49 Similar comparisons showing the expansion of the postal system from 1879 to 1897 are shown below : 26 THE POSTAL DEFICIT. NUMBER OF ROUND TRIPS PER WEEK. Between- Concord and White River Junction. Boston and Albany New York and Buffalo Canandaigua and Tonawanda New York and Philadelphia Atlanta and West Point Nashville and Hickman Glasgow Junction and Glasgow Dayton and Toledo Columbus and Pittsburg Peoria and Rock Island Milwaukee and La Crosse Mankato and Wells Hannibal and Sedalia Kansas City and Denver Topeka and Kansas City Union Pacific Transfer and Ogden. . Salt Lake City and Stockton San Francisco and Ogden Weverton and Hagerstown Grafton and Parkersburg Columbia and Greenville Cincinnati and Chattanooga Chicago and Milwaukee Chicago and Burlington , Chicago and Davenport St. Paul and Missoula Dubuque and Sioux City St. Louis and Atchison : St. Louis and Kansas City Little Rock and Arkansas City Houston and Orange Omaha and Oreopolis Junction Valley and Stromsburg Columbus and Norfolk Marion and Chamberlain Flandreau and Sioux Falls 1879, 1880, 1881, or 1882. 17.15 45.11 46.52 6. 107.48 14. 14. 7. 20.01 21.49 6. 14.3 6. 12. 70 68 15 14 14 9 6 9 12 21 6. 16.02 12. 22.6 15.29 8.73 12. 14.4 26. 6. /. 12. 8.5 7.09 6. 6. 1894, 1895, 1896, or 1897. 28.75 90.17 109.38 11.84 299.40 21. 18.85 16. 30.89 49.17 12. 31.23 12. 14. 14.37 34.46 28.46 6. 17.92 21. 27.73 9.44 20.39 46.02 50.12 38.30 9.67 17.88 28.97 25.47 9.65 14. 23.50 11.67 15.22 12. 11.64 THE POSTAL DEFICIT. 27 The railway mail routes connecting the points shown in the foregoing statement rendered servii directly to 1,406 post-offices and points of exchange at tin' beginning of the period covered by the com- parison, and to 1,537, or a number greater by 9.3 per cent, at its close. The increasing demand upon the railways of the country made by the Post-office Department is sum- marized, so far as this phase of development is con- cerned, in the following statement : Year. Total length of railway mail routes in miles. Total annual transportation in miles. No. of miles of annual trans- portation pci- mile of rail- w a y mail route-. 1873 63,457 110,208 166,952 171,212 173,475 176,727 65,621,445 129,198,641 252,750,574 267,117,7::; 273,190,356 in 7, 5* »1, 269 1,034 1,172 1,514 1,560 1.574 1,627 1883 1893 1895 1897 1899 In the foregoing table the figures in the first col- umn show the total number of miles of railway uti- lized in the postal service, and those in the second show the total transportation as measured by num- ber of miles traversed by locomotives hauling some quantity, great or small, of mail. The third column -how- the average number of times each mile of route was traversed by separate lots of mail. It appears that the entire transportation of L873, as thus meas- 28 THE POSTAL DEFICIT. ured, was equivalent to traversing the total route mileage of that year 1,034 times, while in 1899, with a railway route mileage 178 per cent greater than in 1873, it was equivalent to traversing the total route mileage 1,627 times. The right claimed and exercised by the Post-office Department to send mail on any train which it may select also results in the gravitation of preponderat- ing portions of the mail toward the most rapid and consequently the most costly passenger trains. The addition of a postal car to a limited express is fre- quently a source of great difficulty to the operating departments, as every additional car is an obstacle to the observance of schedule time and imposes an additional and material demand upon motive power which can be met only by the considerable enhance- ment of train cost. Under these conditions the typical mail-carrying train unquestionably exceeds in speed the average speed established for passenger trains. How serious a matter the requirement to furnish mail facilities in connection with the fastest trains may become is indicated by one of the rules of the Department which requires : " At all points where the Department deems the exchange of mails necessary, the speed of trains must be slackened so as to permit the exchange to be made with safety." The increase in rapidity of mail movement during the last three decades is especially notable. In 1868 the average running time of the mail train between New York and New Orleans was 98 hours and 39 minutes; in 1877 it was 86 hours and 30 minutes; THE POSTAL DEFICIT. 29 in L887, 51 hours; and in 1897, 39 hours and 10 minutes for one train and 43 hours and 55 min- utes for another. In 1868 and 1877 there was but one train; in 1887, two; and in 1897, three. A few examples of increased speed of passenger trains may be added, with the observation that they indi- cate a minimum statement of the advancement in mail service. From 1873 to 1898 the average time ofpassenger trains between New York and St. Louis decreased from 50 to 30 hours, and that between New York and Chicago from 37 hours 41 minutes to 26 hours. The average speed of passenger trains be- tween Chicago and Council Bluffs via the Chicago and Northwestern railway was 22 miles per hour in 1879 and 32 miles per hour in 1897. In a letter of instructions dated December 4, 1897, the Second Assistant Postmaster General expressed the principle which is the basis of the Department's demands concerning mail traffic in the following words : 11 The dispatch of mails is of such importance to the public that the Department holds that it should not be treated as of secondary importance to passenger or other traffic." The practical consequence of the vigorous asser- tion of this principle is that passenger, express, and all other business is treated as secondary in import- ance to mail. Nol only does mail ero forward on the fastest passenger trains, but if these are run in sec- tions the mail musi invariably go forward on the first section. In cases of accidents or delays from snow blockade-, washouts, or other causes, if one or 30 THE POSTAL DEFICIT. more trains are overtaken by a following train and are consolidated and run in sections all mail cars must be put in the first section, while the passengers are hauled in those that follow. In all cases of acci- dents it is usual to take care of the forwarding of the mail ahead of all other traffic. Even in the exigen- cies which occasionally grow out of unforeseen and unavoidable interruptions of business the postal cars or the compartments allotted to mail in baggage cars must not be utilized for baggage or express. On the other hand, it is required that if, for any reason, the space allotted to mail is insufficient the latter must be allowed to encroach upon the space usually occu- pied by baggage and express. The Department has frequently forced the railways to attach postal cars to trains supposed to be run exclusively for express business, while if the latter are delayed and get in the way of mail trains they must be side-tracked to allow the mail to pass. As a further exa mple, though possibly an unusual one, of the rigorous enforcement of the exclusiveness of the mail service, it may be mentioned that even the General Superintendent of the Chicago, Burlington and Quincy railroad cannot ride on the special fast mail run over that road with- out previously obtaining a permit from the officers of the Railway Mail Service. Train schedules are also frequently arranged in such a way, to accommo- date the mail, especially newspaper mail, that it is impossible for the trains to do a profitable passenger business. An obvious illustration is the train from Chicago to Cairo, Illinois, run over the Illinois Cen- THE POSTAL DEFICIT. 31 tral railroad. This train leaves Chicago at 2.50 a. rn., and carries tin i morning newspapers. It is estimated to cost the railroad eight-five cents per mile for operating expenses alone, and earns but sixty-one cents, of which the mail pays ten : express, twenty- six cents, and passengers, twenty-five, making a net loss of twenty-four cents per mile run. In this connection a quotation from a letter written by the Postmaster General to the Chairman of the Committee on Post-offices and Post-roads of the House of Representatives, under date of March 29, 1892, is instructive. He said, in part : " It is a fact that other than through willingness to co-operate on the part of the railroads, the Post-office Department possesses no authority in determining train schedules ; ' . . . . It never seems to have heen contemplated that the occasion would arise when the Department would want to fix its own railroad schedules, the natural expectation being that the mails would adapt themselves to ordinary schedules rather than that, to some extent, ordinary schedules should become secondary to the needs of the mail service. It quickly, however, became plain that the due frequency, the speed, and the extent of train service that prevailed from 1878 till 1880 were greatly below the needs of the country ten years later, and I became impressed with the belief that it was never con- templated, even by those who were most enthusiastic in their advoeacyof the expansion of the railway mail system, that its extent would in a few years reach the proportions that have prevailed since 1889. "... In 1878 there did not exist a single railroad-train schedule that the railroads felt obligated to maintain or modify primarily for the advancement of the mails. The Post-office Department, everyone understood, was expected to make the best use it could of schedules created from the standpoint of the requirements of passenger and other traffic, and as these fluctuated so the mail service was expected to change Today the conditions are altogether dif- ferent, and there exists over practically the entire arterial rail- way post-office system of the country train schedules that have heen fixed primarily to promote the mail service, and these, except the Post-office Department consent, will not be changed." 32 THE POSTAL DEFICIT. The requirements that have been enumerated and others equally insisted upon by the Department are enforced by, among other means, a system of fines which is exceedingly drastic. The postal regula- tions on this subject are as follows : " Fines will be imposed unless satisfactory explanation be given in due time for any of the following delinquencies on the part of the railroad company : " First. Failing to take from or deliver at a post-office the mail or any part of it, or to deliver the mail into a post-office im- mediately upon arrival, where the service devolves upon the railroad company. " Second. Suffering the mail, or any part of it, to become wet, lost, injured, or destroyed, or conveying it in a place or man- ner that exposes it to depredation, loss, or injury. "Third. Refusing, after demand, to carry mail by any train. " Fourth. Leaving or putting aside mail, or any part of it, to the accommodation of passengers, baggage, express, freight, or other matter. " Fifth. Leaving mail which arrives at the station before the departure of the train for which it is intended. " Sixth. Failing to use the first practicable means of forward- ing mail which is delayed en route. " The fine will be in each case such sum as the Postmaster General mav impose, in view of the gravity of the delinquency, and will be deducted from the compensation of the railroad company." In accordance with the foregoing fines aggregating $1.00,046.90 were assessed against the mail-carrying railways during the fiscal year ended June 30, 1899. Of this amount $3,118.58 was remitted after satis- factory explanation, leaving a net deduction from railway mail pay on account of fines of $96,928.32. POSTAL AND COMPARTMENT CAR SERVICE. As has been indicated, much the greater portion of the aggregate weight of mail is carried, subject to dis- THK POSTAL DEFICIT. :;:: tribution while in transit, in full postal and com- partment cars. These differ merely in the quantity of space which they afford and in that, while the full car is run exclusively for mail, the compartment con- sists of space separated by a partition from the bal- ance of the baggage car. The space so separated is. however, devoted exclusively to the mail service, and the distinction last mentioned is frequently more superficial than real, for it often happens that the demand of the Post-office Department for a compart- ment requires the railway on which the demand is made to attach an additional car to the train affected. In this case it may not have any use for the portion of the car which is not devoted to mail. The following statement shows the number of cars of each kind in use and in reserve during each alter- nate year from 1882 to 1898 and in 1809 : Full postal cars. Compartment cars. Year. In use. Iu reserve. In use. In reserve. Total. 1882 1884 L886 1888 1890 1892 1894 1896 1898 1899 318 349 350 36H 439 500 550 622 701 729 24 102 85 91 103 139 175 L54 L80 L92 L,229 1.219 1,362 1,616 1,760 1,867 L,911 1,996 2,082 2,04 carry the mails upon all trains, the obligation did not extend to the providing of an unlimited extent of apart- ment space or nmre frequently than six times a week : but this claim has been virtually abandoned, there being but a few instances in which the railroads are not willing to grant Buch a degree of post-office space as the Department decides is neces- sary. 36 THE POSTAL DEFICIT. " Today the railway post-office system is general, and instead of once daily many of the lines are doable daily ; and it is only for lack of appropriation that we are prevented from applying double daily railway post-office service to practically all the railroad lines on which the railway post-office operates. In connection with large cities the railway post-office on some lines runs as frequently as three, four, or five times daily. Each service of this kind is attended with considerable direct expenditure by the railroad. Every railway mail service re- quires at least an apartment of a car, for which there is no special compensation, and, as the frequency of this service is not necessarily occasioned by an immediate marked growth in the weight of the mails, the railroads are deserving of a good- measure of praise for the promptness with which they incur the increased cost, sometimes imposed upon them by the De- partment in its eagerness to render the mail service more and more complete. The Department, in its efforts to render the mail service more perfect, frequently proceeds on its own lines, not deeming it essential to give special consideration to the outlays to be incurred by the railroads." The law under which the mails are carried by the railways enumerates, among the conditions which must be met bv the carriers, " that sufficient and suitable room, fixtures, and furniture, in a car or apartment properly lighted and warmed, shall be provided for route agents to accompany and distrib- ute the mails." The postal regulations are still more explicit, but must be regarded as merely a more de- tailed statement of the legal requirements, and are so accepted by the railway companies. The follow- ing quotation is from the postal regulations : "That all cars or parts of cars used for the railway mail service shall be of such style, length and character, and fur- nished in such manner, as shall be required by the Postmaster General, and shall be constructed, fitted up, maintained, heated, and lighted by and at the expense of the railroad companies." As a consequence of the application of the rules that have been quoted, postal and compartment cars are invariably built, equipped, and maintained THE POSTAL DEFICIT. 37 under conditions which amount, substantially, to complete control, even of the most minute details, on the part of the Department, The feeling on the pari of railway officers in regard to this matter is well represented by a quotation from the testimony of Mi-. Kruttschnitt, vice-president and general manager of the Southern Pacific railroad, before the Joint Postal Commission. He said : " Xot over two months ago the question was taken up with us by the Department of providing some new postal cars. To avoid misunderstanding, I requested the railway mail superin- tendent to take the question up direct with our superintendent of motive power. I said: ' You show us exactly in drawings what the Department wishes. We don't want any hereafter about it or complaints that the car is not just as you want it. Now, make your own plans.' I gave him free entry to our drafting-rooms and shops, and in conference with the superin- tendent of motive power the plan for the new cars was made." Postal cars are built more substantially than any others in railway service, except parlor and sleeping cars, and are in every respect equal to the latter. Though there are doubtless some lighter ears of old construction still in use, the standard postal ear now weighs from 80,000 to 100,000 pounds. The follow- ing comparative weights relate to the newer equip- ment of the Atchison, Topeka and Santa Fe railroad, and may be regarded as typical of recent construction at least in the region traversed by that road : WEIGHT OF EQUIPMENT, Postal car 94,300 pounds. Express car 63,700 Baggage ear 65,400 Passenger coach 65,300 Chair car 67,600 Tourist sleeper Km. nun Pullman sleeper ] 20,000 a 1 1 t < 38 THE POSTAL DEFICIT. The postal laws declare that the cars or compart- ments devoted to mail distribution shall be properly lighted and warmed, as well as supplied with suitable fixtures and furniture. Under this law the railway companies are compelled to supply the cars with pat- ent devices for handling, loading, and unloading mail sacks; with patent devices for catching the mail, and with nettings over the windows to keep cinders out of the cars. These cinder devices cost twelve dollars per car. In a car having a floor space of nine by sixty feet, the Southern Pacific Company was re- cently compelled to place nine chandeliers of four lights each, or a total of thirty-six Pintsch gas lights, to provide for a total area of only 540 square feet. The general superintendent of the New York Central and Hudson River railroad testified that it cost an average of 17| cents per hour to light mail cars, as against an average of eight cents per hour for passen- ger coaches. The expenditures for heating and lighting postal cars are greatly enhanced by the fact that these cars have frequently to be placed at the disposal of the postal employes many hours before the starting time of the trains to which they are to be attached. In one case reported by the Illinois Cen- tral railroad, the postal cars are occupied by the postal clerks and must be fully heated and lighted for full six hours and fifty minutes before leaving the terminal. The ordinary fixtures in a sixty-foot postal car weigh about 4,350 pounds, and those in a twenty-two foot compartment about 4,230 pounds. These fix- • THE POSTAL DEFICIT. 39 tures occupy about two-thirds of the space in each car, and their weight slightly exceeds that, at least for full cars, of the mail that is carried. The addi- tional furniture, supplied by and at the expense of the railway, consists of chairs, feather dusters, clothes- presses, and similar conveniences. The <•< >s1 of | >ostal cars was variably stated by different witnesses before the Joint Postal Commission at from about $3,000 on the Flint and Pere Marquette railroad, which has but one, to §0,000 on the Illinois Central railroad. There can be very few, if any, which have been con- structed at the lower figure, and those must be of the older type. Mr. Kenna, vice-president of the Atchi- son, Topeka and Santa Fe railroad, which builds its own cars, testified that the cost charged on the books of the company for the last one constructed was $4,584, while Mr. Erastus Young, general auditor of the Union Pacific system, declared that his company operated twenty-five full postal cars with a floor ca- pacity of 12,734 feet, which had cost, in the aggre- gate, $129,588, or an average per car of $5.LS4. Probably the witness best able to speak on this sub- ject with general authority was Mr. Wickes, vice- president of the Pullman Company, who testified that his concern had recently built sonic sixty-foot postal cars at costs ranging from $5,400 to $5,900, and some fifty-foot postal cars ;it S.">. •_>()(>. lie stated that sixty-foot baggage cars built by his company cost from $3,800 to $4,200. The same authority de- clared that the annual cost of maintaining a sixty- foot postal car would be about $1,000, adding thai ;i 40 THE POSTAL DEFICIT. * large part of the cost of car maintenance consists of keeping running gear in order, and that the latter is as costly for a postal car as for a Pullman sleeper. Two mail-catchers constitute a necessary part of the equipment of each postal car, under modern methods, and must have their complementary mail cranes at the points where they are to act. Mail cranes are more numerous than mail-catchers, the proportion on the line of the Chicago and North- western railway, for example, being 262 of the for- mer to 150 of the latter. The cost of mail cranes on the Union Pacific system was about $18.57 each, and that of catchers, $7.50 each. The expense of main- taining and repairing catchers alone from July to November, 1898, was at the rate of $16.00 per an- num. TRAVELING POST-OFFICES. The postal car and the compartment car have superseded the distributing offices which were, at one time, a prominent feature of American postal practice. An order of April 30, 1859, discontinu- ing 13 of the 150 distributing offices which were then in existence, is regarded by the author of the "History of the Railway Mail Service," which was published in 1885, as marking the beginning of the new system. The following is quoted from that history : " The discontinuance of distributing offices was coincident with the establishment of railway post-offices. Instead of send- ing mail to be delayed from ten to twenty-four hours at points on the way, the practice of direct mailing was substituted, and THE POSTAL DEFICIT. 41 the abuses which had crept into the service through the dis- tributing post-offices were in part corrected. The high com- missions which were allowed formerly were cut off. The order of April 30, 1859, therefore, marks an epoch in the his- tory of the postal service of the country, in that it was an im- portant economical measure, not only removing a heavy bur- den from the revenues of the Department, but greatly accel- erating the mails, preparing the way for the improvements in- troduced by the changed condition of transportation." Superintendent Bradley is authority for the state- menl that, at the present time, mail for every State and Territory in the Union, with the exception of Arizona, Nevada, New Mexico, North Dakota, and Utah, is separately handled and sorted, piece by piece, on the postal cars between New York and Chi- cago and Saint Louis. On the basis of weight, ninety per cent, of the mail between these points is assorted on the trains and only ten per cent, goes through intact. InDecember, 1898,a calculation concerning the westward-bound mail out of Xew York was made for the purpose of determining whether a sufficient amount of through mail could be segregated to war- rant the Department in asking for competitive bids. The result of this effort was the discovery that the average daily weight of all made-up mails, not re- quiring distribution in transit, was only fifteen thou- sand pounds, and that even this quantity was pro- vided for by six or eight separate dispatches. To - ure the absolutely five transportation of this rela- tively unimportant quantity would have had an al- most inappreciable effect upon the total payment, but tic delay incident to it- consolidation into a single shipment would doubtless have been produc- 4 I 42 THE POSTAL DEFICIT. tive of serious inconvenience and the cause of imme- diate complaint. The development of the railway post-office since its inception has been progressive and rapid. Not only is mail distributed with regard to the city or town to which it is destined, but it is frequently pre- pared for immediate distribution to separate sub- stations and to individual mail-carriers in the free- delivery cities. The great mail trains which reach the city of Chicago every morning carry the mail into that city in such condition that that portion which goes to the business section is actually ready for the carriers, while the balance is sorted and ar- ranged to go to the respective stations serving the urban and suburban residence regions. For this purpose the Chicago mail must be arranged in about 175 lots, which means that there must be space in the postal cars to hang 175 open pouches. With regard to the outgoing mail from a city like Chicago, it is evident that with the increase in the number of post- offices in the country from 33,244, in 1873, to 75,000, in 1899, the distribution of mail in the office in- stead of in the cars would not only result in serious delays, but also in the addition of enormous weights of pouches to the total weight carried by the rail- ways. Similar results would occur in about the same proportion to the total volume of outgoing mail at nearly every post-office. In the words of a witness before the Joint Postal Commission, " there would be a great deal more leather than mail." Even as early as 1874 Mr. Bangs, the General Su- THE POSTAL DEFICIT. 4o perintendent of the Railway Mail Service, and the man to whom, above all others, is due the credil for tin' present perfection of this branch of the postal service, said that — "The effect of the trunk lines suspending the running of postal cars would be to force the Government in the city of New York to hire three or four large warehouses to do the mail distribution that they now do upon the railway trains." At about the same time Mr. Davis, the Assistant Superintendent, testified that the effect of the discon- tinuance of postal cars would be — "To tli row into the principal post-offices such a mass of matter that they would have no accommodations for it. With the limited accommodations they have they could not work a force sufficient to distribute in good time. It would involve a very annoying delay." When the railways protested against the payment provided in the law of 1873, and the postal authori- ties feared that they would be compelled by Con- gressional parsimony to return to the antiquated system, the postmaster of the city of New York went before the House Post-office Committee, which was considering the question, and stated that to go back to tie- former mode of distributing mails and making up pouches in the post-offices only would necessitate a building in the city of Now York that would cover all the ground from the city hall to the Battery, util- izing all the space that could be had if the building was six stories high, and even then tie- delay of the mail passing through, as well ;i- that originating and ending in Now York city, would bo many hours. Coming to a more recent period, the present utili- 44 THE POSTAL DEFICIT. zation of the traveling post-offices can be set forth in a few pertinent quotations from officers of the Post- office Department. In 1896 the Second Assistant Postmaster General said : " Marked as is the improvement in the rapid transit of mails, effected through the combined efforts of the Department and the carriers, perhaps the most noteworthy feature is the extent to which the distribution in the railway post-offices is now car- ried. No longer content with delivering into the larger post- offices the mail addressed thereto, the railway post-office now separates and arranges for immediate delivery by the letter- carriers in larger cities an immense and constantly increasing volume of mail to the extent of making it almost possible to supply the letter-carriers from the postal car on its arrival with the mail intended for their personal distribution, which prac- tically eliminates a very large amount of work that was for- merly done in the post-office buildings. " More and more of the work formerly performed in the city post-offices is thus transferred to the railway post-offices, the effect of which should be kept well in view when considering the necessity for increasing appropriations for this branch of the service, "the idea being that expenditures of this nature will not only increase the efficiency of the mail service, but will greatlv decrease the amount required for increasing Govern- ment buildings intended for post-office purposes ' Nor is it proposed that the development of the rail- way mail service shall cease with what has been ac- complished. The officers of the Department are looking forward to still greater achievements in the service of the public. The direction these improve- ments will take is already clearly indicated, and it is evident that they will impose upon the railways relatively greater demands for facilities and space. The following is from the annual report of the Post- office Department for the year 1895 : " It is the intention eventually to absorb all the work of city distribution into the railway mail service whenever the mails can be expedited thereby." THE POSTAL DEFICIT. 4") In 1899, the present Second Assistant Postmaster ( reneral said : '• Some day, if I live long enough, I hope to show you how the car and wagon will dispense with the big city post-offices. The postmaster at New York said to me a few days ago that if we were not doing what we are doing on wheels he could not handle his mail in New York." It follows as a not unnatural consequence of the extent in which the work of separating and distribut- ing the mails has been transferred from the post- office proper to the cars supplied by railway carriers ; that the time occupied in running over the railway mail routes traversed by single crews of postal clerks is inadequate for the accomplishment of the labors assigned to them. Two remedies for this condition arc equally obvious, but only one of them is really available to the Department. More men could be pat on the cars and greater space supplied for the work of distribution in transit, but the Department needs all of the money it can secure for additional and improved service, and therefore this remedy, though conceivable, is not actually practicable. The other remedy is to secure the use of the cars during a longer period, which means that they must be available for use for whatever period is necessary before they start. This practice has hoc. .mo quite common, and, as will he evident, imposes upon the railways the uecessity of providing more equipment than would otherwise he required. For example, the fast mail for the South leaves Chicago at 2.50 in the morning, hut the car- must he placed in position and be ready fur the postal clerks to commence the 46 THE POSTAL DEFICIT. distribution of mail at eight o'clock of the previous evening. The corresponding train from the South arrives in Chicago at midnight, and there would be no difficulty in sending the same postal cars back three hours later if this equipment was not required for use in the station before leaving. Similar use of postal cars is made at the termini of nearly every route, and in at least one case the cars are made ready full twelve hours before leaving time. The space required at important terminals for this pur- pose is a by no means negligible item. The average quantity of mail that is carried in a full postal car unquestionably approximates two tons, though at least one competent and experienced divis- ion superintendent of the Railway Mail Service thinks that it does not exceed 3,500 pounds. There is some doubt concerning the limits within which the items that make up the aggregate from which this average is obtained range, but there is evidence that the average of a particular route, on the Great Northern railway, is as low as 1,700 pounds, and that one train of three cars on the Chicago, Burlington and Quincy carries but 3,945 pounds, or less than seven-tenths of a ton per car. On the other hand, there are routes on which the average runs as high as three, and in one case at least to 3.87, tons (including mail in storage cars) per postal car, the former being on the Pennsylvania railroad and the latter on the Chicago, Burlington and Quincy railroad. The fact that cars ranging from forty to sixty feet in length and weigh- ing from 80,000 to 100,000 pounds never — at least, THE POSTAL DEFICIT. 47 only in vary rare instances — carry a paying load of as much as four tons, and that the average is as low- as two tons, would require an elaborate explanation had it not already been made clear that the mail- carrying capacity of postal and compartment cars has been made subservient to the requirement that these cars shall contain complete facilities for mail distribution and ample room for the accommoda- tion of the employes who must perform the work. These requirements prevent anything like loading to the full capacity of the cars as mere carriers of bulk or weight. Mr. Troy, Superintendent of the Sixth Division of the Railway Mail Service, who has had experience as a traveling postal clerk, declare - that it requires two clerks to work 3.500 pounds of mail in a car; that four tons of mail would crowd a letter car, and that an ordinary force would find it impossible to work in a car containing six tons of mail. As the maximum must always materially exceed the average not only on account of the im- possibility of planning so as to secure an absolute balance between facilities and traffic, but also for what is probably in this case the more potent reason, that the weighl of mail in a postal ear in- variably diminishes as its journey progresses, it is p irfectly evident that the averages g iven are not un- reasonably low. The fluctuation in volume of mail, which Superintendent Bradley says amounts, in the mail dispatched from New York city. t<> a variation of sixty per cent, from day t<» day, also serves to diminish the average, because facilities must always 48 THK POSTAL DEFICIT. be ample for the heaviest mail that may be dis- patched at any time. If anything further were required to establish the fact that, as Professor H. C. Adams has declared, "the character of the service rendered by postal cars is es- sentially different from the service of transporting mail," it ought to be found in the following quotation from a letter written by the Second Assistant Post- master General during February, 1897 : "On the Pennsylvania railroad, in a special train of six cars entirely for Department nse, four of them are postal cars, paid for by the Department, and the other two are storage cars which are not paid for. The total weight of mail carried in the six- cars is 70,513 pounds, or 35 tons, a load which could easily he carried in the storage cars without the expense of the postal cars if the Government does not care to do post-office work en route. In the case of trains with only one postal car, the mail so hauled, were it not for the Government necessities of work- ing in transit, would find a place in the ordinary baggage car without the expense to the railroad of hauling the postal car. I think this will illustrate to you that the railroads really have no use for the postal car that we require them to furnish, equipped in such manner that they cannot possibly be used for any other purpose." It would be a great mistake to assume that the ob- servation that there is an essential difference between a simple transportation service and that rendered by postal cars is properly applicable to the postal car only. The compartment car is a diminutive postal car, and differs from the latter merely in size and in the legal status assigned to it by Congress, which denies a similar standing with the full postal car in regard to compensation. Only eighteen inches of the entire length of a twelve-foot compartment are available for storing mail, and in *a thirty-foot com- THE POSTAL DEFICIT. 49 partment, the largest in use. but eight feet and four and one-half inches are available for that purpose. In fact, when the extraordinary services performed in connection with all mail, including that carried in closed pouches, are considered, there is no justification left for the contention that railway mail services are merely those of moving a certain weight ot hulk of mail, and as such are comparable with ordinary trans- portation services. MESSENGER SERVICE. The performance of what is known as messenger service by the railways which carry mail is a curious example of the survival of a practice long after the circumstances out of which it arose have ceased to exist. In the days when the mails were carried in stage coaches it was a comparatively simple expedient to require the vehicles to turn aside from their regular routes and proceed moderate distances from the direct roads iu order to save the Department the expense ami difficulty of providing messengers and means of con- veyance between the routesand the post-offices located short distances therefrom. It is not probable that the number of these divergences was ever very great under the turnpike and stage-coach system, and the extreme distance which tie- Latter should he required to go out of its way in anv case was fixed at eighty rods or one-quarter of a mile. Tin- requirement was not abandoned when the greater portion of mail transportation was transferred to the railways,and (. 50 THE POSTAL DEFICIT. the latter are still required to provide means for the transfer of mail between their stations and all post- offices located not more than one-quarter of a mile therefrom. Like everything else that the railways do for the Department, this service is performed under conditions laid down and rigidly enforced by the officers of the postal service. The following ex- tract from section 713 of the Postal Laws and Regu- lations is illustrative of this fact : "At places where the railroad companies are required to take the mails from and deliver them into post-offices or postal sta- tions, the persons employed by the railroad companies to per- form such service are agents of the companies and not employes of the postal service, and need not be sworn as employes of such service ; but must be more than 16 j r ears old and of suit- able intelligence and character. Postmasters will promptly report to the proper division superintendent of the Railway Mail Service, or the General Superintendent thereof, any viola- tion of this requirement." General Shallanberger states that the railways are compelled under this system to furnish messenger service at 20,000 stations, or else to see that the post- master himself handles the mail, and that this leaves but 7,000 stations, distant more than eighty rods, at which the service is performed by agencies provided I^a by the Department. This requirement extends to the transfer of mails between different railway lines when the stations are not more than eighty rods apart. The number of stations and the number at which the railways and the Government respectively fur- nish messenger service is given below for a few im- portant roads : THE POSTAL DEFICIT. 51 Number of stations. Railway. Total. Messenger service performed by — Railway. Govern- ment. Pennsylvania railroad Louisville and Nashville railroad. . Southern Pacific Company Chicago and Northwestern rail- way 1,454 674 700* 761 785 445 419 570 88 669 229 281* 191 Mobile and Ohio railway 34 Total 3,711 2,307 1,404 * Approximate. From the foregoing it appears that the roads named perform messenger service at 02 per cent of the stations that they serve. They are, as a whole scarcely typical of the country at large in this re- spect, because in the aggregate they probably serve a larger proportion of the older and larger cities and other settlements, in which the post-offices and busi- ness portions are more apt to be widely separated from the railway stations than in newer and less ex- tensive settlements. The expenses incurred in performing these serv- ices cannot be mathematically determined in many cases because they are covered by the compensation paid to employes who also have other duties. Such compensation must, however, be enhanced on accounl \ 52 THE POSTAL DEFICIT. of this work. In a relatively small number of in- stances the railway companies are forced to hire em- ployes to perform these messenger services who have no other duties, or to contract with outsiders for their performance. The annual expenditures of the Illinois Central railroad, in accordance with such contracts, which provide for services at thirty-eight towns, aggregate, annually, $3,864. The Southern Pacific Company expends directly for this purpose $9,814.64 per annum, and estimates that the services of its em- ployes in this connection cost $57,115. This is for services at 419 stations, including 72 terminals. The expense incurred by the Union Pacific sys- tem for transfers at Union Pacific Junction, Chey- enne, and Ogden amounts to $12,600, and that of the depot company at Kansas City to $8,500 per annum. There are some very curious results of this system taken in connection with the method of deter- mining railway compensation. A mail route on the Delaware, Lackawanna and Western railroad from Newark to Montclair, New Jersey, is 6.08 miles long, and the pay from the Department amounts to $587.44 yearly. Yet the railway company, in addi- tion to carrying the mail each way several times per day, actually expends $600 per annum for messenger service, $300 at each terminus. Two station agents along the line also perform messenger service, though without special compensation therefor. In another case, in which the route was finally discontinued at the request of the carrier which was unwilling to THI>: POSTAL DEFICIT. 53 continue business on such terms, the railway ex- pended $480 for messenger service at a single station, while receiving hut £4-5.48 per annum for the entire route. This route was from Clifton to Rosehank, on Staten Island, and the excessive expenditure was at the last-named point. Superintendent Bradley estimates, roughly, that the cost to the Department, if it undertook these services, would be §500,000 per annum, though < Gen- eral Shallenberger testifies that it now costs the De- partment about §1,000,000 annually to handle mail at 7.000 or one-third as many stations as those in question. The offices served by the Department are, however, more than 80 rods from the railway stations. When mail was carried principally in stage- coaehes, the latter were required to prolong their journeys to the post-offices at terminals without re- gard to the distance which might separate them from the ordinary stopping places for passengers. This custom, too, has survived the conditions out of which it grew, and railways are now compelled to pel-form with difficulty and at considerable expense an extra service which was simply and easily per- formed by the stage-coaches. The following is from the Postal Laws and Regulations : •• 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 Department." 54 THE POSTAL DEFICIT. There is one difference between the service at terminals and that at intermediate points, viz., that the distance between the station and the post-office is added to the length of the route when this service is performed and the carrier receives pay at the rsgular rate per mile, while in the case of inter- mediate stations there is no compensation whatever. This service at terminals is, however, a cause of con- siderable loss to the railways which are forced to perform it, and the regulation is a source of relative injustice as between these companies and those at whose terminals the Department provides its own service. At Denver the Union Pacific railway ex- pends $1,920 per annum to carry mails between its station and the post-office, while the amount added to its compensation in return is $215.70. A few years ago, before certain mails were diverted to other routes, the loss was considerably greater, the com- pany expending $3,900 and receiving but $410 per annum. SPECIAL STATION SERVICES. Allusion has already been made to the feet that track room must be supplied at terminal stations for postal cars during the hours that they are used for distributing purposes prior to the departure of the trains to which they are to be attached. This is not, however, the sole demand which the postal serv- ice makes in regard to station facilities. The postal regulations include the following : THE POSTAL DEFICIT. 55 " Tlie railroad company, at stations where transfer clerks are employed, will provide suitable and sufficient rooms for hand- ling and storing the mails, and without specific charge there- for. These rooms will be lighted, heated, furnished, supplied with ice water, and kept in order by the railroad company." Another section reads: _ " 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 dispatched by such train, the division superintendent may authorize the mail messenger or carrier to take the mail to the railroad station at such time as will best serve the in- terests of the mail service, and deliver it to 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." Under these regulations the Chicago, Milwaukee, and Saint Paul railway furnishes the Department with a separate room at Saint Paul, which is thirty- seven by forty feet in size; two at Chicago, twenty by twenty-five and eight by ten, respectively ; one at Minneapolis, twenty-five by twenty-four: and one at Milwaukee, twelve by eighteen. At other points the mail is stored in the baggage-room, freight-room, or in the office. Railway employes load the mail, and. in case there is no postal clerk on the train, they also unload it. At terminals they must unload it and take it in trucks or otherwise to the wagons or transfer it from ear to ear. as may be necessary. The Chicago and Northwestern railway employs eight men at Chicago who devote all their time to sorting, loading, and transferring mail. < 56 THE POSTAL DEFICIT. RECORDS AND REPORTS REQUIRED. Section 728 of the Postal Laws and Regulations reads as follows : " Railway companies shall keep a record of all closed pouches handled by their employes, and any irregularity will be imme- diately reported to the division superintendent of Railway Mail Service. Specific instructions in regard to the character of the record to be kept, and of the report to be made, will be issued through the office of the General Superintendent of Railway Mail Service." The stationery and blanks necessary to carry out the foregoing section must be supplied to the rail- ways. Railways are also required to furnish the blanks, stationery, etc., required for use in connec- tion with the weighings which constitute the basis on which railway mail pay is calculated. FREE TRANSPORTATION OF PERSONS AND PROPERTY. The railways are also required to furnish services in the transportation of mail equipment and other postal property not in connection with any regular mail service for which they receive compensation. This, though by no means voluntary on their part, must be deemed free service, as it has no fixed rela- tion, either in quantity or otherwise, to the services for which they are paid, and is in no way repre- sented in the calculations by which such compensa- tion is determined. This requirement is set forth in section 712 of the Regulations, which reads as fol- lows : THE POSTAL DEFICIT. 57 " Railroad companies are required to convey upon any train, without specific charge therefor, all mail bags, post-ofiice blanks, stationery, supplies, and all duly accredited agents of the Department and post-office inspectors upon the exhibition of their credentials." The transportation of the clerks who are employed in handling mail in postal cars has been discussed under this head, but it bv no means includes all of the transportation of persons which is furnished at the del. uuid of the Post-office Department. The aggregate distance traveled by officers and employes of the Railway Mail Service during the year ended June 30, 1898, was, approximately, 350,452,635 miles, of which 337,217,407, or 94.60 percent., was by postal clerks in the performance of their duties ; the bal- ance, equal to 19,235,228 miles, or 5.40 per cent, of the total, was made up of 17,608,450 miles traveled bv clerks who were " dead-heading " and of the mile- age of the higher officers of the service. Post-office inspectors carry photographic commis- sions, in accordance with the terms of which the rail- ways are obliged to carry them free. These commis- sions read in part as follows : " To whom it is concerned : "The bearer hereof is hereby designated a post-office in- spector of this Department, and travels by my directions on this business. He will be obeyed and respected accordingly by mail contractors, postmasters, and all others connected with the postal service. Railroads, steamboats, and other mail contract- ors are required to extend the facilities of free travel to the holder of this commission." The miles traveled by inspectors during Septem- ber, L898, numbered 247,513, which was at the rate of 5 < 58 THE POSTAL DEFICIT. 2,970,156 miles per year. The superintendent of the free-delivery system estimates that the holders of commissions calling for free transportation in his branch of the service average 25,550 miles per annum. As there are twenty persons who hold such commis- sions, the total travel must approximate 511,000 miles. Congress has given at least tacit sanction to the understanding that the railways must furnish free transportation to the employes of the Department whenever traveling on other than official business. This apparent sanction is to be found in the provis- ion which required the Department to revoke the order which prohibited postal clerks from living off from the routes to which they were assigned, and forbade them to accept free transportation except on the routes on which they had to travel for official purposes. Postal clerks who work in only one di- rection, and this practice is not uncommon owing to the fact that the volume of mail in different direc- tions is unequal, are returned free in passenger cars, while in other cases postal clerks, and even local postal employes, are sent to meet trains in the same manner. RISK ASSUMED BY RAILWAYS. The railways are responsible for injuries incurred by employes of the Post-office Department, and the assumption of this risk is properly to be enumerated among the services which the railways perform, or at least as a condition which is material in any ex- amination of the nature of those services. The posi- THE POSTAL DEFICIT. 59 tion of the postal ear is usually such as to make the danger to its occupants, in case of collision, greater than that of any other persons on the train, except those on the locomotive. The total number of postal clerks injured in railway accidents from 1875 to Is!)!), inclusive, was 2,520, of whom 82 were killed, while 938 others were seriously injured. The following statement shows the results of railway accidents dur- ing the last five years : Year. Number of clerks in service. Number killed. Number seriously injured. Number slightly injured. 1895 7,045 7,408 7,573 . 7,999 8,388 7 5 14 7 6 50 47 33 34 50 128 1896 1897 1898 1899 65 75 146 162 The amounts actually paid by the railways in damages growing out of such injuries as are shown in the foregoing are by no means insignificant. During the first half of the year L898 the Southern Pacific Railway Company paid out $3,750 for this purpose, and an officer of that road estimates that th<' yearly average is live or six thousand dollars. 'Hie Atchison, Topeka and Santa Fe railroad has paid an average of $7,500 per annum for the lasl five years, while during a single year the claims paid by the Southern Railway aggregated $15,000, after which it still had claims pending settlement which altogether amounted to $24,000 more. 60 THE POSTAL DEFICIT. RAILWAY SERVICES SUMMARIZED. The more important of the requirements may be recapitulated as follows : 1. Mail must go on the fastest train. 2. Mail service must be carried on any train that the Depart- ment selects. 3. Mail trains must be accorded the right of way over all other trains. 4. No mail may ever be left behind. 5. Railways must invariably supply sufficient car space, re- gardless of the suddenness or unusualness of the demand. 6. Mail cars must be furnished with the best appliances that science and art can afford. 7. Mail cars must be placed in the stations where they can be easily and conveniently approached. 8. Railway employes must give the mail their earliest atten- tion on the arrival of trains. 9. Mail must be placed in trains and at termini and in certain other cases removed from trains by railway employes. 10. Mail must be called for and delivered by the railway wherever the post-offices are within one-quarter of a mile of the railway station. 11. The railway must assume responsibility for accidents to postal employes. 12. Employes of the Department must be carried free of charge in passenger coaches when traveling on official business. 13. Appliances for the receipt of pouches while trains are in motion must be supplied and maintained wherever demanded by the Department. 14. Special postal cars and compartments partitioned off from other cars must be supplied, lighted, heated, and otherwise maintained and provided with space and appliances for dis- tributing mail in transit at the demand of the Department. By persistent and strenuous insistence upon these requirements the Post-office Department has, with the cordial co-operation of the railways, built up a system of railway mail distribution and transporta- tion that is magnificent in its efficiency and marvel- ous in the perfection of its adjustment to the demands tup: postal deficit. 61 of the public. Tt should not be forgotten, however, that it is a costly service, and involves methods that arc radically different from those followed in other forms of transportation. Mail is not and cannot satisfactorily he handled as an ordinary commodity of commerce, and the service performed by the rail- ways is not comparable with those usually designated by the term transportation. This fact was admi- rably expressed by Mr. Kruttschnitt, vice-president and general manager of the Southern Pacific Com- pany, in the paragraph quoted below: (« We cannot handle the mail as a commodity. The Depart- ment, for the benefit of the public, prescribes the most expen- sive manner of handling it. and the public is given the very best of service. With freight we can make our own rules. We can load cans to the limit of their capacity, and we can hold them back a little and put them in trains where the locomo- tives are worked up to the limit of their capacity. Indeed, we have been studying nothing else for the past three years but how to operate our roads with the greatest economy, and we have succeeded, in the face of the general fall in rates, in keep- ing the properties going through economical methods of opera- tion. Day after day the public and the Department represent- ing the public is more and more exacting, and the expense to us of conducting that service is increasing instead of diminish- ing. There is no way by which we can reduce the cost of the service, because the facilities are continuallv being increased." RAILWAY COM PENSATION. Having ascertained what the railways do for the public in connection with the postal service, it is now desirable t<> sec how much and in what manner they are paid for those services. The actual amount received bv all mail carrying railways for the services performed by them during the fiscal year ended June 30, 1899, was $35,759,343.93, distributed as follows: 62 THE POSTAL DEFICIT. Pay based on weight and distance $31,621,486.12 Pay based on mileage of full postal cars 3,960,953.86 Pay for expediting certain mails 176,903.95 Total $35,759,343.93 That portion of railway mail pay which has been referred to in the foregoing as being based on weight and distance is in accordance with a law which was passed in 1873, as amended by laws providing for successive reductions of ten and five per cent of ex- isting rates which became effective respectively in 1876 and in 1878. This law provides different rates per mile of line for different quantities of mail, so that the rate per unit of weight decreases as the amount carried increases. The following statement shows the rates per mile of route that are paid at present for different weights of mail and the equiva- lent rates per ton per mile : Average weight of mails per day carried over whole length of route. 200 pounds 500 " 1,000 " 1,500 " 2,000 " 3,500 " 5,000 " Every additional 2,000 pounds Under act of March 3, 1873, as amended by acts of July 12, 1876, and June 17, 1878. Rate per Rate per mile per ton per annum. mile. Cents. $42.75 117.123 64.12 70.268 85.50 46.849 106.87 39.039 128.25 35.137 149.62 23.424 171.00 18.740 21.37 , 5.855 THE POSTAL DEFICIT. 63 It will be observed that the effect of the scale of rates shown in the foregoing is that as the amount of mail shipped over any route increases the average rate per unit of quantity decreases. Proportionate increases are accorded for quantities between those shown in the table, but no payment is made for an amount which is insufficient to require the payment of one dollar at the regular rate.* Roads which were assisted by grants of public land are paid- only eighty per cent, of the foregoing. The railways are divided into routes without regard to their corporate organ- ization, and tli is permits the Government to secure cheaper service by availing itself of the shortest routes between the points served, and also by concen- trating mail upon certain lines. There are about 2,017 of these routes in the country, and of these there were 208 routes on which the rate of payment has been fixed, by special agreement, at less than $42.75 per mile, the lowest figure provided in the law. In order to illustrate further the operation of the law, the following table, which has been arrange. 1 from data collected and presented to the Joint Postal Commission bv Professor Henrv ( \ Adams, is intro- duced : 64 THE POSTAL DEFICIT. o3 03 03 O — 03 O o3 H 02 CU O 3jD O G 03 CU o Cu 3 O c" o3 go a; o cu a) o3 S ° cu 02 £ O H 9> o 4° 02 0; = « si CU O CU c O 0) a? -j— > o3 PC © 05r-JNlOCOc> t— i Oi CC Ci iM H — 00 C. iC N Cl oi Ci co of Ci CO — ci a oi -+*' t*- i— i i o Oi OI o COiCfOO^XCOiOMGO Si»CMiONiO»OMSCO n n -t x © -r i.o n c^i o: c: ic -t"of co'cTcc" of of co't^ CO © CO ©OHi/lr-iOOOOiMOiO oi iC b- b- i^ '^"^ l " °* , ~1. ,> !. <: ^ oi io t>^ co" oT 'Co"" ic-*" i cT co ^ r- rH Cl N W CO t^ GO CO CO o »o -— i OI iO i— i -t 1 X OI -f CM iC iO i— i GO Ci CO iC OI — i oi co co co © go tjh oi -f i-h 01 I— I I— 1 1— 1 T— i CjCiOi— i X N X ?] iC -+ CO - ■ iO CO CO OI go' co" ci co co — ' od ic — < io t^ oi O0 -f O N OO CO (M -f X CI N O t>- iO CO O © GO OI O CO CO rf OI t- — OI CO GO CO CO lO t— CO CO OI OI — i t— i v l COCOCiCOT-HOiOCiOlOl-fcO co oi — co — co ■* oi oa i— Ol TT OI i— I i— i 5- cu > <=> 02 r— -*— ' g S c3 o ^OOOOiOOlOCiOCt-CO ^StCOOIr-r-« So . » , . OOOOfMMOCtXNCOO CO^CON-HHH 1-- q of OI o o © o OI co Ci CO © 1>- CO OI OI OI OI CO CO «— i OI o l> CO o lOCOi— iCSCCCOGOOICiiOi— it— ( o COt^CicO^fCOi-Ir-- I o o o ~*^ of — P 02 CD _fj o 2 cu 02 ~ ■M 03 £ 02 aS'cc '"V Ci *s &, o3 CJ x a;" O 02 4-^ -w .— O Bfl ci 6C C •el - a? a) - ' S /•j *^ 33 o gtal — (J C cu X O OJO ^- <-> cu .- c3 cu o3 >i£ -*^ 03 03 ^, -CoS cu H I 5 p_§ 53 02 Ss cu 02 02 O Cj _X '•+2 -*s 02 03 . — ( THE POSTAL DEFICIT. 65 The statement shows what a large proportion of the aggregate mail traffic given to railways is carried at the lower rates. It shows that nineteen routes, or less than one per cent of the total number, perform 20.73 per cent of the total transportation, measured in tons carried one mile, though they receive but 10.27 per cent, of the total compensation. On the other hand, 1,286 routes, or 53.58 per cent of the total number and 22.08 per cent of the total mileage, perform less than one per cent of the total transportation, though they receive 6.49 per cent of the aggregate pay. The latter class includes all of the routes which receive more than sixty cents per ton per mile. The routes that receive from five to ten cents per ton per mile perform 62.06 percent, of the total transportation, for which they receive 37.42 per cent, of the total pay. The pres ent allowan ce of pay for full postal gars is based on the length of the cars, and consists of a certain rate multiplied into the length of the route. In order to earn these rates, the car must pass over the whole length of the route twice daily. The fol- lowing statement shows the rates provided and some of their results : Length of car in feet. 40 4-") 50 55 or 60 Rate per mile run, in cents. 3.42 4.11 5.48 6.85 66 THE POSTAL DEFICIT. No pay is allowed for compartment cars, though the facilities furnished are similar in every respect except in quantity to those afforded by full postal cars. The primary observation in regard to this portion of railway pay is that it cannot properly be considered apart from that portion which is based upon weighc and distance. A historical study of the subject will show that postal-car pay was pro- vided in order to relieve the serious discontent of the trunk-line railways over the rates of pay under the law of 1873, and at the behest of the officers of the Department who feared a reduction in the efficiency of the service. It is, therefore, to be con- sidered as a part of the general payment and as special in form only. It is accorded to the lines which receive the lowest rates and furnish the pub- lic with the most complete facilities. This will be evident from the table below, in which postal-car pay is classified according to the rates received on the same routes under the weight and distance scale of rates : THE POSTAL DEFICIT. 67 Hate per ton per mile. 00 cents and over 40 to 60 cents . . . 40 " ... 30 20 15 12 10 8 7 5 i i 30 « 20 « 15 ■ 12 ' 10 ' 9 " 8 ' 7 ' 6 « Total Postal car pay. Amount. None. $2,435.50 17,605.00 50,315.50 217,0:51.53 430,700.05 403,708.18 421,548.52 1,011,830.89 891,251.45 73,642.50 None. 3,580,738.12 Per cent of total. 0.00 .07 .49 1.41 0.08 12.03 12.95 11.77 28.20 24.89 2.05 100.00 That portion of railway mail pay which has been designated as being allowed in return for especially expedited service is allotted to certain lines which carry mail between the cities of New York and New Orleans, and between Kansas City and Newton, Kansas. It is probably allowed in view of the belief that the regions traversed by these routes are too sparsely settled and the volume of mail forwarded over them too small to warrant service of the quality that is desired by the Department and believed to be accessary on account of tbe-eharacter of the mails handled on them. The entire amoUn4 of this pay, which is usually denominated "special-facility pay ' constitutes less than one-half of one per cent of the 68 THE POSTAL DEFICIT. aggregate mail pay, and it is therefore too insignifi- cant to warrant extended treatment. It is evident from the foregoing that there is no fixed or definite relation between postal receipts and the amounts paid for railway mail services. The practical application of the postal principle by the United States Government has resulted in a system of postal charges in which distance is absolutely ignored. Congress could not fail to recognize the impropriety of attempting to secure railway services upon similar terms, and therefore adopted the plan contained in the law of 1873. This plan recognizes both weight and distance as factors, and also pro- vides an allowance that recognizes space in the form of postal-car pay. The relation between these al- lowances is so disproportionate to the extent in which the different elements enter into the services per- formed that the recognition can only be regarded as a formal concession of the principle, and is impor- tant in that aspect only. An adequate allowance for the space occupied would certainly include compen- sation for compartment cars, and the total payment under it would probably encroach materially upon the sum now paid on the weight basis. Among the noteworthy results of the system in vogue is the fact that the railways frequently fur- nish postal cars for which they do not receive postal- car pay. It is in evidence that the Chicago, Mil- waukee, and St. Paul railway ran a full line of such cars over a route 230 miles in length for several years without receiving any payment. In fact, it appears THE POSTAL DEFICIT. G9 to have come to be an understanding among railway officers that they must furnish all facilities that are called for and accept whatever compensation the Department can and will allow. WEIGHING. As weight is the basis of the greater portion of railway mail pay, it follows that means must be pro- vided for ascertaining, at regular intervals, the weights that are carried over the several routes. The law on the subject reads as follows: " . . . '. the average weight to be ascertained in every case, by the actual weighing of the mails for such a number of successive working days, not less than thirty, at such times after June thirtieth, eighteen hundred and seventy-three, and not less frequently than once in every four years, and the re- sult to be stated and verified in such form and manner as the Postmaster General may direct." The method adopted by the Department in the execution of the foregoing provision of law is to divide the country into four great weighing districts, and to conduct a weighing in each of the--' districts once in four years. The districts are taken in suc- cession, one of them being weighed each year, and never more than one in the same year. As the basis of payment, established by the statute, is pounds carried the whole length of the route, while in actual practice mail is put off and received at every intermediate station at which trains stop, and by means of cranes and catchers at many stations where they do not stop, it i< necessary to reduce all mail to its equivalent in pounds carried over the 70 10 o ) 0'^ THE POSTAL DEFICIT, kr J feP whole route. Thus, if the length of a r&ute is one hundred miles and a particular lot of mail, weighing one thousand pounds, is carried between two inter- mediate points which are twenty-five miles apart, it appears in the result as two hundred and fifty pounds carried one hundred miles. The weight which is the basis of payment is thus made up of a large number of items, and it is wholly incorrect to con- sider it as a single shipment forwarded over a dis- tance equal to the length of the route. The follow- ing weighing sheet for an assumed route has been copied from Professor Adams' report to the Joint Postal Commission : Distance between stations. Weight of mail. Pounds carried between stations. Pound- mileage of mail. Average weight car- ried over whole route. Stations. Pounds taken on. Pounds put off. A Miles. 5,000 7,000 3,000 4,000 5,000 6,000 5,000 8,000 6,000 50,000 96,000 168,000 B 10 12 28 C D Totals and 50 15,000 15,000 314,000 6,280 The foregoing relates to a supposititious route fifty miles in length, with two stations in addition to its termini. The train arriving at station B brings 5,000 pounds of mail, 4,000 of which is put off. To the difference is added 7,000 pounds received at B, and the sum is multiplied by the distance between B and C, giving a pound-mileage of 96,000. This, added to similar accounts obtained between other i' THE POSTAL DEFICIT. 71 pairs of stations, gives the total pound-mileage of 314,000, which being divided by 50, the Length of the route in miles, the result is 6,280, the equivalent of the total movement in pounds carried the entire length of the route. A weighing sheet similar to this could be made for each mail train traversing all or a part of each route, and the sum of the amounts shown in the lower left-hand corner would indicate the total weight on which the payment should be calculated. No one who bears this method of deter- mining the weight basis of payment in mind will fall into the error of assuming that payments are for single and continuous shipments. The weighing is done under the supervision of officers of the Railway Mail Service and by persons appointed by the Postmaster General. It usually extends throughout a period of about thirty days. A good deal has been said, chiefly by means of covert intimations and innuendo, in regard to fraud- ulent increases of mail during the weighing periods for the purpose of securing to the railways increased and excessive compensation. The subject has re- ceived careful examination, both on the part of the Department and of the Joint Postal Commission, and up to the present time the most searching investiga- tions have brought to light but two attempts of this kind, both of which were promptly detected. One of these attempts involved a weight of 200 pounds on a railway only 37 miles long, and the other wasof only slightly greater importance. The unanimous testimony of the officers of the Post-office Depart- 72 THE POSTAL DEFICIT. merit, including those of the P*ailway Mail Service, and of all who have studied the methods in use, is that it is quite impossible to pad the mails during the weighing period without the facts being immediately detected by the Department. The following is from the testimony of Mr. 0. L. Teachout, now a railway officer, but for many years Superintendent of the Eleventh Division of the Railway Mail Service : "I had charge— full charge— of the weighing in 1894, as su- perintendent of the eleventh division. I had virtual charge of the weighing in 1890, being assistant superintendent of the di- vision, and I never, in all the experience I have had, saw but two suspicious cases. "Q. (By Mr. Moody.) Do you think that there is any danger of fraud in the weighings where you have honest Government officials, honest superintendents, and honest clerks? "A. I don't think there is any particle of danger. . . . . I have been in the service as postal clerk and weighed mail, f know that when a clerk is on the road he notices anything out of the ordinary. You cannot send 500 pounds of mail of any peculiar kind over any ordinary line without the postal clerk knowing about it." The investigation of this subject resulted, how- ever, in bringing into prominence the very singular fact that while any attempt on the part of the rail- ways to increase the volume of mail during the weighing period is universally condemned, there are numerous officers of the Government who habitu- ally withhold mail during weighings, and that this practice has the sanction of the Department. Of course, the consequence of such withholding of mail is to reduce the railway's compensation during the succeeding four years below the figure which would have been fixed had the mail been permitted to go forward in its customarv volume. Yet while an THE POSTAL DEFICIT. 73 effort to increase the volume during the weighing has been made an offense punishable by the Federal courts, the effort to decrease it is considered as a com- mendable act, if not, indeed, one indicated as a duty. If the facts really indicate, as they apparently do, a principle upon which the Post-office Department and manv other branches of the Government habit- ually act, there must be an enormous weight of mail which is never permitted to be represented in the weighings. Former Third Assistant Postmaster General Hazen has said that during his term of office it was the practice of the Treasury Department to ship roller-top desks, carpets, etc., as mail matter, and that it was customary for the Geological Survey to ship tents, valuable instruments, and other para- phernalia in the same manner. In at least one in- stance, alluded to by Mr. Loud, the Government brought an entire train-load of coin, valued at $20,000,000, across the continent as registered mail. Postal supplies are also believed to be withheld at weighing periods, though they move in large vol- ume at all other times. There are other reasons why the results of the weighings do not constitute a fair average of the daily movement throughout the year. It is a matter of general knowledge that mails are much heavier during the holiday season than at any other time, yet weighings are never held 'then. Business houses usually -end their catalogues in the fall, and in fact all mail is heavier (hiring the fall and win- ter seasons than when the weighings are taken. 6 74 THE POSTAL DEFICIT. The facts that have been mentioned are insignifi- cant, as causes of the disparity between mail traffic and the assumed mail movement that is made the basis of mail pay, when compared with the fact that the weighings are held but once in four years. The statement of the latter fact is all that is necessary to convince any one who is at all familiar with the de- velopment of postal business that the railways must always carry more mail than they are paid for car- rying. Especially is this true in regions where population is rapidly developing or where many new industries of the kind which make extensive use of the mails are being inaugurated. A recent example of this occurred on the Denver and Rio Grande railroad, which for the four years that ended with June 30, 1898, was paid on the basis of the weights taken in April and May, 1894, when the State of Colorado and the country were suffering from serious financial depression. Soon thereafter the great Cripple Creek gold region was opened, populated, and developed to the highest degree of activity. In two years from the time of weighing the district had an estimated population of 35,000, and the mails to and from the district were carried by the Denver and Rio Grande and its connection, the Florence and Cripple Creek railroad, without the former re- ceiving any additional compensation until July 1, 1898. Under normal circumstances it is probable that the increase of mail for a given quadrennial period would be about equally divided among each of the years. The reader can easily see, from the THE POSTAL DEFICIT. I following statement, how much mail must be car- ried annually that is not paid for if this assumption is even approximately correct : Ton-mileage of all routes. Weighing. Latest weighing. Next preceding weighing. Difference. Amount. Annual average. First 73,227,667 90,622,588 47,620,441 61,243,321 66,819,535 70,379,429 42,196,164 46,626,693 6,408,132 20,243,159 5.424,277 14,616,628 1,602,033 5.060,790 1,356,069 3,654,157 Second Third Fourth It* the increases in the foregoing districts are dis- tributed equally among the years separating the respective weighings the average amount carried by the railways, but not paid for, must have been 11,073,049 ton-miles per year. At the average rate of pay prevailing in the United States the pay for this amount of mail transportation would be 1 1 ,466,952. DECLIXK IX RATES FOB RAILWAY MAIL SERVICE. The law under which the railways are paid for carrying mail, as has been observed, was so framed that as mail increases the rate per unit of weight de- crease 3. Tin- extent of the downward movemenl that was insured by those who formulated tin* Dres- ent law will he indicated by a few examples. The following table was compiled from data in Professor 76 THE POSTAL DEFICIT. Adams' report. In a later portion of this paper at- tention will be called to certain methods adopted by Professor Adams which have resulted in making the average rates obtained by him considerably higher than those actually paid by the Government. The table will, however, fairly serve the present pur- pose of showing that there has been a substantial de- cline in mail rates. It is to be observed also that Professor Adams' methods do not result in an over- statement of this decline for separate groups. The groups shown are those adopted for the classification of railway statistics by Professor Adams, as statisti- cian to the Interstate Commerce Commission, and are roughly described as follows : Group I. Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. Group II. Delaware and Maryland, exclusive of that portion of New York and Pennsylvania lying west of a line drawn from Buffalo to Pittsburg via Salamanca and inclusive of that portion of West Virginia lying north of a line drawn from Parkersburg east to the boundary of Maryland. Group III. This group embraces the States of Ohio, Indiana, and the southern peninsula of Michigan ; also that portion of the States of New York and Pennsylvania lying west of a line drawn from Buffalo to Pittsburg via Salamanca. Group IV. This group embraces the States of Virginia, North Carolina, South Carolina, and that portion of the State of West Virginia lying south of a line drawn east from Parkersburg to the boundary of Maryland. Group V. This group embraces the States of Kentucky, Ten- nessee, Mississippi, Alabama. Georgia, Florida, and that por- tion of Louisiana east of the Mississippi river. Group VI. This group embraces the States of Illinois, Wis- consin, Minnesota, the northern peninsula of the State of Michi- gan, and that portion of the States of North Dakota and South Dakota and Missouri lying east of the Missouri river. Group VII. This group embraces the States of Montana, Wyoming, Nebraska, that portion of North Dakota and South Dakota lying west of the Missouri river, and that portion of the State of Colorado lying north of a line drawn east and west through Denver. THE POSTAL DEFICIT. 77 55 a a: a QU Z c a 32 as. a o < a > c5 B I J* CD e, t» 6o a -r a 00 a OS a. C3 O 7. o & 60 a o a > > o ■9" DC 7 / - - /. iC f- — c© » 3 3 iO - X US I- CN — - - - ri ec 9)1 — r r. SO — 09 '_ M CO 3> t- 5 CO ?i as 3 3 Mi-~~ •f r- 30 * ~ r- o o a » 50 - ^- t v~ m « ' « ' «n ~* r* 3 x i-^ t^ t-^ t^ CO !0 CO '• -r-r -r r; W M S CM N M;iMM^jij)5 > a / e ot « x n r. r 3 1 X / r. to X) 78 THE POSTAL DEFICIT. Group VIII. This group embraces the States of Kansas, Arkansas, that portion of the State of Missouri lying south of the Missouri river, that portion of the State of Colorado lying south of a line drawn east and west through Denver, and the Territories of Oklahoma, Indian Territory, and that portion of New Mexico lying northeast of Santa Fe. Group IX. This group embraces the State of Louisiana, ex- clusive of the portion lying east of the Mississippi river, the State of Texas, exclusive of that portion lying west of Oklaho- ma, and the portion of New Mexico lying southeast of Santa Fe. Group X. This group embraces the States of California, Ne- vada, Oregon, Idaho, AVashington, and the Territories of Utah, Arizona, and that portion of the Territory of New Mexico lying southwest of Santa Fe. From the foregoing it appears that the average rate per ton per mile paid to the railways declined in twenty-five years throughout the United States from 26.420 to 12.567 cents, or 52.43 per cent. In the first group the decline amounted, from 1870 to 1898, to 67.80 per cent. The decline in the rate per ton per mile is con- stantly being retarded by the extension of the mail service into sparsely settled regions and over routes on which the movement is light in volume, and the rate in consequence relatively high. The utiliza- tion of the railways commenced with those having the greatest volume and has extended gradually to those serving the more thinly populated portions of the country. In 1873 the postal service made use of but five- sevenths of the railway mileage of the country; at the present time it utilizes nearly nine-tenths. It follows from the fact just mentioned that the real reduction can be discovered only by an examination of the results on particular routes. The following statement shows such changes : THE POSTAL DEFICIT. '9 HATES PBB TON PKR MILE IN CENTS. (Not including postal-car pay.) Between — Concord and White River Junction. Boston and Albany New York and Buffalo Canandaigna and Tonawanda New York and Philadelphia Weverton and Hagerstown Atlanta and Westpoint Nashville and Hickman Glasgow Junction and Glasgow Dayton and Toledo Columbus and Pittsburg Peoria and Rock Island Milwaukee and La Crosse Mankato and Wells Hannibal and Sedalia Kansas City and Denver Topeka and Kansas City Union Pacific Transfer and Ogden. Salt Lake City and Stockton San Francisco and Ogden Grafton and Parkereburg Columbia and Greenville Cincinnati and Chattanooga Chicago and Milwaukee Chicago and Burlington Chicago and Davenport St. Paul and Missoula Dubuque and Sioux City St. Louis and Atchison St. Louis and Kansas City Little Rock and Arkansas City. . . . Houston and Orange Valley and Stromburg Columbus and Norfolk Marion and Chamberlain Flandreau and Sioux Falls Year-. 1879,1880, 1881, or 1882. 18.8 8.0 6.6 118.0 6.4 74.0 18.3 46.7 93.9 32.0 7.3 63.8 11.5 26 M) 27.0 16 8 10.8 8.0 266.0 8.6 8.4 52.3 29.6 19.5 12.4 12.5 8.8 28.0 12.0 35.6 74.8 35.5 74.1 104.5 71.2 47.9 1894. 1895, 1896, and 1897. 10.2 6.4 6.0 70.0 5.8 54.0 8.1 19.6 58 9 6 41 6 56 20 11.0 7.6 6.8 156. - o 39.7 9.4 7.9 b.o 8.3 i . i 10.4 6.4 10.4 41.2 12.0 56.5 43.1 42. 1 80 THE POSTAL DEFICIT. The least reduction for any route shown in the foregoing is 9.09 per cent. There are many showing over 50 per cent, decline, and the greatest amounted to 78.15 per cent. The illustrations were taken at random, the selections being made by an officer of the Post-office Department, According to the testi- mony of Mr. Erastus Young, general auditor of the Union Pacific system, the rate paid that company for carrying mail between Cheyenne and Denver de- clined, from 1880 to 1898, from 62.5 cents per ton per mile to 13 cents, or 79.20 per cent. It is possible to compare the reductions in mail rates with those in the charges for other services which are rendered by the railways. Such comparisons have already been given for the United States as a whole. The follow- ing table shows comparisons between the rates ap- plied to mail, passenger, and freight traffic respect- ively during the earliest and latest years from 1890 to 1898 in which the mail was weighed : THE TO.STAL DEFICIT. M Year. Rate pe >r mile in cents. Percent of decline. Territory cov- ered. Q s — — M "5 as sengers per pus- senger. reight per ton. '3 issengers. +3 '3 § a, fe £ '- £ United States. 1890 14.968 2.167 0.941 1898 12.567 1.973 .753 16.01 8.95 19.98 Group I' 1 890 13.724 1.912 1.373 1898 11.248 1.827 1.176 18.04 4.45 14.35 Group II 1890 10.952 2.029 .828 1898 9.975 1.786 .617 8.92 11.98 25.48 Group III.... 1893 11.534 2.076 .663 1897 10.933 2.001 .605 5.21 3.61 8.75 Group IV 1893 15.387 2.406 .763 1897 13.885 2.262 .648 9.76 5.99 15.07 Group V 1893 IS. 660 2.435 .927 1897 16.434 2.337 .864 11.93 4.02 6.80 Group VI.... 1892 15.089 2.292 .983 1896 14.117 2.181 .917 6.44 4.S4 6.71 Group VII... 1891 13.410 2.501 1.333 1895 12.400 2.486 1.098 7.53 0.60 17.63 Group VIII.. 1891 16.216 2.377 1.217 1895 14.660 2.275 1.161 9.60 4.29 4.60 Group IX.... 1891 26.844 2.587 1.363 1895 23.1)50 2.398 1.253 10.78 7.31 8.07 1891 16.082 2.328 1.631 1895 14.063 2.153 1.261 12.55 7.52 22.69 The foregoing table shows that, for the United States, mail rates declined 16.04 per cent in the eight years from 1800 to 1898, while passenger rates de- clined but 8.0.5 per cent. During the same period the decline in freight charges amounted t<> 10. OS per cent. An examination of the averages for the several geographical districts, in accordance with which the 82 THE POSTAL DEFICIT. data are classified, shows that the decline in mail rates has varied from 5.21 per cent in group III to 18.04 per cent in group I. The range in passen- ger charges was from six-tenths of one per cent to 11.98 per cent, and in freight rates from 4.60 to 25.48 per cent. In considering the extent of the de- cline of each class of rates for each group, the differ- ent periods of time which the respective comparisons cover should be borne in mind. It appears that the decline in mail rates has exceeded that in passenger rates in every group but one, and has also exceeded that in freight rates in four of the ten groups. The fact that mail invariably receives passenger train service should not be lost sight of while examining these data. Comparisons of average mail rates, in which all routes on particular railways are represented, with other charges via the same roads can also be made. Such comparisons for two railways follow : ft Rates per mile in cents. Per cent of decline. Railways. ** 03 GO i S- 03 0> o3 .' bXi &,£ 5 el 0> &* £ oi cu 5" £^- a, ft Oh ■i— tt o •— ft r-i O •r- H-> OS 03 1 Si OO c« -j ol Cu® C 51 4) ^ - » &i Oh s- Ph CD Chicago & "j Northwestern > railway J Union Pacific j railroad j 1885 1897 1888 1897 21.78 13.87 9.4 7.2 2.379 2.053 2.238 2.057 1.194 .978 1.173 .988 36.32 23.40 13.70 8.09 18.09 15.77 THE POSTAL DEFICIT. 83 • The foregoing does not require extended com- ments. It shows that on at least two great railways the operation of the law providing mail pay has been more effective in securing reduced charges than the natural economic forces of which so much is written in producing corresponding changes in rates on other traffic. After examining the foregoing, one is prepared for the statement that the percentage of the total postal expenditure paid out for transportation has declined without much interruption since railways began to carry the mail. This proportion amounted to 6S.6 per cent in 1700, and there had been no substantial change up to 1837, when railway mail service began. The following statement will be of interest in this connection : PERCENTAGE OF POSTAL EXPENDITURES PAID FOR TRANSPORTATION'. Decade. Highest. Lowest. Average. 1837-1846 88.0 62.2 82.6* 48.5 51.1 44.5 63.7 53.6 39.0 43.9 43.8 42.1 69. 24 1847-1856 56.43 1857-1866 1867-1876 1877-18S6 52.26 46.:>2 46.60 1887-1896 4:;. 29 * Due to increased expenditure for star-route service. The percentages of all postal expenditures paid for transportation in 1897 and 1898 were 42.1 and 41. -J respectively. The foregoing results have been ac- complished very largely through the substitution of 84 THE POSTAL DEFICIT. railways for more costly means of transportation in* the mail service. No one can make a careful and unbiased exami- nation of the present laws for paying railways for the services which they perform without being strongly impressed that they were framed, from the point of view at least of securing such services on the most favorable terms consistent with efficiency, with sin- gular wisdom. They have worked steadily and rap- idly toward the reduction of the average rate per unit of weight, and such conclusions as are justified by the limited data available indicate that the de- cline per unit of space has been much greater. THE ATTACK ON THE PRESENT SYSTEM. In spite of the decline that has taken place and the improvement in railway mail service by which it has been accompanied, there has been considerable effort to show that the present rates are excessive, and propositions for their reduction have been rather noisily advocated in certain quarters. The reduc- tions proposed have ranged from about 10 per cent of the present rates to 75 per cent. It is probably due to the gentleman who made the latter sugges- tion to add that he advocated a present reduction of 25 per cent, to be followed by an investigation which he felt assured would show that the greater reduc- tion was desirable. A United States Senator intro- duced an amendment to the Post-office appropriation bill providing for a reduction of one-third in the present rates. THE POSTAL DEFICIT. 85 MR. PINLEY ACKER. It is unfortunate that the adverse discussion of the present rates of mail pay should be so thoroughly identified with one or two men whose erroneous state- ments, probably made in good faith, have so misled the public that it is impossible thoroughly to present the current situation without references of a personal character. The most prominent of these gentlemen is Mr. Finley Acker, a manufacturing confectioner of Philadelphia, a man evidently of much public' spirit, of unbounded enthusiasm and persistence, and with very limited knowledge of statistical methods or of economic science. In 1898 Mr. Acker was a representative of the Philadelphia Trades' League in the National Board of Trade, and as such he man- aged to secure the adoption of a series of resolutions regarding mail pay which have constituted the basis of the attack upon the present law. These resolu- tions constitute a series of misstatements, either in express terms or by implication. They dealt, how- ever, with matters not familiar to the members of that body, and were adopted without more than formal discussion and probably without attracting much notice, or anything lik<* a complete realization of their importance. The statements that have beeo shown to be erroneous and the facts now established in regard toeach subject areshowD in parallel columns below : w 1 86 THE POSTAL DEFICIT. MISSTATEMENTS IN RESOLUTIONS. THE TRUTH. First. That railway mail pay Average mail rate per ton had not declined in twenty per mile in 1878, 23.167 cents ; years. in 1898, 12.567 cents ; decline, 45. 75 per cent. Second. That the rate paid Average mail rate, $12.57 per to railroads for hauling mail ton per 100 miles, or 12.567 averaged $40 per ton per 100 cents per ton per mile; 53.90 miles, or 40 cents per ton per per cent of mail transportation mile. by rail charged less than 9 cents per ton per mile ; only 2.86 per cent pays as much as 40 cents per ton per mile. Third. That the average pay- • Average distance hauled, 438 ment for carrying mail average miles; average rate per 100 distance by rail was $6.58 per pounds per mile, 6.2835 mills; 100 pounds. product (average rate for aver- age distance), $2.75. Fourth. That the Depart- Number of postal cars June ment pays $6,250 per annum 30, 1898, 921; annual rate of for postal cars. payment, same date, $4,175,- 724.86 ; average per postal car, $4,533.90. Number of compart- ment cars furnished free, 2,585. The first misstatement was indirect and is found in the words, " The law determining the rates for hauling mail matter has not been modified in twenty years." No one who examines the context can doubt, however, that this was meant to convey the impression that there had been no reduction, and in his speech in regard to the resolutions, Mr. Acker did so state, as will appear from the following extract : " The free discussion of Mr. Loud's bill upon the floor of the House resulted in directing attention to another feature, which may bear as direct a relation to the causes of the deficit as the abuses connected with second-class matter, and that is the ex- THE POSTAL DEFICIT. 87 cessive rates which the Government is said to be paying th* railroads for the transportation of mail matter, and which ratee have not been changed during (fie past twenty years."* The truth is that Mr. Acker is an enthusiastic ad- vocate of the reduction of letter postage to one cent per ounce. He has heen led by his desire to aid in the accomplishment of that result to urge a reduc- tion in railway pay that would offset the loss in revenue that, he thinks, would result from a 50 per cent reduction in rates for letter mail. He has made no substantial contribution to the investiga- tion of railway mail pay, but has surrounded the discussion with voluminous misstatements and vio- lent prejudices that 'have grown out of them. In spite of his voluminous contributions to the discussion there would be no value in a lengthy ex- amination, of his arguments. His final word seems to be that mail transportation is governed by what he calls the " commutation principle," and while this is not as evidently absurd as the suggestion that the half rates charged children show that railways make passenger rates on a weight basis, it is equally use- less as an aid to a reasonable conclusion. Commu- tation passenger rates, to which Mr. Acker refer-. furnish one of the most perfect examples of the ad- justment of rates with the idea of fostering traffic by means of the lowest practicable charges. They in- volve a careful and constant study of the ability of travelers to meet them, and their prompt modifica- tion in the face of changed conditions Is essential to * The italics are the present writer'-. 88 THE POSTAL DEFICIT. satisfactory results. They are also closely connected with suburban freight traffic, and hence can be made exceptionally low. The value of Mr. Acker's testimony before the Joint Postal Commission, which includes all of the statements made before the National Board of Trade as well, has been appraised by Professor Adams. When he was last before that commission, the follow- ing colloquy occurred between Mr. Loud and Pro- fessor Adams : it Mr. Loud: Have you examined Mr. Acker's testimony, Professor ; if so, of what value is it as a guide to our action ? " Mr. Adams: I cannot think that Mr. Acker's testimony is of any very great importance. It is some time since I read it. I read it immediately upon its being published, and so far as his argument rests upon the average haul of passenger and freight, it is not correct, because he misused the figures. And then this report on the weighings of mails has come out since then, and that shows that his estimate of the average haul of mail is also incorrect." Professor Adams was accorded an opportunity to revise the testimony given by him on the occasion referred to, and in the revision he made the forego- ing still stronger. The following may be taken, therefore, as representing his deliberate judgment : " On the whole, however, I cannot think Mr. Acker's testi- mony will prove to be very helpful. When he first appeared before this commission he rested his case upon an erroneous statement of the rate per ton per mile, and upon his second appearance he rested his argument upon an erroneous state- ment relative to the average length of haul for mail, for freight, and for passengers." THE POSTAL DEFICIT. 89 MK. JAMES LEWIS COWLES. Next to Mr. Acker, the man who has been most influential in determining the form of the attack is Mr. James Lewis Cowles, of Farmington, Connecti- cut. Mr. Cowles is the author of a book entitled "A (leneral Freight and Passenger Post," in which he advocates uniform fares, regardless of distance, for each class of accommodations in passenger trains and similarly adjusted charges for freight. It is quite natural that any one who believes that one dol- lar would be a fair charge for carrying a passenger from Xew York to San Francisco should regard the present scale of postal pay as excessive. Mr. Cowles' ideas concerning the proper scope of the postal serv- ice are partially expressed in the following extracl from the testimony taken by the Joint Postal Com- mission : " Q. I want to get at something. I understand that the remedy which you suggest is embodied in your bill ? "A. "Yes, sir. " Q. Let me see if I understand it correctly. Is it proposed that the Post-office Department, together with the Interstate Commerce Commission, should extend the postal business of ili»- country so as to cover all public transportation of persons, baggage, parcels, and general freight, and that it shall d<> that at a rate for, say, passengers ranging from five cents to five dol- lars per trip ? "A. From five cents to one dollar per trip for ordinary cars, but where you use parlor cars 25 cents extra." The questions in the foregoing were by Mr. Moody, answers by Mr. Cowles. The following, containing answers by Mr. I lowles to questions by Mr. ( alchin. is also instructive : 7 90 THE POSTAL DEFICIT. " Q. Why not carry all of the freight of the people, too ? "A. We "should, most assuredly. I want to say simply this much: That was the original purpose of the post-office as run- ning back to the time of James VII in England. " Q. I mean carry the freight. "A. I mean precisely that. " Q. And the people, too ? "A. And the people, too. " Q. Do you think the Government should own the trans- portation lines of all kinds? "A. I think all public transportation should be done by the Government. " Q. Railroads, telephones, telegraphs, express business, everything? 11 A. Most assuredly. That is precisely what my bill con- templates, and just precisely what my book leads up to, and just precisely what the conservative men of the city of Boston are looking forward to." Though Mr. Cowles' book has constituted an arsenal for those who have attacked the present system, he has contributed no facts to the discussion. It is obvious, therefore, that any time spent in the examination of his conclusions by those who dis- agree radically with the premises upon which they are dependent would be quite useless. It w r ould be possible to accumulate evidence almost indefinitely all tending to establish the fact that the misstatements that have been referred to constitute the foundation of whatever public senti- ment antagonistic to the present system has existed or can be found now to exist. Thus Dr. Spahr, of the editorial staff of the Outlook, a most influential periodical, repeats the misleading statement that there has been no reduction in railway mail pay since 1878, and declares that, this is one of " a few broad facts" which led his journal to take the ground that " the railroads were extravagantly overpaid." THE POSTAL DEFICIT. 91 THE [NVESTIGATION, Congress naturally felt the force of the public clamor thus aroused, and some of its members were led to urge action so drastic in its nature that had the measures they proposed been adopted the result must have been disastrous in the extreme. Wiser and more conservative minds recognized the danger, and some saw at the outset that the allegation that rates were extortionate was based upon misstate- ments and would fall to the ground when the latter were uncovered. Under these circumstances Con- gress very wisely and properly decided upon an in- vestigation, and a Joint Postal Commission, consist- ing of four members of the Senate and an equal number of members of the House of Representatives, was provided for in the postal appropriation bill, which was approved by the President on June 13, 1S0S. This commission, which is still in existence, was directed — "to investigate the question whether or not excessive prices are paid to the railroad companies for the transportation of the mails and as compensation for postal-car service, and all sources of revenue and all expenditures of the postal Bervice, and rates of postage upon all postal matter." Work in accordance with this mandate began at once and continues at the present time. The Com- mission ha- collected and published an exceedingly valuable mass <»f testimony. This testimony and the data collected by the agents especially employed to investigate different phases of the questions sub- 92 THE POSTAL DEFICIT. mitted to the Commission contain material for a most accurate and complete description of postal activities and methods. This information has heen very lib- erally drawn upon in the preparation of the present work. THE ADAMS REPORT. One of the most important steps taken by the Commission was the employment of Professor Henry C. Adams, head of the department of economics in the University of Michigan and statistician to the Interstate Commerce Commission, to whom was dele- gated the duty of compiling, arranging, and present- ing such statistical data as would throw light upon the subjects of the investigation. Though the in- structions given to Professor Adams have not been made public, it appears that the Commission also directed him to present such recommendations as seemed to him desirable. Professor Adams brought to this work a high reputation both as a statistician and as an economist. He had been favorably known to the public and especially to railway men for many years on account of his connection with the statistical work of the In- terstate Commerce Commission and of the Eleventh Census. Had he approached the grave and difficult problems with which he had to deal in the broad and impartial spirit of an arbitrator, with an in- flexible desire to weigh with the utmost care the considerations on both sides, the greatest good might have resulted from his employment. Unfortunately, THE POSTAL DEFICIT. 93 however, Professor Adams appears at the outset to have misconceived the ohjects which Congress wished to attain by means of the Commission. He appears to have been dominated throughout Ins entire inves- tigation by the idea that Congress had prejudged the case and had delegated to the Commission, not the duty of impartially investigating the facts, but that of con- triving means to secure from the railways, in the form of a reduction in mail pay, a material contribu- tion to the elimination of the postal deficit. In accordance with this idea, his conception of his own duties as an expert employe of the Commis- sion appears to have been that he must devise a practical scheme for the reduction. It is necessary to introduce this personal aspect of the case because of the paramount importance of the work accom- plished by Professor Adams, which is, at the present time, the only argument in favor of lower railway mail pay that has not been shown to be based upon gross misrepresentations. It is also the only one that is sufhcientlv scientific in form or method to receive the respectful attention of a student. The importance attached by the Commission to the reporl rendered by Professor Adams as the result of hia labors was indicated by Mr. Loud, when at a public hearing on April 7, 1900, the latter addressed the former as follows : " . . . it must be admitted that if your report can be fully substantiated, it must end the case." The statement that Professor Adams believed him- self to be charged with the duty of devising a scheme 94 THE POSTAL DEFICIT. for eliminating, at least a large part of the postal deficit at the expense of the railways would not be made on slight evidence, and should not be accepted unless established in the most complete and irrefu- table manner. There need be no doubt, however, upon this subject. Professor Adams has, with most laudable candor, taken the public fully into his confidence and explained with considerable detail the impressions under which he proceeded. In the formal report which contains the results of his labor he declares : "If, then, a reduction in railway mail pay is necessary, or even desirable, for the interests of the postal service (and this may be assumed as the judgment of Congress, since otherwise this question would not have been formally raised.*) . . . ' The foregoing is equivalent to saying that Con- gress would not provide for an investigation unless it had already come to a conclusion concerning the subject to be investigated. It should be compared with the clause, already quoted, providing for the Commission, which states clearly that the duty of the Commission was " to investigate the question whether or not t excessive prices are paid to the railroad companies for the transportation of the mails . . ." Again, in a deliberate and evidently studied re- vision of testimony given before the Commission, Professor Adams said : " I assumed that the purpose of this Commission was to efface the deficit in the post-office administration. ... In view- ing this entire matter, I came to the conclusion that $3,000,000 *The italics are the present writer's, f The italics are the author' s. THE POSTAL DEFICIT. 95 was the limit that could reasonably be asked from railways. . . . Starting, then, with the necessary saving in the rail- way mail compensation <>f $3,000,000, in order to achieve tin- end which I had supposed this commission had placed before itself, ..." Iii spite, however, of this unfortunate misunder- standing of the purposes of Congress and of the Commission, Professor Adams' work has thrown ma- terial light upon the conditions of the Railway Mail Service, and has resulted in the complete refutation of every claim upon which the reduction of railway mail pay was formerly urged. He has forever set at rest the allegations that the railways receive forty cents per ton per mile ; that there has been no reduc- tion in mail pay: that the average haul of mail is 328 miles,* and that postal cars rent for more per annum than their original cost. The statistics compiled under Professor Adams' direction are of vital importance, and throw light upon the Railway Mail Service which make- possible a more complete and satisfactory knowledge of its operations than was previously attainable. They were compiled with unmistakable sincerity of pur- pose, and it is only fair to add that the misconcep- tion of the purposes of the investigation that has been referred to was not permitted to affect the methods used. It will be necessary, however, to pre- sent some criticisms of the statistical methods em- ployed in the investigation, which make the results *Or 81o miles. The same individual at different tim<-> used each distance as the basis of an argument, and l»oth arguments were urged with equal vehement 96 THE POSTAL DEFICIT. of the present law appear less favorable to the Gov- ernment than would be the case if they were more accurately portrayed. The most significant contribution to the data con- cerning railway mail services and pay made by Pro- fessor Adams is, beyond all question, the tabulation of the information contained in the records of the Post-office Department in such a manner as to estab- lish the amount of transportation of mail annually performed by the railways, expressed in the familiar ton-mile unit. Unfortunately the method adopted was such as considerably to impair the value of the results. The latter show the transportation which is made the basis of compensation, but by no means show the actual quantity performed. Professor Adams did not overlook this defect, but appears either to have underrated it or to have been unwilling to resort to the simple expedient necessary approximately to eliminate it. His explanation of the method em- ployed follows : "It is the practice of the Department to weigh the mail on each route in each district for thirty consecutive working days once in four years, and to accept this weighing as the basis of payment for the four years following. According to the law, the basis of payment is ' average weight of mails per day carried over whole length of route.' . . . This being the case, the aggregate ton-mileage of mail carried over the railways of the United States may be determined by computing the ton-mileage by routes and aggregating the results. This was done for each year subsequent to 1873. . . . " Continuing, Professor Adams called attention to the defect of this method as follows : " Under this method of procedure it is of course evident that the ton- mileage of mail in the United States for any particular THE POSTAL DEFICIT. 97 year cannot rest upon the weighings of the year named. It represents rather the amount of mail in one of the four districts for the year under investigation, to which is added the amount of mail determined by the weighings of the three years previous, respectively, in the three other weighing districts. For ex- ample, the ton-mileage statistics of mail presented in this report for 1898 would be the sum of the weighing for ls«»s in district 4; for 1897 in district 1 ; for 1S96 in district 2 ; for 1895 in district 3." Before presenting a more technical criticism, it is necessary to call attention to a formal error in the foregoing extract. Its author does not state cor- rectlv the method which he used, but assumes that he has brought the statistics of ton-mileage a full year nearer to the actual weighings in each districl than is actually the case. There was a weighing in the fourth weighing district in 1898, but its results were not used by Professor Adams in determining the ton-mileage of that year. The ton-mileage given in the report for the year 1898 was made up as fol- lows : Weighing district. No. No. No. No. 1. •_> :;' 4. Total Ton- mileage. 73,227,667 90,622,588 47,620,441 61,243,321 272,714,017 The total used for L898 does not, therefore, con- tain a single unit representing mail weighed during that year, it is perfectly true that the result rej.nj- 98 THE POSTAL DEFICIT. sents the aggregate of the ton-mileage that is the basis of compensation, but it is obviously far short of the amount carried, and yet it will be accepted, if accepted at all, as being an approximation of the latter, and will become, as Professor Adams has already made it, the basis of calculations as to the average receipts per ton carried. Under the method adopted, the result of each weighing in each district, expressed in ton-miles, is used for four successive years, beginning with the year after the one in which it took place, as an ele- ment in calculating the total number of ton-miles, and this calculation consists merely of adding the separate items. This method involves the assump- tion that the ton-mileage in every district remains constant for four years and then moves forward with a sudden increment, only to remain stationary for another quadrennial period. Of course no one be- lieves this to be true ; yet, unless it is the case, the ton-mileage given by Professor Adams is invariably too small and the average rates per ton per mile in- variably too high. The following statement shows how great has been the difference in the ton-mileage resulting from successive weighings in district 1. It can be taken as a type of the entire country, and will show how serious an error must result from neglecting to consider interquadrennial increases : THE POSTAL DEFICIT. 99 DISTRICT NUMBER ONE. Ton-mileage. Year of weighing. » 1869 1873 1877 1881 1885 1885) 1893 1897 Amount. 6,513,655 13,737,677 15,851,752 23,316,828 30,155,323 43,993,235 66,819,535 73,227,667 Increase over preced- ing weighing. Amount. 7,224,022 2,114,075 7,465,076 6, 838, -4 9 5 13,837,912 22,826,300 6,408,132 Per cent. 110.91 15.39 47.09 29.33 15.89 51.89 9.59 Although extreme irregularity is an especially noticeable feature of the foregoing statement, it can- not he doubted that the quadrennial increases were in each case distributed throughout the periods be- tween the weighings. Professor Adams ignored this fact — at least in practice — and declared in regard to the results secured by his methods that — << 'pi This is as close as it is possible to arrive at the quantity of mail carried in any particular year in the United States." This was certainly a mistaken conclusion, for, with- out claiming that the increases were distributed evenly over the interquadrennial periods, it is safe to assert that their arbitrary distribution in thai manner must result in closer approximations of the truth than entirely to ignore the fact of their actual distribution. This is a simple expedient, one easily 100 THE POSTAL DEFICIT. understood, and by no means imposes an arduous task upon the statistician. The following presents a comparison of the results of the method suggested and of that employed by Professor Adams in rela- tion to the first weighing district and for the period from 1889 to 1898, inclusive : Professor Adams' method. The correct method. ge of in ton- by cor- thod. Year. Weigh- ing year used. Ton-mile- age. Source of figures used. Ton-mile- age. Pereenta increase mileage rect me 1889 1885 1889 1889 1889 1889 1893 1893 1893 1893 1897 30,155,323 43,993,235 43,993,235 43,993,235 43,993,235 66,819,535 66,819,535 66.819,535 66,819,535 73,227,667 43,993,235 49,699,810 55,406,385 61,112,960 66,819,535 68,421,568 70,023,601 71,625,634 73,227,667 74,429,191 45 89 1890 12.97 1891 Estimate 25.94 1892 Estimate 38 91 1893 Actual weighing Estimate 51.89 1894 2 40 1895 , Estimate 4 80 1896 Estimate 7.19 1897 Actual weighing Estimate 9.59 1898 1.64 In explanation of the column that has been indi- cated as showing the correct method, it should be said that the weighings have been supposed to show the actual tonnage of the year in which they are taken instead of the year following. It is true that they are not made the basis of payment until the year after that in which they are taken, but that is no reason for adding to this injustice, if it may be so called, the denial of the fact that the service per- formed is greater than that paid for. In estimating for the years subsequent to the latest weighing the extremely conservative rule has been adopted of assuming the continuance of an annual increase, but THE POSTAL DEFICIT. 101 fixing the amount at but three-fourths of that of the previous quadrennial period. ( onsidering the com- mercial conditions of the last five or six years, it is evident that this materially understates the services actually performed, but it was considered better to err upon the side of caution. A correct statement of the actual ton-mileage of the country would be secured by making a series of estimates such as that in the foregoing table for each weighing district and combining the results for each year. In order further to indicate the importance of this criticism and to show the effect of the use of the wrong method, the following comparisons, relating to the whole country, are introduced : Ton-mileage. Rate per ton per mile in cents. Year. Professor Adams' method. The correct method. Professor Adams' method. The correct method. 1878 1883 1888 1893 1898 24,687,923 39,755,061 72,444,857 112,830,405 203,195,521 272,714,017 34,986,496 52,624,560 92,551,975 152,815,777 244,757,219 295,520,353* 26.420 23.167 17.828 16.268 13.973 12.567 18.646 17.502 13.955 12.012 11.601 11.598* ♦The extremely conservative rule adopted in estimating y.-ars subse- quent to the latest weighings unquestionably makes the ton-mileage of 1898 too low and the average rate too bigh. As the estimates for the earlier years are more accurate, this results in an apparently Bmall decline during the later years. 102 THE POSTAL DEFICIT. This defect in the method of determining ton- mileage of mail affects nearly all of his most impor- tant tables, and especially those which show average rates per ton per mile or attempt to compare the in- crease in passenger and freight traffic with that in mail traffic. It should be borne in mind and suit- able allowance made for it whenever conclusions based upon it are used. The uncorrected data have been used in this paper because the error which they contain is invariably prejudicial to the conclusions in regard to railway mail pay that have approved themselves to the present writer, and for the reason also that it has not been considered desirable to an- ticipate a discussion of the statistical methods by which they were obtained. Before considering the principles governing mail pay, as presented by Professor Adams, it is advisable to examine some of his minor conclusions concerning the conditions of railway mail transportation. One of these is that the expense of speed is greatly overestimated. Possibly the following quotation somewhat overstates Professor Adams' contention, but it has been selected with a view to presenting it as clearly as possible in his exact words. Whatever qualification was intended must here, as in his re- port, be read between the lines or supplied by the reader. He said : " In the same way that the rapid worker can produce a quan- tity of goods at lower cost than the slow worker, so a speedy train can render a service more cheaply than a slow train. The operating expenses which increase with increased speed are relatively small when compared with those upon which a sav- ing is made by speed. . . . The correctness of this view THE POSTAL DEFICIT. 103 must be acknowledged when it is recognized that the burden of speed to the railways does not arise so much from the increase of the cost of a fast train over a slow train, all elements of cost being taken into account, as from the decrease of the loud rendered necessary by the increase of speed. . . . The economic speed for any train is a resultant arising from balanc- ing the saving of expense occasioned by high speed against the saving of revenue occasioned by low speed." Of course, Professor Adams is not ignorant of the fact that train employes are almost always paid per mile run and not per hour or day of definite dura- tion, though he appears from the foregoing to have temporarily overlooked it. He is also in complete dis- agreement with all practical railway men in regard to the effect of speed upon cost. This is not a question that the statistician can determine with his ordinary tools, and in the present state of knowledge it is better left to those whose duties have given them practical acquaintance with the subject. Such a man is Mr. Frederick A. Delano, superintendent of motive power of the Chicago, Burlington and Quincy railroad, who appeared before the Joint Postal Commission on June 26, 1900. It is proper to add that his testimony was not available when Professor Adams made his report. This testimony contains unmistakable evidence of the careful and continued study oiven to the question, and should be examined thoroughly by any one who wishes to be fully conversant with this phase of the subject. Only the briefest extract can be given, and that will scarcely represent the conclusions with ac- curacy, for it cannot indicate the care taken to quality them and explain their essential limitations. The following gives Mr. Delano's Language: THE POSTAL DEFICIT. I should say, taking all the factors into consideration, that the cost increases fully half again more rapidly than the speed. For example, I mean by that that if the speed was doubled the cost would be trebled." The importance of this disagreement between the author of the report and practical railway men lies in the fact that mail is given to the fastest trains available, and that the direct cost is therefore affected by whatever conditions determine the relation be- tween the direct expenses incurred, respectively, for fast and slow trains. Another calculation in the report that can scarcel} 7 be sustained is expressed in the following extract : "If, however, one analyzes the operating expenses of rail- ways, he finds a considerable part of the items to which this expense does not pertain. Thus 'station expenses,' 'station supplies,' ' advertising agencies,' and a large number of other expenses do not pertain to the traffic handled for the most part by the employes of an outside agency. Probably $100,000,000 out of the grand total of $800,000,000 ' operating expenses ' should be excluded when considering the cost of the mail serv- ice. It is obvious to remark that as an offset to the op- erating expenses that are in no way contributory to the mail service there are other expenses, perhaps not separately stated in the reports to the Interstate Commerce Commission, which relate exclusively to that service. The maintenance of cranes and catch- ers, messenger service in connection with the rule requiring railways to take and deliver mail when the post-offices are within one-quarter of a mile of their stations, may be especially mentioned. Re- gardless of this offset, however, the statement is not correct. Of the three expenses referred to by Profes- THE POSTAL DEFICIT. 105 sor Adams, " advertising " alone has no relation to the mail service. Those who recall the explanation of what the railways do for the Government in connec- tion with the postal service are already aware that station services are by no means an unimportant fac- tor. This has been shown by extract- from the Postal Laws and Regulations, and the statement ap- plies to station supplies, including stationery, as well as to other station expenses. The statement given by Professor Adams, which purports to show the distance at which " profit on transportation turns into loss" for the different classes of mail when carried by rail, is also inaccurate and misleading. It is of comparatively slight im- portance, but should be corrected. It is based pri- marily on the assumptions that the Government pays to the railways thirty-five per cent of the earn- ings on each class of mail transported by rail, and that each piece of mail carried is of the maximum weight allowed for the amount of postage paid. Thus the Government charges two cents for one ounce of sealed first-class matter, which is at the rate of si; lo per ton, regardless of distance. Thirty-five fa per cent of $640 is $224, and this divided by 12.561 .■cut-, the average rate per ton per mile ascertained bv Professor Adams, gives 1,782 miles as the maxi- mum distance which a piece of first-class mail can be carried without a greater cost to the Government, for transportation, than thirty-five per cent of the amount received. Professor Adams gives this as the distance at which profit turns into loss. Both of the 8 106 THE POSTAL DEFICIT. assumptions are, however, inaccurate. The postage actually received on each class of mail matter is given by the Department in the annual report for 1899, and in each case varies materially from the rate calculated by assuming that each piece of mail is of maximum weight. Thus the receipts for first- class matter average 85.6 cents per pound instead of 32 cents. Again, while the Department does pay ap- proximately 35 per cent of its receipts to the railways, it must be borne in mind that the mail carried by rail is the more profitable portion. Probably, in spite of the losses incurred on second-class matter, the deficit would be wiped out if the postal service could be con- fined to points reached by railways. This, however, would not be desirable. No correction for the latter error is attempted in the following table, in which figures based on the actual receipts for each class are put by the side of those given in the report by Pro- fessor Adams: Distance at which profit turns to loss on the assumption that 65 per cent of earnings are required for other expenses than those incurred for railway service. For first-class mail For second-class mail For third-class mail For fourth-class mail (ordinary) For fourth- class (seeds, etc.) . . . For foreign mail For postal cards As given by Professor Adams. 1,782 miles 56 " 446 " 891 " The correct figures. 4,768 miles 45 819 947 512 2,562 10,483 THE POSTAL DEFICIT. 107 The concluding three items were not estimated by Professor Adams, but are added to make the state- ment complete. The average rate per ton per mile for mail calculated by Professor Adams is also used, though it makes the distances too short. The next condition stated in the report, which re quires discussion, relates to the variation in the volume of mail from day to day and month to month. Professor Adams appears to think that an argument in favor of low rates can be predicated upon the as- sumption that mail moves with substantial regu- larity. In the testimony given by him in New York on November 23, 1899, he said : "Among the considerations favorable to the argument that railway mail compensation might with propriety be reduced are the following: This traffic is sure traffic to the railways; it is steady traffic, and while it may be true that a heavier weight of mail passes west than passes east, .... it does not vary from month to month as does the passenger traffic. It is dis- tributed with a fair degree of equality." The present writer knows of no evidence substan- tiating the foregoing in more than the most general sense, and there is a great deal of testimony, some of which has already been summarized in describing railway services, that indicates that it may not be correct. Superintendent Bradley says that thedaily variation in mail leaving New York city amounts to 60 per cent. It is not possible to do more at the present time than to suggest that the assumption that mail traffic docs not fluctuate materially re- quires demonstration before it can properly be made the basis of action. 108 [the postal deficit. There are two portions of Professor Adams' report which, although relatively inconspicuous in treat- ment and comparatively insignificant in length, espe- cially attract the student, because they appear to be deliberate attempts to determine what would con- stitute reasonable railway pay, or at least, with par- ticular reference to the one first to be considered, the minimum limits of such pay, by inductive methods. As such they differ materially from all other portions of the report. The following extract from the report will serve as an introduction to the discussion of one of these attempts and at the same time indicate the importance attached to it : "The question whether or not railways are overpaid under the law of 1873 is reducible to the question whether or not the Pennsylvania railroad, the New York Central, the Chicago, Burlington, and Quincy railroad, and the Union Pacific rail- road are overpaid for the service which they render." The calculation proposed is as follows : " The two most important mail routes in the country are the Philadelphia and New York route, over the Pennsylvania rail- road, and the New York and Buffalo route, over the line of the New York Central railroad. The former has an average daily weight of 309,000 pounds per mile of line, which, for ease of calculation, will be called 150 tons per mile per day. Confining attention for the moment to the Pennsylvania route, it appears that this route receives an annual compensation of $3,422 per mile of line, a condition which presents the following question : Can the Pennsylvania road afford to carry 150 tons of mail daily between New York and Philadelphia for less than $3,422 an- nually per mile of line, or $93.75* per mile of line per day? "The answer to the above question depends entirely upon the manner in which the freight is moved. According to Mr. Bradley, Superintendent of Railway Mail Service of this divis- ion, mail goes upon 140 trains daily, 26 of which, however, perform 90 per cent of the service. This is important informa- *An obvious error. The amount should read $9.37?. THE POSTAL DEFICIT. L09 tion, for it indicates thai the ear unit and train unit are a Bafe basis of calculation upon this route. The average loading of the post-office car, according to the testimony before tin- Com- mission, is 2 tons. It must be admitted, in view of the great weight of these cars, that such loading pays little regard to the requirements of economy. It is doubtful if, on the basis of such loading, the railways could afford to carry mail at a rate much cheaper than it is now carried. On the other hand, if cars were loaded with :>] tons, which Mr. Davis says is an 'easy load,' or should the average load go as high as <> tons, which, according to testimony, is accomplished on the Pennsylvania railroad by its special mail train. 1 am confident that railways operate upon a marginal profit in carrying mail that warrants a reduction in pay. The calculation upon which the above conclusion rests is as follows: At 2 tons per car 150 tons of mail would demand that 75 cars be passed over each mile of the Philadelphia and New York route per day. This would be the equivalent of 8 trains per day run at passenger speed. "The average cost pertrain mile, all operating expenses being taken into account, is slightly under SI. As stated above, it is assumed to be SI. This would make $8 per mile per day charge- able to operating expenses, which increased by 33 per cent for fixed charges and dividends, improvements chargeable to incomes, investments, and the like, would give $10.40 per mile per day properly chargeable to mail service. This multiplied by obVithis multiplier ought to be decreased in the proportion that Sunday service is less than week-day service) would give $3,796 per mile per year as the cost of mail service. This amount is'an excess of the amount which the route actually received. If, however, the basis of the estimate be modified, and if it be assumed that each car is loaded with 31 tons, as stated in the testimony of the superintendent, a similar computation shows that the road would expend for its mail service an annual sum per mile of line of $2,244, which is considerably less than the amount received per mile of line on this route." The foregoing will be discussed independently of the questions concerning the average Loading of postal cars which it naturally raises, because that subjeel wouldrequire rather extended commenl and relates quite as closely t<> the examination of the specific re- ductions proposed by Professor Adams, which will constitute a more important part of this work and will be taken up hereafter. One qualification n( the 110 THE POSTAL DEFICIT. foregoing introduced in the report should be quoted. It is as follows : "The above calculations are submitted in part as an emphatic expression of the fact that one must know every detail under which traffic is carried on dense routes before he can judge whether the present compensation is or is not overpayment." Professor Adams also asserts that the calculation quoted — "is the same sort of calculation that a railway manager would adopt if called upon to face the question whether a specific charge for a specific service should be yet further reduced or the service abandoned." It is submitted that in the foregoing quotation Professor Adams has fallen into the error against which he warns the Commission and others when he declares on page 223 that the " bane of statistics is the mathematical average." In the first place, he has used an average which, while it agrees substantially with that given for all trains in the United States, freight as well as passenger, and also for the group in which the New York-Philadelphia route is located, is considerably lower than that which his own report, rendered as statistician to the Interstate Commerce Commission, applies to the Pennsylvania railroad. The average for the United States (figures for 1898 are used, as that is the year used by -Professor Adams) is 95.635 cents, and for the group in question 94.985 cents, but for the Pennsylvania railroad the average is $1.12842. Merely allowing for this difference would change Professor Adams' conclusion on the basis of 2 tons from $3,796 to $4,294, and that on the basis of 3J tons per car from $2,244 to $2,539 as THE POSTAL DEFICIT. 1 1 1 the cost to the Pennsylvania railroad per mile per day.* But this would be merely to repeat, albeit on a slightly safer basis, the misuse of a mathematical average, and could be only misleading. It is intro- duced solely to show one of the inherent dangers of such a calculation. The average cost per mile of $1.12842 for the Pennsylvania railroad represents all trains, both passenger and freight; it represents the results of operating the Pennsylvania Limited as well as local freight trains; it represents results on the lines that have four tracks and block-signal- ing apparatus, 100-pound rails, and miles of elevated city tracks, as well as those of the least expensively equipped branches. The mail is carried on the most expensive trains, and the route in question is over what is probably the most expensive stretch of track of its length, not only of the Pennsylvania rail- road, but in the United States. Is it reasonable, in the face of these facts, to suppose that the average operating cost per train mile is no higher for the New York-Philadelphia route than for the Pennsyl- vania railroad as a whole? Professor Adams urges * Professor Adams 1 calculation also contains a mathematical error that would seriously impair its value even han the basis of two tons per car. from $3,796 to $4,831 and that on the basis of three and onedialf tons from $2,244 t<> S^s.jfi. 112 THE POSTAL DEFICIT. that it costs no more per mile to operate a passenger train than to run a freight train, but this, by no means, meets the difficulty. If the average passen- ger train cost per mile were ascertained with abso- lute definiteness (a thing in itself impossible) for the Pennsylvania railroad, it would still be unwise and misleading to attempt to use it for such a calcula- tion. If any railroad officer does use such an aver- age in the manner indicated, as is claimed, he merely deceives himself and those who depend upon his judgment. It will not be out of place to add that the demand for facilities for prompt and rapid dis- patch of mail has so affected the New York-Phila- delphia route that the number of pounds of mail carried per single trip was but 3,099 in 1897, against 3,367 in 1881. The rate per ton per mile, as given by General Shallenberger, was 6.4 cents in 1881, and the earnings per single trip $9.70, while in 1897 the average rate was 5.8 cents, and the earnings per single trip $8.15, or 15.98 per cent less than sixteen years earlier. The next attempt makes use of the comparative method by placing the average mail rates of certain routes in juxtaposition with the rates charged for particular quantities of express and of first-class freight when shipped from one of the termini of the same route to the other. This comparison is intro- duced with the remark : "As corroborative evidence of the impression that railway mail compensation upon dense routes constitutes overpayment to the railways, the following statement is introduced. . . .' THE POSTAL DEFICIT. 113 And it is followed by the observation that — "The data in the above table, properly interpreted, support the impression that railway mail rates are relatively higher than freight rates or express rates, and that this excess payment ex- tends not only to the dense routes, but to all routes." It is clear from the foregoing extracts that Pro- fessor Adams assigns to the table in question (table P, pp. 237, 238, of the report) a position of material i mportance in the argument upon which the reduc- tions in mail pay which he proposes are based. The table includes a large number of points, of which six of the first seven are shown below, one being omitted because the data are not complete in the report : Per ton of 2,000 pounds. From Now York to — Mail Freight Expiess Buffalo $81.65 Chicago 71.39 Onion Pacific Transfer. 107.67 Ogden 192.85 San Francisco 265.63 Philadelphia 6.57 n • 15.00 29.40 7.-.. in 60.00 4.4u $12.50 25.00 15.00 1 n :,.iin 135.00 7..-,. i Per hundredweight. Mail Freight $1.58 5.38 9.64 13.28 .33 |0.39 .75 1.47 3.77 3.00 Express $0.63 1.25 2.25 .-..-J.", 6.75 The foregoing has been slightly rearranged in order to save space, but the substance of the table, as presented by Professor Adams, is unaltered. It will be observed that the rates are given for two units of weight, those per hundredweight being the quotient of those per ton divided by twenty. Under these circumstances the discussion need be applied to but the lasl three columns. It is obvious thai if the rates in the table arc accurate and comparable the payment for mail service exceeds the payment for 114 THE POSTAL DEFICIT. first-class freight on each of the routes indicated, and exceeds that for express on five of the six routes given. This inference is supported by Professor Adams' com- ments upon the table. It merits, however, a somewhat closer examination. The average rates given for mail represent the entire mail traffic over the routes in ques- tion. The shipments of mail, as was shown when the methods of weighing mail were considered, are among all of the stations along the several routes, and the estimated weight carried over the whole route is obtained by reducing the traffic of inter- mediate points to its equivalent in pounds carried over the whole route ; thus the payment, though based upon an estimated weight carried between* termini, is not for a service exclusively between such points, but for one which involves the receipt and delivery of mail at each intermediate station as well as at the termini. For example, the route between New York and Buffalo, on which the rate of $1.58 per 100 pounds of mail is quoted by Professor Adams, has 133 post : omces and points of exchange. The average 100 pounds of mail to which the rate as quoted is applied is made up of many separate pieces, some of which must be presumed to have been received and others to have been delivered at each post-office and point of exchange. The actual number of pieces in an average 100 pounds of first-class mail is probably more than 4,000. On the other hand, the shipment of first- class freight, with which Professor Adams has com- pared this complex of mail shipments, is an actual THE POSTAL DEFICIT. 115 single shipment from one consignor to one consignee, traversing the entire distance from New York to Buf- falo in an uninterrupted journey. The New York Central and Hudson River railroad, which is the line over which the New York and Buffalo mail is routed, receives relatively higher rates on shipments from New York to intermediate stations than on those to Buffalo, as well as on traffic wholly between intermediate stations and from the latter to Buffalo. It also receives relatively higher rates on shipments of less than 100 pounds, but these are probably few. To obtain a satisfactory comparison between first- class freight rates and mail rates on the New York to Buffalo route it would be necessary to take the freight rates between every possible combination of stations, including the termini, on the route, to reduce the traffic taken at each rate to its equivalent in a com- mon unit of weight carried the whole length of the route, and then secure a weighted average in which each rate should be given representation proportionate to the quantity of transportation to which it is applied. The task is a considerable one, but, with the co-opera- tion of the officers of the railway, bv no means an impossible one. However, no one. with the possible exception of Mr. Acker, is now likely to propose freight rates as a proper measure of reasonable mail rate-. The comparison just discussed, though ob- noxious to sound and logical statistical principles, is qoI likely seriously to mislead anyone. This cannot be said of the comparison with express payments, which is contained in the same table. In a later 116 THE POSTAL DEFICIT. portion of this work it will be shown that the serv- ice performed for the Post-office Department is so different from that performed for the express com- panies that comparisons between the payments for each are of a very limited value. This objection will be passed over at the present time, and only the misleading character of the comparison pre- sented by Professor Adams will be discussed. Every- thing which has been said in regard to the funda- mental error of comparing the average rate obtained from a complex of mail shipments, only a portion of which traversed the whole length of a route, with freight rates for traffic traversing the entire distance should be understood as applying with su- perior force to an effort to compare the same average with express payments for through shipments. In the case of the comparison with express payments there is the added error, equal if not greater than the first, of basing the comparison on shipments of 100-pound packages of express. The express pay- ments used by Professor Adams were obtained by taking the express rate on 100-pound packages and assuming that half of each rate is paid to the railway for the services performed in behalf of the express company. The basis of 50 per cent for this purpose was obtained by adding to 40 per cent, which is the basis of some contracts, an arbitrary of 10 per cent more as an allowance for the services performed for the railways and the payments directly to railway em- ployes. The evidence shows, however, that express contracts call for cash payments of from 40 to 55 per THE POSTAL DEFICIT. 1 1 , cent of gross express earnings, and frequently include minimum guarantees in addition. There is also some contention that the allowance for services per- formed is too low. Assuming, however, thai 50 per cent is the actual proportion of gross express reve- nue that is paid to the railways, it should be remem- bered that it is a percentage of gross revenue and not of the revenue on any particular shipment. Express business is essentially a small package business, and much of it is between points located within short dis- tances of each other. The railway gets all of the business along a particular line and is willing to carry the large and low-rate packages along with the small and high-rate packages, because the average payment resulting from all of the business is satisfactory. It is certainly unreasonable to suppose that it would ac- cept on all express traffic the smallest amount which is added to its revenue from this source by the least remunerative kind of business that the express com- pany conducts. Yet this is exactly the assumption that Professor Adams has made. He admits that the selection of average express rates would have resulted in raising the rates above those shown. The rates on 100-pound packages are absolutely the lowest known to the express companies, yet so few packages of that weight are received that it scarcely atl'eets the average returns. Eleven car-loads of express leaving New York in one night over the same route traversed by New York to Buffalo mail contained only nineteen packages which weighed as much as LOOpounds. Mr. Julier, the General Manager of the American Expr* - 118 THE POSTAL DEFICIT. Company, certainly a competent authority, regards a typical package as one weighing 7 pounds. The same authority has furnished the actual average payment made by the express company to the railways on cer- tain of the routes selected by Professor Adams. If a comparison of mail routes with express payments, based on weight carried, has any value at all, it should be made with such averages. The following table shows comparisons for a few selected points between the data used bv Professor Adams and those furnished by Mr. Julier : From — New York New York New York Chicago . . Chicago . Cincinnati Cincinnati To- Buffalo Chicago Omaha Milwaukee.. New Orleans St. Louis. . . . Cleveland. . . Express payments per 100 pounds. n O . fl 02 (-i > g£ •r 1 s-, ^3 rj2 " ^ 50.63 1.25 2.25 .30 2.13 .75 .63 •' attained in a purely arbitrary manner unless (he principle <>t' com- pensation could he supplemented by another that would more directly affect particular rates. The principle of public utility satisfies this requirement. Properly understood, it means nothing more than that the public interest in the results of railway 9 122 THE POSTAL DEFICIT. transportation should be recognized in the adjust- ment of the charges for the different services per- formed. The public is under an obligation to those who have furnished railway facilities which requires that the total revenue collected as payment for rail- way services shall be permitted to be sufficient in amount to pay operating expenses and a reasonable return to invested capital. On the other hand, the public has the right to insist that in raising such revenue the amounts assessed against particular services shall bear those relations to each other which will best serve the general welfare. This principle does not involve any conflict between the owners of railway property and the shipping and traveling public. The interest of the former in the develop- ment of the resources of the regions contiguous and * tributary to their lines is coincident with that of the public in the general development of industry, and both tend to secure the same result through the utili- zation of a common means — the relativelv reason- able adjustment of transportation charges. It is to be observed also that the principle of public utility will never require the transportation of any traffic for less than the cost directly incurred in moving it, but is only applicable to the distribution among the several services of those expenses which are jointly incurred. No student of transportation will object to Professor Adams' general statement of the principle of public utility. The idea which is expressed has been ap- plied in railway practice ever since rate-making be- THE POSTAL DEFICIT. 123 came at all systematized, and in one form or another lias long been familiar to railway men. To state a principle correctly and to apply it with precision are, however, two very different things, and Professor Adams' application of the principle to the problem of railway mail pay tails to commend itself, as does the statement which he has formulated. The man- ner in which this application is attempted will he shown by a series of quotations "The principle of public utility suggests the point of view from which to regard the transportation of mail. It being ad- mitted that carrying the mails is a transportation service for which compensation must be allowed, where in the schedule of services rendered by railways should the transportation of mail be classed? . . . the transportation of mail should be classed among those services which minister to the develop- ment of the process of production rather than to the satisfac- tion of wants through the transportation of the products. Of all things transported by rail intelligence is the most essential to social and economic advantage, and on this account is in the highest degree amenable to considerations of public utility. . . . The application of the principle of public utility classi- fies mail transportation with freight; it classifies it among the fundamental or social services of railways." The following quotation will explain why. in Pro- fessor Adams* opinion, the principle of public utility classifies mail traffic in the manner indicated by the foregoing : " A railway manager is willing, for example, to carry coal at a very low rate even at the risk <>f incurring loss, because he knows that coal is potential industrial development, and that what In' losea on the coal traffic becomes for him a gain on the transportation of high-class freight, the product of the mills and factories which the distribution of coal renders possible. The railway nuuiau'iT adjusts his charges upon coal with a view t<> the development of industry in the territory contribu- ting freight to his railway rather than according to the cost of transporting coal. %\ 124 THE POSTAL DEFICIT. 11 The same line of reasoning is pertinent, even in a higher degree, to the transmission of intelligence, because the means of diffusing intelligence is an essential condition of growth and development. As the distribution of coal, which is latent man- ufacturing power, is essential to the upbuilding of manufac- tories, so the diffusion of intelligence is a fundamental condition of all social and industrial evolution." The conclusion from the line of reasoning indi- cated in the quotations already given is as follows : " . . . Government;has the right to insist that the transportation of mail is an essential social function ; that it is imperative, not alone to the present advantage of the public, but to the healthful and permanent development of the State. It has the right openly, publicly, and without apology to put in practice, in the interest of the public at large, a rule uni- versally acknowledged by railway men in the development of their property. . . . The application of the principle of public utility . . . justifies an unusually low rate upon mail transportation, provided this is essential to rendering the important service undertaken by the Postal Department, and pro- vided that by this adjustment the gross revenue to railways is not so far depressed as to deprive investors of property.'" The concluding clause of the foregoing has been italicized by the present writer in order to emphasize a modification introduced in this paragraph since Professor Adams first appeared before the Commis- sion. The change is probably in the direction of accurate statement, but the original language will serve to throw light upon the meaning of the last proviso. The sentence was originally phrased ex- actly as quoted, except that instead of the portion in italics the following appeared : " Provided that the railways are permitted to recoup them- selves by higher rates from other relatively less important serv- ices." The idea of recoupment from less important services appears to be quite prominent in Professor THE POSTAL DEFICIT. 125 Adams' view. When lie appeared before the Com- mission for further examination, after having sub- mitted his report, he said: "In the consideration of the theory of the nature of trans- portation, they have the right to reduce the railway mail pay below cost and recoup on freight if the public utility is served thereby." * When revising his testimony, however, lie substi- tuted for the foregoing the following : " When one considers the peculiar nature of the business of transportation and the intimate relation which it holds to the lives and interests of all people, it certainly seems to me right to say that the rate charged for any particular service may be below the cost of that service, even though it is necessary for the railway to recoup itself by a relatively higher charge upon another service, provided public utility is thereby served. In saving this, however, it should be remembered that the pros- perity of railways is to be included within the survey of public utility." The later statement means substantially the same as the earlier, unless it is believed that the return to investors in railway property is now excessive, though the language adopted in the revision is probably less likely to arouse antagonism to a reduction in mail rates. One more quotation will clearly present Pro- fessor Adams" point of view. In his formal reporl he said : "Of course, considerations of public utility might keep the rate on one class of traffic high, notwithstanding an increase in its volume, but in the case of mail traffic this consideration would work in quite the opposite direction on account of the fact that mail traffic is of all classes of trattic the most essential to social and industrial growth." Briefly summarized, the consideration of the ap- plication of the principle of public utility to the Rail- 126 THE POSTAL DEFICIT. way Mail Service, as indicated by the quotations given, establishes, according to Professor Adams, the follow- ing : 1. Mail traffic is of the highest social importance. 2. Mail traffic is entitled to the lowest rates, provided these are necessary to adequate service. 3. Railways are entitled to a reasonable gross revenue which means adequate compensation for the aggregate of services per- formed. 4. Very low rates in one kind of traffic, e. g. mail, should be offset by relatively high rates on other traffic. The fundamental fallacy in the application of the principle to the case in hand, however, is that Professor Adams has utterly neglected to consider whether the lowest rates or lower rates than those now paid are " essential to rendering the important service undertaken by the Postal Department." This goes directly to the heart of the question at issue. The theory of public utility has no favorite services to which it contributes gratuities. Correctly applied, it will secure from each service rendered bv the rail- ways the highest amounts which can be paid with- out preventing the transportation of any traffic which, from the viewpoint of the economic interests of so- ciety at large, it is desirable to have moved. These will, at the same time, be the lowest rates which the railways can afford to charge. The inquiry which is properly made in aid of the application of this principle, when the reasonableness of any rate is questioned, is whether the rate is so high as to for- bid the socially desirable transportation. If the rate is so high as to prevent such transportation or so low as to encourage socially undesirable transportation, THE POSTAL DEFICIT. 127 it i> opposed to the general welfare and consequently obnoxious to the principle of public utility. It should be understood also that this inquiry will not be adequately answered in any ease until it has been learned whether the transportation alleged to be de- sirable is (impeded by anything outside of the rate charged and natural economic conditions. If there are any uneconomic and removable restraints the interests of society in general, as well as the rights of the public carriers, demand that they be eliminated before a reduction is required. The question is, therefore, neither complex nor very diffi- cult in practical application when addressed to the mail service. This is the form it should take at the present time : 1. Does the Postal Department adequately serve the public? 2. If it does not. is the difficulty due to high rail- way charges or can it be attributed to extravagant organization or to other causes? It is quite possible that a careful examination of the facts that would appear in reference to the first inquiry would show that there is superfluous mail transportation, and that those appearing in answer to tie- second, should it still be asked, would demon- strate that more efficient organization, more rea- sonable salaries, and properly adjusted charge - would quickly result in the elimination of the present deficit and the substitution of a considerable surplus. 128 THE POSTAL DEFICIT. If, however, it should be admitted, as it is assumed by Professor Adams, without even the most perfunc- tory discussion, that the present railway mail, pay is an impediment to an adequate postal service, it would still be necessary, according to the principles that he has announced, to establish one of three things be- fore a reduction could be considered proper. It would have to be shown either : 1. That the aggregate railway revenue is excessive; 2. That there are certain charges which can be raised to compensate for those lowered ; or, 3. That the reduced rates would so increase busi- ness as to produce greater revenue. In the case of mail business the third possibility is so improbable as scarcely to merit discussion. Professor Adams gave no attention to either point, though there is ample evidence that the theoretical necessity was not unrecognized by him. A few quota- tions from his report will show that, in theory at least, he appreciated the necessity of considering the entire schedule of railway charges in connection with the problem of mail pay. He said : "The principle of public utility enables the problem of railway mail pay to be treated as an integral part of the gen- eral scheme of railway rates. Congress may properly consider the amount given to railways for transporting the mail as one of the many sources from which the carriers draw their reve- nue, and, holding in mind the social value of the service as compared with the other services rendered by railways, can arrive at some conclusion as to the relative amount that ought to be allowed for this service. ... To cut this analysis short, the position of this report is that the private interest in railway charges is limited to the claim that the gross rev- THE POSTAL DEFICIT. 129 enno of railways Bhould be adequate to cover operating ex- penses, fixed charges, and a fair return to stockholders; but this sum having been guaranteed, tne manner in which this gross amount is collected from the shippers is a matter of public policy and not of private interest." The foregoing is so clearly expressed and so cath- olic in sentiment that it is a matter of deep regret and almost supreme surprise to find its author delib- erately discussing the reduction of one rate upon alleged grounds of public utility without either pre- senting evidence that the lower rates would hotter serve the general welfare, considering the relation of the present income to total operating cost and capital invested, or offering any suggestions as to means of offsetting the reductions which he proposes. It is a curious "guarantee" of a "fair return" which per- mits the reduction of single rates without any refer- ence to the general schedule. On another page of his report Professor Adams recognizes the necessity of considering the results of the entire schedule in the most explicit terms, as follows : "It is believed that no headway can be made toward a solu- tion of the problem of reasonable railway mail compensation so long as mail traffic and railway mail revenue is considered independently of general traffic and general revenue." The revised text of Professor Adams' latest ex- amination shows, however, that lie finally begged the entire question in the following answer to a < j nest ion by Mr. Loud : "Your questions have brought out the important fact that the adjustment of railway mail compensation is intimately con- nected with the adjustment of railway schedules as a whole, and that the rule of compensation cannot be applied to any 130 THE POSTAL DEFICIT. particular service considered by itself. Further questions in this direction would necessitate a general discussion of the theory of railway rates, and whatever one might say upon so comprehensive a question in an examination of this sort would probably be either platitudes or statements which on their face would be absurd. I should prefer, except the Commission see some bearing of these questions other than that which has al- ready been brought out, to refrain from expressing myself upon so fundamental a problem as the problem of railway rates." Apparently, it is impossible to reconcile the state- ment with which the foregoing begins with the effort to avoid the discussion to which it naturally pointed with which it closes. Until the hiatus in the dis- cussion of railway mail compensation from the point of view of public utility is supplied by a careful examination of the question thus indicated, that principle will be of little aid in the determination of reasonable rates. "THE PRINCIPLE THAT DENSITY OF TRAFFIC ENABLES ECONOMIES." There are certain industries, in which the propor- tion of fixed capital is large, which can enlarge their output without a corresponding increase in their out- lav. Such industries are said to conform to the economic law of increasing returns, which means that the cost of production per unit of product is lower with the enlarged output than when the quantity produced was less. President Hadley, of Yale Uni- versity, has contributed a most useful suggestion in this connection by calling attention to the fact, in a footnote to one of the pages of his " Economics," that the real distinction between industries in this respect THE POSTAL DEFICIT. 131 is based on the extent of the utilization of the exist- ing fixed capital. Railways constitute one of the most ready examples of industries which conform to the law of increasing returns. The outlay required for road-bed, stations, signaling apparatus, etc., does not multiply nearly as rapidly as traffic. It is easy, however, to overstate the effect of this law, and much harm lias been accomplished by so doing. A rail- way may be in such a situation that an increase in certain kinds of traffic requiring especial facilities or service will actually raise the average cost of render- in"; such services. Professor Adams expresses his interpretation of the law of increasing return^ as applied to railway transportation in what he terms— . . . "the business law of transportation, a law which asserts that the cost per unit of transportation decreases as the density of traffic increases. . . . this law is that operat- ing expenses do not grow proportionally with an increase in traffic." Again, it is desirable to introduce a series of quota- tions in order that Professor Adams' application of the law of increasing returns, or, as he has called it, the "principle that density of traffic enables econ- omies/' to the problem of railway mail pay may be fully apprehended. The first quotation will he from the preliminary statement made to the Commission by Professor Adams several months before his report was ren- dered. He said at that time: " The possibility of introducing economies into the business of transportation depends upon the increase in the volume of traffic, from which, in the absence of countervailing consider- 132 THE POSTAL DEFICIT. ations, it follows that a form of traffic which increases most rapidly through a series of years should show a relatively more rapid decrease in charges as compared with other traffic!" The following are from the final report : " The significance of the increase in the volume of traffic is that it enables an introduction of economies and a consequent decrease in the cost of rendering the service." "The conclusion from this law was that the traffic which contributes most to an increase in density ought, other things being equal, to show the greatest reduction in rates." "If there be any virtue in the rule that economy of transpor- tation depends upon density of traffic, it is evident that mail traffic ought to show a greater relative saving than either freight traffic or passenger traffic." In another place, in the same report, after introduc- ing a statement which shows the relative increases since 1881 in mail, passenger, and freight transpor- tation, Professor Adams says : " The statement justifies the general reduction in rates dur- ing the past eighteen years, for it shows such a reduction to have been possible on account of the economies introduced in the business of transportation. It also justifies, in the absence of countervailing consideration, a much greater relative reduc- tion of mail rates than of passenger or freight rates." No one who gives even the most cursory attention to the foregoing will fail to appreciate the fact that the possibility of introducing economies as traffic increases is 'the essential element in the law. If there is no such possibility, if traffic at the beginning of the period under observation had reached the point at which the highest practicable economy can be attained, no conceivable increase in density could operate so as to produce a presumption in favor of lower rates. That the important place in the theory here assigned to the coexistence of potential econo- THE POSTAL DEFICIT. 133 mies with increasing traffic is a fair statement of Professor Adams' position will be made more evi- dent by the following extract from his report: " Whether or not this great increase in ton-mileage warrants the increase in pay from 16,522,725 to $34,273,431 depend- entirely upon the degree of economy that may be introduced into the service on account of this increased density of traffic." Yetj in spite of the paramount importance of this aspect of the development of railway mail service, according to the theory which he advocates, Pro- fessor Adams' report will be searched in vain for any evidence that the great increase in ton-mileage of mail which has taken place has been accompanied by even the smallest economies in its transportation. If such economies have been effected it should be possible to point out when and where they occurred. In freight transportation one can explain the fact that railways can carry traffic at from five mills to one cent per ton per mile and remain solvent by reference to larger cars, more powerful locomotives, increased tonnage per train, and other very salient improvements. What similarly money-saving im- provements have been applied to the transportation of mail? It is submitted that thev have not been pointed out, and that they will not be pointed out. Thev do not exist. I )n the contrary, the whole history of the railway mail service since the intro- duction of postal and compartment ears shows pro- gressively greater demands upon the railways for facilities. The data now available, which it must be admitted are in many respects far from satisfactory, 134 THE POSTAL DEFICIT. indicate, not only that the point where increasing traffic ceases to " enable economies" was reached on most railways several decades ago, but that, under the current demands of the Post-office Department, the normal increase in traffic does not affect com- pensation sufficiently to keep the latter in perma- nent relation with the development of more costly methods. Professor Adams himself suggests an inci- dent of the law of increasing returns that may warn the thoughtful that the limits of economy may have been reached at a comparatively early date in the development of mail transportation by rail. He declares : " The above does not complete this fundamental law of trans- portation. Not only does increase in the volume of traffic tend to reduce relative cost, but the effect of increased traffic in re- ducing cost is relatively more intense for a road whose traffic is sparse than for a road whose traffic is dense." The foregoing is in accord with the true theory of the relation of the returns of industry to the capital and labor employed — that is, that all industries pass or may pass through successive states in which they conform, first, to the law of increasing returns; sec- ond, to the law of constant returns, and, third, to the law of decreasing returns. The fact of conformity to these laws is a technical one, and is dependent upon the degree of development attained in the particular industry considered. The regularity of the succes- sion can be interrupted by the development of new methods. For example, agriculture, which is usually regarded as the best example of an industry subject THE POSTAL DEFICIT. 136 to decreasing returns, may be brought into temporary conformity with the law of increasing returns by the adoption of intensive methods. Unless the methods of a particular industry are so modified as practically to substitute a new one, as in the substitution of the factory system for that of household industry in tex- tile manufactures, the states of conformity to any rule except that of diminishing returns, must be consid- ered as temporary. This statement requires thequal- ification, however, that some industries may supply the entire effective demand while remaining in the earlier states, and that the incentive to development beyond those states may thus he lacking. Such in- dustries may appear to be continuously subject to the law of increasing return-. The purpose of this digression into economic theory is to throw light upon the passage last quoted. It dearly contemplates just such a progress as lias been described, for if it be true that " the effect of increased traffic is relatively more intense for a road whose traffic is sparse than for a road whose traffic is dense," it follows that the decrease in intensity may proceed to the point where it is zero, and that beyond that point it would become negative — that is, increase of traffic might proceed until it required extra facilities to an extent that would increase the quotient of expense divided by volume. This may be regarded a- ex- tremely unlikely to result from any probable in- crease iu any kind of railway traffic, but long before it could happen the economy from increasing traffic would be negligible. This " fundamental law of 136 THE POSTAL DEFICIT. transportation " is, therefore, a temporary law, apply- ing only under certain conditions and subject to very definite limitations. There is evidence that it has very little effect upon passenger traffic at the present time, if the railways of the United States are consid- ered as a single system, though it still applies with considerable force in freight transportation. Profes- sor Adams has not shown that it still applies to mail transportation, and when the effect of constantly in- creasing requirements, of methods substantially rev- olutionized within three decades, is added, there is reasonable ground for refusing to believe that it does. It has been asserted that Professor Adams has made no effort to show that increasing mail traffic has been accompanied by economies. In order that there may be no misunderstanding it should be added that the fact that he has made occasional allu- sion to higher average car-loads of mail on certain routes than in the country at large has not been overlooked. Examination will show, however, that these allusions were invariably introduced in order to throw light upon the relative situation of different routes, and that there was no effort to show that these averages are higher now than in the past. Throughout the entire discussion Professor Adams depended wholly upon the assumption that there must have been economies, because ton-mileage had increased. That this portion of his argument is wholly dependent upon the existence of such a pre- sumption was acknowledged in the following words THK POSTAL DEFICIT. 137 which an- quoted from his revised testimony of April 7. 11)00: "... it may be added that the railway representatives do not appear adequately to appreciate the significance of the tremendous increase in mail traffic since 1870. Many of them assert, by implication at least, that we have come to a point in the development of mail traffic when it is impossible to further decrease cost as the result of increase in mail traffic. This im- plication is at least questionable; indeed, it must be conceded that if this be a correct statement of the case the entire argu- ment of my report is incorrect." REDUCTIONS RECOMMENDED BY PROFESSOR ADAM-. At the commencement of this examination of the report rendered by Professor Adams to the Joint Postal Commission allusion was made to certain internal evidences that he did not approach the investigation • in a spirit of complete open-mindedness, but had pre- judged the case, or at least his relation to it, so far as to believe that it was his dnty to find a means of re- ducing railway pay. It is not surprising that while in this attitude of mind, and after reaching the con- clusions concerning the application to railway mail pay of certain sound and generally recognized eco- nomic principles, conclusions that it has been neces- sary in this paper to criticise adversely, he should have found in the prosperity which has come to the railway industry in common with all other indus- trios of the country an additional justification for the reduction of mail pay. He presented this idea to the ( 'oiimiission as follows : " It ie absolutely certain, in view of the current earnings of railways and of the large increase in the sums contributed to 10 138 THE POSTAL DEFICIT. gross earnings in payment for passenger services and freight services, that a moderate decrease in the amount contributed by the Government for transporting mail would have no in- jurious effect upon the value of railway property the Government is justified in presenting its claim to a participa- tion in the benefits conferred upon the railways by a return of prosperity. . . . The only form the benefit can take is that of a reduction in the rate of pay." It is noticeable that the idea of recoupment from less important services is not present in the forego- ing extract. In fact it suggests, while of course it does not parallel, the easy nonchalance with which Mr. Acker turned aside an inquiry as to the effect of his proposed reduction of 25 -per cent of present mail pay. Mr. Acker said : " In answering that question I will simply remind you that the percentage which the postal revenues figure in the rail- > road revenue — I think it is about 3 per cent — is so small that a change of 25 per cent could hardly affect either the freight rates or passenger rates of any road that I have any knowledge of. The item would be too small to cut any figure." In spite of the preconceived idea that it was his duty to report in favor of a reduction that would, in effect, constitute a material " contribution " from the railways toward the elimination of the current postal deficit, Professor Adams has given evidence that his confidence in the propriety of his recommendations is not complete. While before the Joint Postal Com- mission, on April 7, 1900, some time after the presen- tation of his report, he admitted that there was an apparent inconsistenc} r in his conclusions, though he tried to show that it was not real. At that time he said to the Commission : THE POSTAL DEFICIT. 139 • Still, there ia an apparent inconsistency there in recom- mendinga reduction and in recommending a further investiga- tion, because my recommendation does include all routes. I am perfectly willing, if the Commission thinks clearly to adopt either dilemma, to bringing this report to a conclusion, to drop from my report the recommendation of reduction of pay and retain the recommendation for further investigation." The foregoing was entirely omitted from the re- vised testimony; but, as both the original and tin- revision have been published by the Government, it is still available,, and, with the discussion which ac- companied it. continues to throw light upon the rec- ommendations which it was finally decided to in- clude. The reductions recommended include a horizontal reduction of 5 per cent to be applied to all routes and certain specific reductions, upon a graduated scale, to be applied, in addition, to the routes already receiving the lower rates of compensation. Professor Adams' report contains exactly forty-three words in regard to the 5 per cent horizontal reduction, which, if adopted, would have the effect of reducing the present compensation by about one and three- quarters millions of dollars. < >nly twenty of these words are in the body of the report and are as fol- lows : 11 First. It is proposed that the present rate of compensation on all routes shall be reduced by 5 per cent." There was no further allusion to the proposed horizontal reduction in the report as originally sub- mitted, but after the examinatioD of April 7. 1900, in which this recommendation was discussed in such 140 THE POSTAL DEFICIT. a way as to bring out its absolute independence of the processes of reasoning concerning mail pay embodied in the report, a footnote of twenty-three words was added, which reads as follows : " This suggestion is justified by a consideration of the econo- mies in railway transportation not dependent on increase in the density of mail traffic." It will be observed that if these forty-three words shall be accepted at their face value by the Joint Postal Commission and by Congress, they will cost the railways something more than forty thousand dollars apiece. That is rather higher than the usual rate of payment for contributions to statistical and economic literature. That so important a proposition should have been so lightly treated is scarcely explicable, and in order that there may be no doubt concerning the matter or suspicion of oversight, the following frank admis- sion from Professor Adams' revision of his testimony of April 7, 1900, is quoted : " I must confess that the report is incomplete at this point. It contains no explanation of the reasons for advocating a hori- zontal reduction of 5 per cent in addition to the differential reduction on the dense routes." On April 7, 1900, Professor Adams declared, in ex- planation of the fact that the recommendation of a 5 per cent reduction had been applied to all routes, while he had previously limited his conclusions in regard to overpayment to routes carrying 30.000 pounds and upward per day, that — " The justification of it is that you get such a very large per- centage of your mail over 30,000 pounds." THE POSTAL DEFICIT. 141 l The foregoing disappeared during the revision of this testimony and the following appeared in its stead : " The justification <>f the horizontal reduction — th:it is to say, a reduction which affects all routes under all conditions and in all parts of the country — is found in the fact that the railways of the country during the last quarter of a century have heen benefited by improved methods of manufacture and changes in the price of equipment and supplies quite independently of the economies introduced as the result of increased traffic. In order that the Government might secure advantage from this form of economy I recommended a horizontal reduction upon all routes." If this "justification' 1 had not been formulated after the recommendation to which it was applied, which is palpably the case, as the report bears date as of February 1, 1900, while the explanation finally given was clearly not in the mind of its author as late as April 7, 1900, the fact that it is in radical contradiction to the balance of his argument and proposals could not have escaped his attention. He has expressly stated that — " The law of 1873 is drawn in harmony with the fundamental law of transportation, namely, that volume of traffic renders economy possible. . . . This consideration is recognized . . . hy specific reductions in the rate of payment." . . . and that there is a — " constant reduction no matter how large the quantity of mail carried." He has also specifically shown that under the law the average mail payment per ton per mile has been reduced from 20.420 cents in 1898 to 12.507 cents in 1898. It is submitted that this reduction secures to 142 THE POSTAL DEFICIT. the Government all of its due proportion of the bene- fits derived by the railways from " improved methods of manufacture and changes in the price of equip- ment and supplies." An additional quotation from the examination of April 7, 1900, which was also omitted in the revision, will nearly complete the evidence in regard to the easy independence of logical foundation which char- acterized the introduction of this recommendation. The following is from page 418 of Part II of the published testimony : ''Professor Adams: I have not investigated the effect of a 5 per cent reduction upon the small routes — those that receive in excess of 60 cents per ton per mile. "Mr. Loud: And, as a matter of fact, it might all be eaten up by mail messenger service, might it not ? " Professor Adams : Possibly ; yes, sir. I have not investi- gated that." The specific reductions proposed by Professor Adams are contained in the following extract from his report: " Second. It is proposed that all routes receiving in excess of 20 cents per ton per mile shall be subjected to a further reduc- tion at a uniformly progressing rate, the rate of progression being indicated in the following table : THE TOSTAL DEFICIT. 1 13 8< HEME FOR PB06RBS8IVB RKIH'CTION OF RAILWAY MAT I, FAY. Classification of roads on the basis of rates received under the present laws by which railway com- pensation is determined (cents per ton per mile). 16.50 to 20... 14 to 16. 50... 12.30 to 14 . . 11.25 to 12.30 10 to 11. 25... 9.20 to 10.. . 8.80 to 9.20.. 8.40 to 8.80.. 8.10 to 8.40.. 7.67 to 8.10.. 7.34 to 7.67.. 7 to 7. 34 Percentage of reduc- tion a p - plying to each class of roads in ad d i- tion to a unif o r m reduction of 5 per cent. Per cent. 1 o 3 4 5 H 7 8 9 10 11 12 The foregoing was substituted for a differential - ile of reduction which was proposed to the Com- mission by Professor Adams on November 23, 1899. The earlier proposal included routes receiving up to sixty cents per ton per mile, while, as will be seen. the later specific reductions apply to routes receiving not more than twenty cents per ton per mile. As the earlier proposal involved a reduction of about ten per cent, and the later about half as much, the pos- sibility that Professor Axlams' confidence in the 144 THE POSTAL DEFICIT. applicability of the " principle that density of traffic enables economies " to railway mail service decreased 50 per cent between the end of November and the beginning of February is naturally suggested. These specific reductions are wholly dependent upon the principle just referred to, and as its limita- tions have already been discussed, and the lack of any evidence that the economies suggested have ac- tually taken place has already been made apparent, little further comment is required. Possibly Profes- sor Adams' own appreciation of the fact that this recommendation is absolutely dependent upon the existence of economies with regard to which he intro- duced no evidence can yet be made clearer. In his preliminary statement at New York he said : " My point is this: Unless the Post-office Department can avail itself of a dense traffic of 150 tons per mile per dav, to introduce economies in the dispatch of mail beyond what is indicated by an average load of 2 tons of mail per car, I do not see how Congress can justly reduce the rate." Four and one-half months later, after submitting his report, he said : • " You must understand that this report is written from the point of view of the testimony that has been given here, and conscious of the fact that the argument against reduction would be rested upon the fact that the average load in a postal car is only 2 tons— if it is only 2 tons— and if you cannot make it more than 2 tons, then the overpay, if there is overpay, lies on those routes where, as a matter of fact, they do have an excess of 2 tons ; but I was disinclined to accept what the Post-office Department seems to accept, and many of the witnesses assert that it is impossible to load cars beyond an average of 2 tons. Now, I may be wrong there. . ." . Two is what the evi- dence asserts. Now, I may be wrong there; but my recom- mendation for reduction is that in case we do have 3£ or 4 or 5, if those routes exist, that they are getting too high pay now, and therefore you could now, under existing law, at present reduce the rate." THE POSTAL DEFICIT. 145 At the later hearing the following questions and answers were given: "Mr. Loud: Still, subsequent investigation might entirely change your conclusions— that is, such is possible, is it not? "Professor Vdams: Yes, sir: I admit that. I admit that if it be proved that it is not possible to introduce any greater economies in the Railway Mail Service than now exist, my conclusions are false. •• Mr. Catchings: All of them ? "Professor Adams: My chief conclusion as. to reduction of pay." FURTHER INVESTIGATION RECOMMENDED BY PRO- FESSOR ADAMS. Study of tin- recommendations in regard to railway mail compensation has shown that they were based upon assumptions which cannot be admitted, on principles erroneously applied, and upon allegations of fact with regard to which their author admits that there is- no proof. Though introducing these recommendations for reductions, it has been shown that Professor Adams at one time offered to with- draw them, ami it will now appear that he accom- panied them by recommendations for further inves- tigation that completely nullify any force they might otherwise have retained. Professor Adams suggested live heads of inquiry for further investigation, and the very first of these throws such doubt upon the proposal for reductions upon the denser route- that it would have to be held in abeyance pending investigation were there no other reason for refusing to -accept it. This sugges- tion hegins by asking for: 146 THE POSTAL DEFICIT. '■ Such a classification and compilation relative to trains carry- ing mail that the persistent error which lurks in the phrases 1 average load ' and ' average number of cars in train ' can be set aside. and it ends with this significant fundamental admis- sion : "It must be admitted that the proposed reduction of com- pensation submitted by this report rests, in part, upon an as- sumed ' average load ' respecting which there is no absolute certainty." Two other suggestions indicate that Professor Adams did not entirely overlook the fact that before insisting upon reductions in railway mail pay upon the ground of " public utility " the Post-office Depart- ment must be purged of extravagant methods. These recommendations will also be quoted in full : "Such a description of postal-train service in selected dis- tricts as to warrant a conclusion respecting extravagance or economy of the railway-mail service. " Such an investigation into the methods of appointment, ten- ure of office, and rate of payment of postmasters and post-office employes as will disclose the fact of extravagance outside of the Railway Mail Service if such extravagance exist." All of the data indicated by these suggestions are important, and their collection would materially aid in determining how the postal service can be im- proved. They might also show whether the deficit can be eliminated without resorting to means that would either operate unjustly toward a portion of the public or materially impair the public utility of the services rendered by the Department. THE POSTAL DEFICIT. 147 GENERAL REVIEW OF PROFESSOB A DA Ms' REPORT. Summarizing what lias already been observed con- cerning Professor Adams' report and testimony as expert to the Joint Postal Commission, it must be said that it has been found to be vitiated by the bias with which he undertook and pursued the work. In spite, therefore, of his unquestionably great ability, his long experience as a statistician, and his high reputation as an economist, he has not very mate- rially advanced the solution of the present problem. The data which he collected have sufficed to estab- lish, with much greater definiteness than was for- merly the case, some of the paramount conditions of the E ail way Mail Service, but even in this respect his work has not risen to the height of its possibilities. The comparisons in which he attempted to throw light upon the relation of mail pay to freight rates and express pay were among incomparable data and so misleading as to be worse than valueless. The other attempt to investigate, inductively, the reason- ableness of present mail rates will find its highest utility as an illustration of the baneful and deceptive possibilities of the mathematical average. Passing to the general principles announced, it has been shown that, although usually sound in his broader generalizations, the attempts to apply them to the present problem were often fundamentally erroneous. The principle that density of traffic en- ables economies, which the present writer has pre- 148 THE POSTAL DEFICIT. ferred to designate' in accordance with ordinary economic terminology as the law of increasing re- turns, was overstated at the outset, and yet if the statement should be fully accepted no demonstration of its applicability to the present situation would ap- pear. In conclusion, it was found that one recommenda- tion calling for a deduction from railway earnings of about $1,750,000 was made without the formality of presenting any reasons, and that the only "justifica- tion " ever suggested by its author was an after- thought, brought forward in consequence of adverse criticism, more than two months after the report was rendered. The other recommendation favoring ad- ditional differential reductions was in accordance with the supposed law of density, the applicability of which had not been shown. According to the frank admission of its author, it was based upon an assumption, with regard to which there is no abso- lute certainty, and can be none, until the facts have received much further study. Finally, the report concluded with a series of suggestions which clearly indicate that the facts which are required for a satis- factory study of railway mail pay were not, in Pro- fessor Adams' opinion, available when he made his report. THE POSTAL DEFICIT. SUMMARY 149 The results of the investigation conducted by the Joint Postal Commission afford a great deal of addi- tional information concerning the conditions of the Railway Mail Service. It has been the purpose of this paper to arrange some of this information in such a way as to indicate as nearly as possible the nature of the problems presented. It will be obvious to those who have followed the discussion herein that the data necessary for a complete description of this service are not yet available, and that much more in the way of investigation can sjtill be under- taken with profit. It will appear, however, if it has not already done so, that so far as the data now- available can point to any conclusion they clearly indicate that the present rates of railway mail pay are not excessive. This conclusion is believed to apply with especial force to those routes on which the requirements in regard to compartment and postal car service are greatest. GENERAL CONCLUSIONS CONCERNING RAILWAY MAIL PAY. This work lias already considered the services rendered by railways in mail transportation, and the tact that constantly increasing demands for space and facilities are made by the Department has been established by the most ample and indisputable evidence. It has also been shown that the rates 150 THE POSTAL DEFICIT. charged for these services have steadily declined and that the extent of the decrease within the last three decades has been much greater than in passen- ger rates and but slightly less than in freight rates. Where the comparisons could be applied to particu- lar routes the decline in mail rates has been greatest of all. In the discussion of Professor Adams' report it appeared that if the comparison was made between the data for the respective services that are most nearly comparable the railway receives almost as much per ton per mile for -carrying traffic for the express companies as for the serv- ices rendered in carrying mail. The latter com- parison was 'hardly satisfactory, for while it was possible to determine just what the Post-office De- partment pays, the special services rendered to the railways by the express companies, which plainly constitute a part of the payment accorded, had to be estimated for, and the allowance was necessarily a minimum one. So far as the comparison between express and mail pay has any value, it can, therefore, be postulated, with perfect safety, that the difference is little, if any, and of no especial significance. It is difficult, however, to attach any verv material im- portance to this comparison. The difference between the services rendered to the express company and those supplied to the Department is fundamental. Were the actual rates paid by express companies, in- cluding the value of the services which they perform for the railway, known, it might be possible to add arbitrary amounts for each element of superiority in THK POSTAL DEFICIT. L51 the Railway Mail Service, and thus arrive at an amount which could be supported with very plaus- ible arguments as constituting reasonable compensa- tion for mail transportation. This amount would inevitably It much higher than the present payment. and while it might happen to approximate a reason- able return for the services required, the method is an unsound one. The limitations of the principle that payments shall he adjusted to cost which prevent its applica- tion to specific railway services, whether rendered in carrying mail or other traffic, have already been fully explained. The aggregate cost of all of the trans- portation services rendered by railways can be ascer- tained, and the public is bound, not only in order that justice may he served, but in the interest of travelers and shippers, to see that this sum, together with a reasonable profit, is returned in payment for those services. The railways have no interest in the relative adjustment as between different services of the payments which make up this aggregate return except that which they share with the general public. This interest i< fully expressed in the state- ment that the adjustment must be such as to foster equal and symmetrical industrial development and thus t<> promote the general welfare. If the foregoing is true the primary observation in the consideration of any specific railway charge is that it cannot properly be declared to be either jusi or unjust, unless it is studied in connection with the oeral schedule of charges, and unless the entire 152 THE POSTAL DEFICIT. revenue is examined as to its relation to the aggre- gate expenses for operation and the amount of capital invested. When the investigation of the reason- ableness of railway mail pay is approached in this manner it will appear at the outset that the current adjustment of railway income to railway expenses and investments is reasonable. This could probably be shown inductively, but the demand upon statis- tical science would be a severe one if it were to be attempted by its method, and other inductive proof must, in this case, be fragmentary, and thus open to misinterpretation. The large proportion of railway operating expenses paid as wages, the urgent neces- sity of maintaining road-bed and equipment in a satisfactory physical condition, the large proportion of railway securities which receives no return, and the very low average rate paid on those securities which do receive dividends or interest, all indicate that the present total revenue is not too high. If the question is considered deductively, however, the con- clusion is unmistakable and the process of reasoning by which it is reached is simple and satisfactory. The large proportion of railway traffic is made up of com- modities for which there are numerous sources of sup- ply. The railways have to make rates which will en- able these products to be sold in competitive markets, and this brings each railway into separate alliances with the shippers of each locality which it serves. These alliances compete sharply among themselves, and as there is no known cost of production of spe- cific railway services, while any traffic that pays more THE POSTAL DEFICIT. 153 than the direct cost incurred in its behalf is really profitable, the railway, as a producer, must accepi whatever sacrifice in revenue is necessary to protect the volume of its traffic. If it did not do so the local producers, whose commodities it carries, would he forced out of business. In this manner the constant adjustment and readjustment of railway revenue to a basis that is reasonable to the public is auto- matically enforced by commercial forces that are more powerful than the efforts of railway officers and stronger than legislative action.* As railway revenue is not in the aggregate excess- ive, the theory of public utility, which should prop- erly determine the relative adjustment of charges for different services, must find some rate that is too low, or show that the rate in which a reduction is pro- posed does not produce as much net revenue as might be secured with a lower rate, in order to declare that another is too high. A reduction in the revenue se- cured from one kind of service must be balanced by an increase in that from another, or the railway busi- ness becomes unreasonably unprofitable. This would first act injuriously upon railway employes, then upon railway patrons, by impairing the quality of the services rendered and endangering life and prop- erty in transit and limiting facilities ; then upon the owners of railway capital, and finally upon the gen- eral public by destroying business stability. 11 154 THE POSTAL DEFICIT. This simple question must then be asked : What rates should be raised to balance the loss of revenue that would obviously result if mail rates were re- duced? It will not do to answer loosely that the re- duction may be made up by higher rates on traffic that is of less social importance than . mail traffic. The true application of the principle of public utility involves the performance of all transportation that, is socially desirable without sacrificing any because of its small relative importance. Rates have been ad- justed to this basis, with more or less accuracy, ever since traffic began to be classified, for the adjustment is not dependent upon the conscious acceptance of the principle. Nor does the principle of public utility require the lowest rates upon traffic of the highest social importance. It merely requires rates that will insure the transportation, and if such traffic can bear higher rates than those imposed on business of lower social importance which is charged those necessary to secure its movement, it would be unwise and socially detrimental not to enforce them. There is no evidence that mail transportation or postal de- velopment is hampered by the present scale of rates; there is no adequate evidence that any class of traffic moves too abundantly on account of too low rates. The conclusion from this analysis is that the strict application of the principle of public utility to the present charges for carrying mail indicates very plainly that the railways are not overpaid. THE POSTAL DEFICIT. 155 GENERAL CONCLUSK >NS. At the outset of this work it was suggested thai many different means for eliminating the postal deficit might befound. As it is being completed the daily papers contain evidence that the deficit is not unlikely entirely to disappear as the result of con- tinued prosperity and the natural increase of postal business under current methods and at current rat- - This evidence is found in the synopsis of the forth- coming annual report of the Postmaster General, which appeared in the morning papers of Decem- ber 10, 1900. This shows that the deficit for the fiscal year which ended with June 30, U was but 15,385,688, or less than half that of 1897 and more than three and one-half million dollars less than in 1898. The Postmaster General has estimated the deficit of L901 as |4,634,307. The rapidly decreasing difference between postal receipts and expenditures, together with the proba- bility that a small deficit is the only practicable guarantee against a surplus, which would constitute an actual tax upon those who use the mails and might lead to extravagant methods, would adequately excuse the student from considering methods of eliminating the present deficit. If the discussion could serve no other purpose, there would in fact be little reason for its introduction. Such, however, is not the cas It is quite possible that it may con- tain or lead to suggestions which may materially im- 156 THE POSTAL DEFICIT. prove the postal service by pointing the way to important economies. Only the heads of such a discussion will be intro- duced. The first inquiry in this direction would probably be addressed to the organization of the postal department. Is that organization as efficient as possible and as economical as justice to its many loyal and able employes will permit ? This ques- tion might have been raised earlier with perfect propriety, for the just application of the principle of public utility to the question of railway compensa- tion would require economy in the postal service equal to that in the railway service. If postmasters and other postal employes receive higher pay or serve less efficiently than the corresponding em- ployes in the railway service, it would be necessary to require the substitution of a condition of substan- tial equality before reducing railway mail pay. To neglect this would be unjust to railway employes. The antagonism of the Post-office Department to the present situation in regard to second-class mail matter is universally familiar. The officers of the Department are apparently firm in the opinion that the elimination of what they regard as the abuses of the present system in connection with this class of mail would create a balance between postal reve- nues and expenditures. The present writer is not certain that this would occur but the suggestion merits investigation. On the other hand, it is not impossible that a different adjustment of rates might THE POSTAL DEFICIT. 157 be effected without interfering with any legitimate mail business. Without expressing any opinion as to the probable result of such an investigation, it may be suggested that the imposition of zone rates on other than first-class matter might not in any way restrict the present volume of mail traffic. This might require the reclassification of the lower forms of mail, and it would very possibly be found desir- able to accept mail shipments of greater weight than are now taken. The principle which justifies rates regardless of distance does not apply with equal force to all kinds of mail matter, and there is cer- tainly some reason for contending that to some of them it does not apply at all. The possibility of radical reorganization of American postal practices in regard to the less remunerative forms of mail surely deserves more attention than it has appar- ently received. In examining it, however, it will not do to overlook the powerful opposition that would be aroused should material increases in charges be urged, unless they could be accompanied by changes that would increase the value of the postal service to those who avail themselves most largely of the facilities for transporting periodicals, books, and merchandise offered by the Government. The concluding suggestion relates t<> the possibility of securing greater revenue by preventing the com- petition of private concerns with the postal depart- ment in the transportation of the lower forms of mail, just as such competition has been excluded in 158 THE POSTAL DEFICIT. the case of first-class mail. The difficulty of effect- ing such a change is a strong reason against regard- ing it, at the present time, as a practicable remedy, but it is possible that postal development may yet make it necessary. 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. This book is due on the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. H IOP #& % \ \9&i s RECFfVgp FEB 17 '67 -8 AM LOAN DEPT. w LD 21A-60m-7,'66 (G4427sl0)476B General Library University of California Berkeley * A J - X\ / Ki?490 V-