"In the first place, we have a persistent denial of depreciation as an effective cause, as an existing thing, and a consequent denial of the duty of a transportation company to take care of it. It seems to us here, talking from the platform to the floor, as if such a denial could not conceivably be made by any intelligent man, but you will find whole volume after volume of arguments made within the past two years before the Valuation Division of the Interstate Commerce Commission in support of that perfectly preposterous contention, preposterous from the standpoint of any ordinary business relations of life. The depreciation goes on, of course, in everything, in every physical thing, — in railroad property and street railway property as in all other forms of property. No man could run a cotton mill and remain solvent unless he took care from earnings of the depreciation in his buildings, in his machinery, from all causes, - physical deterioration, advancement of the art and everything else that is covered by the term depreciation. And yet these corporations are spending thousands of dollars- I don't know but hundreds of thousands of dollars, and I think millions, and I think you will agree with me when I tell you of a few instances later on in trying to get the Interstate Commerce Commission to validate that preposterous theory of transportation management, and the consequence is, the consequence to the companies when they appear at the bar of public opinion and demand an increase in rates, if it is not to be used to take care of depreciation, as it ought to be, it is to be used, of course, for the payment of dividends, unearned dividends as before, and I say very frankly that the transportation companies cannot expect a favorable hearing at the bar of public opinion until they drop this contention, which is one of the most foolish, and by no means the only foolish, ones that they are now setting up. Reduction of Capital "Another thing that they do not do,— which I admit is pretty hard to ask them to do, and yet a thing that they ought to contemplate, because any private corporation would do it in an instant,- is, when they find their capital impaired, to reduce it. That is to be done in the reorganization, I understand, of one of these railroad companies in this vicinity to a limited extent. But how many of the other transportation companies in this vicinity, or in the country, who now find themselves in financial difficulties, are willing to do what every cotton mill in the land would do, — if it finds that its assets have been impaired, — reduce the capital, because the situation means that the past stockholders have been living at the expense of the present and the future, and that the present and future stockholders have not got the amount of property which is represented by the outstanding capitalization, but so much less. "It is a difficult thing to ask. It is not like the other proposition. It is perfectly reasonable and necessary to ask the transportation companies to drop their contention that depreciation can be ignored. It is not so easy to ask them to scale their capital down, and yet I submit it is a reasonable thing to do in some of the cases I mention. Excessive Interest "The next thing is this: The demand is made in most every argument that you can find every printed argument that you can pick up in this state or at the offices of the Interstate Commerce Commission in Washington— that a reasonable return should be allowed, say, of 6 per cent on the stock of the corporation, regardless of depreciation and the impairment of capital. It is not necessary for me to amplify that fallacy, because it is included in the others that I have already referred to, but it shows why the companies wish to ignore depreciation. They want something which will pay them 6 to 7 per cent upon their stock after paying operating expenses and fixed charges, regardless of the question of depreciation and regardless of the fact that their capital may have been seriously impaired. In the alternative is another contention which is more consistently pressed yet. Both this and the one I have just mentioned are substantially the same. The one I passed from relates to stocks, and the other one I am coming to relates to property. This is a demand which relates to income of 6 per cent or 7 per cent, that is, above operating expenses and fixed charges, not on the outstanding stock, but upon the value of the property, measured by standards which are negatived by every rule of law and every rule of common sense. Then we have the demand that their mistakes and necessities should be made up by taxation. How far, gentlemen, are public service companies going to get with an argument like that? Because there has been mismanagement, because there has been misfortune, or for any cause that the company happens to be unprofitable for the time being, either from misfortune or from its own mismanagement, the remedy, forsooth, is for the people to tax themselves to increase the already overwhelming burden of public taxation, in order that the difference between 4 or 6 per cent or nothing and 6 per cent should be made up by the public in the form of taxes. "It seems to me that that proposition needs only to be stated to be negatived by common sense, and it is quite certain that it will never pass the public bar. Yet, how much of the energy of these transportation companies is being wasted at the present time, particularly in this state, to an exploitation of that particular fallacy? And how much money is it costing the stockholders, in the first instance, and the consumers in the end? It seems to me that these demands and methods that I have referred to have only to be stated to be condemned. They bear their condemnation on the face. But the more important fact that I desire to call to your attention is that they irritate the public. They are not only confessions of intellectual incompetency, but they are an irritating form of argument, and one which is calculated to prejudice their case, however good it may be, in advance of its statement, and it seems to me that all these methods and all these arguments must be abandoned before relief is to be had, before that relief which, presumptively and apparently, the companies, upon a fair presentation of their case, are properly entitled to. Principles of Valuation First, "I want in particular to refer to the tremendous effort that is now being made by the railroad corporations of this country, by a concert of engineers and lawyers, before the Interstate Commerce Commission, at enormous cost, ultimately borne by the public, to induce that commission, or the Valuation Division of it, to adopt the rules of valuation for railroad property which are negatived by every rule of common sense and law. I think most of you must, of course, be familiar with the fact that the railroads are retaining a tremendous staff of engineers and lawyers at the present time, whose efforts are divided into two parts. they are endeavoring to collate and tabulate exact data for management, respecting their property, and for value, to the Interstate Commerce Commission,- and that is a perfectly proper thing to do, and a necessary thing to do under the act of Congress; but the rest of their activities are devoted to securing, if they can, the abrogation of the rules of valuation and of law which are to be found in the decisions of the Interstate Commerce Commission and the decisions of the public service commissions in this country, and in the ordinary report of the courts of law. "In one of the last condemnation cases I had, which was a railroad case, I went to New York to see what I could find in the way of expert engineers to testify for the company, and I found that they were all busy, that their time was all occupied in preparing this data for the Interstate Commerce Commission Valuation Division, and I found also that they were all committed to such preposterous theories of valuation that I did not dare to retain them for my client, which was a corporation trying to get as large a value for its property as it could. That is an illustration of the amount of money being raised and wasted by railroad companies in this country at the present time in this particular field of endeavor." MR. TAFT ON THE WAR The Club very appropriately decided to make Patriots' Day the occasion for another tribute of respect and affection for a former President of the nation, Hon. Wm. H. Taft, who happened to be in the vicinity of Boston lecturing, and willingly agreed to attend a luncheon and speak his mind on issues of the hour. The toastmaster of the day was Hon. Wm. Cameron Forbes, former governor-general of the Philippines, and one of Mr. Taft's most loyal friends and subordinate officials when the latter was in charge in the Asiatic archipelago. Mayor Curley, who was given the pleasant duty of welcoming the guest of the day to the Club, grouped Mr. Taft with President Wilson and Gen. Leonard Wood as one of the greatest of Americans seen during the last decade of national history. Mr. Taft, when he came to speak, said: - I am always glad to be a guest of the City Club. In season and out of season, in office and out of office, in fortune and out of fortune, I have always had a welcome under this roof. [Applause.] And when you have had as varied an experience with all those things as I have, that means a good deal. [Laughter.] 66 "When the war began, we were all dazed. We were astonished, but we hugged the flattering unction to ourselves that we were not to be in it, that with the isolation and remoteness which Washington urged should be preserved as a great boon, we would be kept out of the way. Then, as Germany went on violating international law, there arose a small party at first, in this country, that grew larger, that acquired such an intense interest in the cause of the Allies that even then they were willing, some of them, for us to engage in war. The great majority of the country, however, continued to felicitate itself that we were not to be in this dreadful struggle which was involving so much sacrifice of life, so much suffering, so much agony of spirit, and so much destruction of the capital of the world. But, as Germany went on, the nucleus or group to which I first referred increased. Those who were responsible for the government, however, felt this, I have no doubt, that while we might have strong sympathy with a cause represented by England and France, while we might have thought that ultimately we could reason out that they were fighting our cause, and that the results of great German victory might be injurious to us, nevertheless, those responsible for our government and the welfare of our people have no right to constitute themselves and this nation a knight-errant, going about the world fighting the cause of constitutional freedom and government as against autocracy; that the duty of the country for self-preservation, the duty to itself and its people, prevented it. "And so President Wilson continued his policy of neutrality, and strict neutrality. He was severely criticized at times for asserting the principle of neutrality which he did. But as we went on, the course of a neutral became difficult. The modern methods of carrying on war, the desperate willingness which Germany showed to trample on every previous rule, put us in a situation that grew to be most embarrassing, and she finally, without warning, sank a commercial vessel of Great Britain, the Lusitania, and sent to their death hundreds of innocent passengers, passengers who had a right to be where they were, passengers that were unoffending to any international law, passengers that were entitled to their lives from Germany if Germany saw fit to take over and possess herself of the Lusitania. And among those passengers whom Germany sent to death were one hundred and fifty Americans, men, women, and children and infants in arms. "President Wilson protested, and the correpondence over the protest continued for a year, and during that year the number of Americans who, contrary to international law, have been sent to their death, was increased to two hundred. And at the end of that time we threatened to sever relations unless there was a change in policy, and the change in policy was announced for the present, until further notice. And then, just before the first of February, we received notice that the pledge was withdrawn and ruthless warfare was to begin again, and that in this zone which was described, nine hundred miles long and one hundred to two hundred miles wide, off France and England, she gave us to know that she would sink every vessel without warning, commercial or otherwise, without any provision for the safety of those who were passengers. "What was there for us to do? We first severed relations. Then Germany renounced her determination, and in a single vessel sank some twenty-five sailors, American sailors on American ships, and under the American flag, coming in ballast to the United States. War Inevitable "What was there for a self-respecting nation to do? What could we do? They were entitled to our protection. Our Constitution was framed largely for the purpose of protecting the rights of the citizens of the United States, and now, with the prospect of their being sent to their death, we were to remain idle, we were to be put in the position of a man confined to his house by a threat to somebody else on the street that if he came out on to the street he would be shot; that he should either get out of the back door or avoid that street in future. Were we to be put in that attitude? Were we to recognize the validity of the argument that if we did go out and were shot, we were to blame for it because we were there to stop a bullet which we ought to know was coming? [Applause.] And so, there is no recourse; we have not been permitted any alternative. We have been forced by Germany into a declaration of war. Defiantly, without reason, without law, after having sent by lawless homicide two hundred and fifty of our citizens to death. "That is the cause of our war. It was not that we were going about the earth establishing freedom for other peoples. That was the cause, and the justifiable cause, that put us where we had to fight. And when we get into that fight, we may be able to say that we were not like the Irishman who inquired whether this was a private fight or whether anybody might join. [Laughter.] We were in it. It was against our will, but we were in it, and we found a good many others who had borne the heat and burden of the day in it. There were some people who must be able to see through a keyhole with both eyes at the same time, who suggested that we ought to carry on a war all our own, just a little war. Well, of course, that is absurd. In a fight we must fight and help those who are fighting the same cause and fighting the same enemy, and so we are going about it, and we have contributed $3,000,000,000 to help along in the fight. But that, of course, does not measure the assistance that we are bound to render, and being in the fight, without minimizing the occasion for our entering it, we may properly rejoice that we find that, being in the fight, the cause is greatly enlarged beyond our individual rights and our individual complaints and becomes a world-cause in behalf of freedom and in behalf of a condition that shall give us permanent peace. [Tremendous applause and cheers.] Now, whom the gods wish to destroy they first make mad. This greatest war in history has been going on for two years and a half, until the traces of exhaustion are beginning to show themselves in every country. The strain upon the food supply, the strain upon the money supply, the strain upon the supply of ammunition and war equipments, is manifesting itself. And then, at that time, when the war in many respects is shown to be a test |