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Mr. STANTON. They would have to compete with Baltimore through private carriers.

Mr. SULLIVAN. I believe that is all.

Mr. BECKWORTH. Thank you, Mr. Stanton.

Mr. STANTON. I would like to have my statement incorporated in the record.

Mr. BECKWORTH. Without objection, that will be done. (The statement is as follows:)

STATEMENT OF JOSEPH L. STANTON, DIRECTOR, EXPORT AND IMPORT BUREAU, BALTIMORE ASSOCIATION OF COMMERCE, REPRESENTING THE INTERESTS OF THE PORT OF BALTIMORE IN INLAND WATERWAYS LEGISLATION

Baltimore, second tonnage port of the United States, has a vital interest in the further capitalization of the Federal Barge Lines operating on the Mississippi River.

The basic objection of the port of Baltimore to the present pending legislation is based on our traditional position of opposition to publicly subsidized operations competing in the same field with private operations. A second and equally important reason for opposing the further capitalization of the Federal Barge Lines is based on the fact that this water carrier, operating at a loss, is in direct competition with the rail routes serving the port of Baltimore, the only means of inland transportation which Baltimore enjoys.

A great portion of the millions of tons of freight passing through the port of Baltimore either originates or is destined to the inland areas of the Midwest. While we naturally accept and do our best to meet the competition for those commodities destined for export that originate in the Midwest, we realize that we can successfully compete only as long as the conditions facing our carriers are the same as the conditions facing the carriers serving the Gulf ports. In other words, competition between Gulf ports and the Atlantic ports wherein a federally subsidized water carrier serves the Gulf and does not serve the eastern ports obviously presents a situation that is extremely difficult to meet.

Such a competitive problem affecting the commerce of the port of Baltimore not only jeopardizes the welfare of the 40,000 persons whose livelihood is derived from port operations, but the $200,000,000 which the port operations annually contribute to the over-all economy of the city of Baltimore.

The trunk-line railroads connecting the agricultural and industrial Midwest with Baltimore and the other Atlantic ports not only are faced with the necessity of carrying on efficient paying operations, but are further handicapped by the necessity of an annual outlay of many millions of dollars in local, State, and Federal taxes. It is rather ironical that a portion of the taxes paid by these railroads serving the Atlantic ports goes toward the operating expense and deficits incurred by the rival Federal Barge Lines which is in direct competition with them for the carriage of export and import commodities. In other words, Baltimore's railroads are helping to pay for their own competitive destruction. The sum of $18,000,000 which is being requested in this legislation is comparatively small in terms of Federal spending. However, with the additional emphasis that the Congress is now placing on economy at the Federal level, the elimination of this proposed appropriation would result in a substantial cut in Federal spending.

It is not the purpose of this witness to attempt to go into a long statistical analysis of the operations of the Federal Barge Lines since its inauguration in 1924 to prove that this experiment in inland-waterways transportation has been expensive to the taxpayers and is subject to elimination without damaging effects on the transportation system of our country.

It is our belief that the very careful scrutiny given to the entire Federal Barge Lines' operations by the Commission on Organization of the Executive Branch of the Government (the Hoover Commission) has amply proven the case against the Federal Barge Lines. The adoption of the Hoover Commission recommendation that the Federal Barge Lines be discontinued as a public operation and turned over to private business is unquestionably sound both economically and from the transportation viewpoint.

The committee is urged to follow these recommendations and thereby eliminate a drain on the taxpayers of the country, restore the competitive situation for the carriage of inland freight to our seaports, and remove the Federal Government from this field of private business.

We have noticed that the proponents of additional capitalization for the Federal Barge Lines are placing great emphasis on the use and potential use by the small shipper for less than bargeload lots. In connection with this, we should like the committee to consider the fact that the carriage of commodities by barge is economically unsuited to small shipments. Of all tonnage handled on United States waterways in 1934, 8% percent constituted package freight of less than bargeload lots. By 1946 this portion of package freight had decreased to 4% percent. It has been repeatedly demonstrated that carloading companies (typical taxpaying American business enterprises) can handle package freight more economically than a federally subsidized carrier operating in a field adapted to bulk carriage. Privately operated barge lines serving roughly the same areas as the Federal Lines and faced with the reality of carrying on an economical operation, are convinced that package freight is not suited to barge haul and therefore have concentrated on the movement of bulk commodities.

This committee is well aware of the highly competitive situation for export and import freight now existing between the Gulf ports and the Atlantic seaboard ports. This competitive situation is such that any factor that allows a freight saving to the Gulf and does not provide a similar freight reduction to the Atlantic ports necessarily has a strong influence on the movement of export and import freight.

Baltimore is especially concerned about this situation which permits a freight rate subsidized by public money to be established at a lower level than can be offered by the railroads to the port of Baltimore. The interest of Baltimore is probably greater than that of the other Atlantic seaports for the very sound reason that Baltimore traditionally is known as a bulk commodity port. Bulk commodities are a natural for movement via barge. How much of the freight that normally would have moved through Baltimore has been diverted to Gulf ports through the lure of rates established by a barge carrier operating at a deficit is impossible to establish, but there can be little question that it is substantial. At the present time the greater emphasis that all shippers are placing on freight charges would indicate that an even greater portion of tonnage that naturally would move through Baltimore will go via the Federal Barge Lines to the Gulf ports.

Here we should like to emphasize and reiterate that we do not object to competition between our rail carriers and privately operated barge lines. In this case where both carriers are faced with the same obligations and operated basically in the same manner, we believe that this is a natural situation and presents a competitive set-up that must be accepted and met.

The port of Baltimore is one of the few major sea outlets of the country that remains under private operation. We pride ourselves on the fact that the port of Baltimore is almost entirely a private business operation with a minimum of political control and assistance. It is natural that our port, a private business operation, would suffer greatly in competition with any port served by subsidized carriers. We in Baltimore view the Federal Barge Lines as a continued threat to the free-enterprise system that has built up and maintained our port as a major gateway for the commerce of the world.

Mr. Chester C. Thompson, president of the American Waterways Operators, Inc., and a gentleman whose background and knowledge of barge operations should certainly qualify him as an authority, has pointed out that total net operating losses of $4,404,973 of the Federal Barge Lines for the period 1924 through 1946 exceeded the total net operating income by approximately $2,813,465. Mr. Thompson further demonstrated that three privately owned common carrier barge lines carried almost twice as much freight for the 4-year period, 1942 through 1945, as the Federal Barge Lines at an operating expense of $2.59 per net ton while the Federal Barge Lines operating expense was $3.81 per net ton. These three privately owned lines had net revenues from waterline operations of $7,505.417 for the 4-year period whereas Federal Barge Lines suffered a deficit of $2,527,686. Here is conclusive evidence that privately owned services can be and are operated more efficiently than the Government-owned line.

The purpose of the pending legislation, as we understand it, is to replace obsolete and worn out equipment of the Federal Barge Lines and to further develop less than the barge load traffic on the inland waterways served. The facts do not support this theory. It has been stated that with this additional appropriation the Federal Barge Lines can become a profitable enterprise and then will be disposed of to private operators. Such a statement has been variously made over the past twenty-odd years. It appears to us that rather than

achieving these results, this additional grant of public money will simply serve as pump priming to an operation that has already proven itself economically unsound and in direct competition with private tronsportation.

It is therefore respectfully urged that the operations of the Federal Barge Lines be discontinued or disposed of at the earliest date possible. It is believed that either of these moves will be in the public interest, that no serious effects will be suffered by the areas now served by the Federal Barge Lines, and that the competitive situation between the carriers serving the eastern ports of the United States and those serving the Gulf ports will be restored to a private enterprise basis.

Mr. BECKWORTH. The next witness will be Mr. John T. Corbett, Brotherhood of Locomotive Engineers.

STATEMENT OF JOHN T. CORBETT, ASSISTANT GRAND CHIEF ENGINEER, NATIONAL LEGISLATIVE REPRESENTATIVE, BROTHERHOOD OF LOCOMOTIVE ENGINEERS, CLEVELAND, OHIO

Mr. CORBETT. Mr. Chairman, my name is John T. Corbett. I hold the offices of assistant grand chief engineer and of national legislative representative in the Brotherhood of Locomotive Engineers. The headquarters of the brotherhood is at Cleveland, Ohio. Mr. A. Johnston is the chief executive officer of the brotherhood with the title "Grand Chief Engineer." The local office is at 10 Independence Avenue SW., Washington, D. C.

The locomotive engineers are the oldest of the railroad labor organizations, and are one of the oldest of present American labor organizations, having been in continued operation since 1863.

I appear in opposition to the proposed provisions of bills H. R. 328, H. R. 429, H. R. 4978, and any and all similar bills proposing the continuation or extension, or the increasing in the capital stock of the Inland Waterways Corporation.

During the many years of its activities the Brotherhood of Locomotive Engineers has been on record as opposed to socialism and communism, and we look upon the Inland Waterways Corporation as a socialized or communized transportation agency which places the Government of the United States into the commercial transportation business as a direct competitor of the railroads of the Nation.

We believe that it is an injustice to the railroads of the Nation, to the hundreds of thousands of investors in those railroads, to the millions of employees of those railroads, including nearly a hundred thousand locomotive engineers who have invested their lives and abilities in railroad service, for the Government to subsidize the competitors of the railroads.

Bill H. R. 328 proposes to increase the capital stock of the Inland Waterways Corporation from $15,000,000 to some $33,000,000. Bill H. R. 429 would, in addition, extend the operations of the Federal Barge Lines to the Tennessee and Cumberland Rivers and the tributaries of the Ohio River above the confluence of the Cumberland and Ohio Rivers.

Bill H. R. 4978 would forbid the discontinuance of carrier operations, whether profitable or unprofitable, for at least 5 years and, apparently, would endeavor to protect the interests of privately owned barge lines by restricting the operation of the Federal Barge Lines where privately owned barge lines and terminals are ready, willing, and able to provide adequate service.

As Amos, or Andy, has said, "Now ain't that somethin'?" There shall be proper protection extended privately owned and/or operated barge lines but no protection is to be extended the railroads or their employees.

I challenge anyone to produce any legislative proposal more discriminatory or more unjustly unfair than the proposal just referred to unless it be the proposal in the same bill (H. R. 4978) that the advisory board, proposed in section 4 (a) of the bill shall have no one connected with a railroad as a member.

It is the opinion of the Brotherhood of Locomotive Engineers that the Government should recognize its inability to make a success out of the Inland Waterways Corporation after some 25 years of unprofitable experimenting in the commercial transportation business and should at once liquidate the Corporation without spending another penny of the taxpayers' money on this rather costly experiment.

Then, there should be some proper recognition of the services being provided by the railroads of the Nation and the employees of the railroads who invest their lives in the greatest transportation work ever known in the history of the world. They have made it possible for this great Nation of ours to prosecute successfully each and all of the wars the country was involved in and in times of peace have provided during every minute of every day of every year the finest services ever known until today it is safer to ride upon a railroad than to stay at home.

At page 64, The Commission on Organization of the Executive Branch of the Government, report on Federal Business Enterprises, had this to say of the Inland Waterways Corporation :

INLAND WATERWAYS CORPORATION

This Corporation was first an agency of World War I and thereafter its purpose was to pioneer barge traffic on the newly deepened waterways.

For 23 years, the company has operated at an almost continual loss and, as of June 30, 1947, showed an accumulated deficit of $8,192,104 from operations and insufficient depreciation reserves. The fleet is obsolete and it is estimated that about $18,000,000 would be required for rehabilitation. Private enterprise now serves this transportation purpose, as indicated by the fact that the company carried about 3,000,000 tons out of a total of over 40,000,000 tons on the rivers it serves.

The Under Secretary of Commerce, in a statement to the Appropriations Committee of the House, has given an uncertain outlook for the Corporation. In 1947, the Committee on Small Business of the House of Representatives recommended that the Government withdraw from this business.

We recommend that the Corporation be put into immediate liquidation and that the annual expenditure of the Government be ended.

To that recommendation the Brotherhood of Locomotive Engineers wholeheartedly subscribes and respectfully requests that no favorable consideration be given to any of the proposed provisions of these bills. The Government entered the field of inland waterways transportation as a purely wartime measure in 1918. From September 1, 1918, until June 3, 1924, when the Inland Waterways Corporation was created, the Government lost money on these operations at the rate of about $1,000,000 per year. At that time, the Corporation took over property then valued at more than $10,000,000; the original authorized capital stock of the Corporation was only $5,000,000, but this was increased in 1928 to $15,000,000, and under H. R. 328, H. R. 429, and H. R. 4978 would be increased, again, to some $33,000,000.

The Corporation has consistently shown serious operating losses from 1939 to date, even though it pays no taxes, no interest on the investment, does not pay its share of the Government costs involved in the Federal Employees' Compensation Act and the Civil Service Retirement Act, has failed to maintain adequate depreciation reserves, and has indulged in other accounting gymnastics which tend to conceal the extent of its financial failures.

Notwithstanding these questionable accounting practices, the gencral balance sheet of the Inland Waterways Corporation as of March 31, 1949, shows an accumulated deficit of $15,760,512 on its river operations (excluding the railroad division), and an accumulated deficit of $14,671,439 on its consolidated operations (including the railroad division). Estimates in the national budget for 1940 (pp. 1303-1305) indicate that this consolidated deficit will be more than $18,000,000 at June 30, 1950.

The consolidated operating deficit of the Corporation for the fiscal year 1947, was $2,091,808, and this operating deficit increased during the fiscal year 1948 to $2,312,341.

At a time when the Nation is under the greatest national debt ever known in the history of the world, we believe it is time to call a halt to this costly, inefficient, socialistic burden on the American taxpayer; appropriation of more money for this experiment in socialism would not only constitute throwing good money after bad, but would also make it more difficult for the Government, ultimately, to dispose of the barge line. How can the taxpayer hope to salvage anything out of this "scheme" if Congress adds another $18,000,000 to an investment of over $26,000,000 as of March 31, 1949, in an enterprise which is hopelessly insolvent, and which has demonstrated over a period of 25 years or more, that it cannot stand on its own feet?

The principal beneficiaries of this costly experiment have been, and are, the large producers and shippers of coal, oil, and related bulk commodities, who have increased their profits by shifting to the general taxpayer a part of their transportation costs. The consumer has gained little or nothing, except the privilege of paying more taxes to support this socialistic subsidy. When you stop at your filling station, do you pay less for water-borne gas or oil than you pay for that transported by railroad, highway, or pipe line?

As indicated, the Inland Waterways Corporation was organized in 1924, in the hope that within the next 5 years it could demonstrate the practicability of water transportatioon. Admittedly the water transporation of coal, oil, and other bulk commodities has shown a substantial growth and development during the last 25 years. In 1924, the IWC handled 498,425 tons of bulk commodities, as against 1,160,634 tons in 1946. Increases have occurred, undoubtedly, in the water transportation of bulk commodities by private barge operators.

But the transportation of package-freight merchandise, and so forth, traffic of the type which the IWC especially sought to develop, shows an exactly opposite trend, and indicates that IWC has failed utterly to demonstrate the practicability and economic feasibility of water transportation for this type of traffic.

In 1924, the IWC handled 573,423 tons of merchandise traffic, but its tonnage of merchandise was only 479,975 in 1946, and was less than 500,000 tons in each of the years 1944 and 1945. Even more significant is the fact that private barge operators seem to be getting out of the less-than-bargeload business as rapidly as possible.

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