Mr. ROGERS. Do you think that the same type of service would be rendered as is rendered to the patrons of that barge line, by privateenterprise, would be rendered by private barge lines?

Mr. HAMMOND. Yes, sir. What is the rest of the country doingthat does not have the Federal Barge Lines? Most of the rest of the country does not have it. They are having to get along without it, and seem to be doing all right.

Mr. ROGERS. I was just wondering whether they would get the same type of service they are getting by virtue of having the barge line.

Mr. HAMMOND. Presently, I cannot conceive how the slow-moving traffic on a river would be particularly appealing to any great number of people for small merchandise, when you have the very fast truck and rail services that can deliver in a matter of hours as against a matter of days. There is also a question that has been raised. I am not too familiar with the details, but I do know this, that it is the hope of the Federal Barge Lines or the Inland Waterways Corporation, to develop the container program, and there is a question there, of course, as to whether or not they can develop two-way traffic to justify such containers, and certainly containers used in one direction are not going to be a very profitable undertaking.

Mr. ROGERS. Well, what do you think of the advisability of developing the Brannan claim in connection with this, as he has attempted to develop it in connection with farming?

Mr. HAMMOND. I have no opinion on that, sir.

Mr. ROGERS. I mean by that, that these few shippers, if they are a few, ship their stuff and let the Government pay them the difference between the barge line haul rate and what the private line charges. Could not the Government save money on that score?

Mr. HAMMOND. I should say, let the shippers pay the full bill that private industry feels that it must charge in order to provide the services desired.

We are not very strong believers, in the United States Chamber of Commerce, of any subsidies.

Mr. ROGERS. Well, which would you prefer, if you had to take one of two policies: Would you take the policy of governmental operation, sustaining a loss, or private operation by subsidization?

Mr. HAMMOND. Maybe I can best answer that by saying we have had subsidized operations here in the Federal Barge Lines for some 25 years and it has not proved successful, and our position is that when the Government gets into such business as this and has had such a long trial run and still is not successful, it should get out of the business. Mr. ROGERS. That is all.

Mr. MCGUIRE. Would you say from Captain Ingersoll's statement that he is very proud of the type of service he is giving now?

Mr. HAMMOND. No, sir; I do not think he is.

Mr. MCGUIRE. And he would almost feel that any change would be an improvement, would it not?

Mr. HAMMOND. I feel that he would like to try to do a better job. I think Captain Ingersoll is a very capable man, but I do not think he is proud of the services they are having to give.

Mr. MCGUIRE. I have just one more comment, Mr. Chairman.
Mr. BECKWORTH. Yes.

Mr. MCGUIRE. I think that the United States Chamber of Commerce is very fortunate in having such an able young men represent them, and I think that they would do a better job if all of the people representing them around the country were of the same type.

Mr. HAMMOND. Thank you very much.

Mr. BECKWORTH. Are there any further questions?

Thank you very much, Mr. Hammond. We appreciate your state

ment.

Mr. HAMMOND. Thank you.

STATEMENT OF FREDERICK E. BROWN, LaROE, BROWN & WINN, WASHINGTON, D. C., REPRESENTING THE AMERICAN BARGE LINE CO.

Mr. BECKWORTH. The next witness will be Mr. Frederick E. Brown of LaRoe, Brown & Winn, Investment Building, Washington, D. C., representing the American Barge Line Co.

Mr. BROWN. Mr. Chairman and gentlemen of the committee, I thank you for this opportunity to appear and make a brief statement in behalf of the American Barge Line Co.

My name is Frederick E. Brown and I am counsel for the American Barge Line Co.

We are opposed to H. R. 429 extending the Federal Barge Lines' services to the Cumberland and Tennessee rivers for the following

reasons:

1. The American Barge Line Co. owns and operates 13 towboats and 200 barges and has an invested capital and surplus of $5,345,000. The company, as a common carrier, holds a certificate of public convenience and necessity from the Interstate Commerce Commission, effective December 22, 1947, granting it rights to operate, and the company does operate on the Ohio and Mississippi Rivers between Pittsburgh and New Orleans, and on the Mississippi River north to St. Paul and Minneapolis and on the Illinois River to Chicago. The certificate also grants it rights to operate on the Cumberland and Tennessee Rivers.

2. As already stated, the American Barge Lines Co. holds a_certificate granting it rights to operate on the Cumberland and Tennessee Rivers. However, it has been operating on the Tennessee River continuously since 1935, and on the Cumberland River prior to this date, offering its common-carrier service to the shipping public since the start of its services on these rivers, and has been soliciting traffic to and from these rivers since the start of its service.

3. American Barge Line Co. has handled all of the traffic that has been offered to it for movement to and from these rivers except in rare and minor instances, in which it is our belief the traffic was handled by other privately owned common carriers serving these rivers. Certain surveys show that there is a large volume of carload traffic to be handled to and from these rivers, but in spite of these surveys our inquiries for carload service have been practically negligible. Should a volume of carload traffic materialize, which can be economically transported on these rivers, we are confident that privately owned common carriers on these rivers would be glad to initiate proper rates and dependable service. For the record, we herewith submit a state

ment showing the tons handled by American Barge Line Co. during 1947 and 1948, which amount was approximately 19,000 tons on the Tennessee River in 1947 and approximately 34,000 tons in 1948, and on the Cumberland River approximately 35,000 tons in 1947 and approximately 26,000 tons in 1948. We feel confident that our tonnage on the Tennessee River in 1949 will double that of 1948.

4. We believe the extension of the Federal Barge Lines to these rivers has no economic justification, as it is contrary to the retraction theory. We feel that should they extend their services to these rivers, they would endeavor to take the traffic from us, which we, as a private carrier, pioneered and developed and are now serving.

As a privately owned common carrier, we are willing and able to extend our facilities on these rivers to accommodate any traffic that can be economically and efficiently handled thereon.

Mr. BECKWORTH. Are there any questions, gentlemen?

Thank you very much, Mr. Brown. We appreciate your state

ment.

Mr. BROWN. Thank you.

(The statement referred to is as follows:)

American Barge Line Co.-Net tons to and from points on Tennessee and Cumberland Rivers, years 1948 and 1947

STATEMENT OF J. H. PARMELEE, VICE PRESIDENT, ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C.

Mr. BECKWORTH. The next witness will be Dr. J. H. Parmelee, vice president and director of the bureau of railway economics, Association of American Railroads, Transportation Building, Washington, D. C.

Dr. Parmelee has waited very patiently for this opportunity, and we are pleased to have you, Dr. Parmelee.

The committee has heard you many times, and we have very great appreciation for your storehouse of information and facts that are at your ready command at all times.

You may proceed, Dr. Parmelee.

Mr. PARMELEE. Thank you very much, Mr. Chairman, for those encouraging remarks. I appreciate the opportunity of appearing here for an important branch of the transportation industry of the United States, namely, the steam railroad industry.

My name is J. H. Parmelee. I am a vice president of the Association of American Railroads and director of the bureau of railway economics of that association, with headquarters in Washington, D. C.

I appear on behalf of the association, in opposition to the proposal to further subsidize the Inland Waterways Corporation by a subscription of $18,000,000 to its capital stock out of the Federal Treasury. Virtually every person who has thus far appeared in these proceedings has declared himself strongly in favor of private enterprise. Private enterprise underlies the whole philosophy of American democracy, and is responsible for the amazing accomplishments of American agriculture and industry in production and distribution of goods and services. Application of this principle in any specific case would require Government to refrain from any form of competition with its citizens, except for compelling and overwhelming reasons to the contrary. Pursuing the same thought further, if the Government is already engaged in a business where it competes with its citizens, it should withdraw from that competitive position at the earliest possible date. This is especially true in the case of the Inland Waterways Corporation, a byproduct of the First World War, which has operated, and is operating, on a heavily subsidized basis. It thus offers unfair competition to private operators on the rivers and to other privately owned and operated agencies of transport, including, of course, the railroads.

Private operators on improved rivers of the United States utilize those channels of commerce free of charge. Inasmuch as the rivers have been improved at the expense of the taxpayer, all river operators are in receipt of a subsidy. The Government barge line enjoys this subsidy, along with all private operators. In addition, it is directly subsidized by having all its capital supplied to it by the Government without paying any return on such capital, and is indirectly subsidized because as a Government corporation it enjoys immunity from taxes and enjoys certain other benefits which private corporations must pay for. All these factors should be considered in any appraisal of the financial results of the Government barge line, and of the competitive inequities brought about by its operations.

We believe, therefore, that this enterprise should be liquidated as a Government operation, and its facilities transferred to private auspices. Our position is not a new one, but has been expressed to the Congress on a number of occasions, as I shall show. The same position has been taken by many others, both in and out of Congress, as I shall also show.

In my statement to the committee, I shall first summarize the general reasons for our opposition to the bills you have under consideration, and shall then develop those reasons at somewhat greater length. The Inland Waterways Corporation was created by Congress in 1924 as an enterprise owned and operated by the Federal Government. Under these auspices, it has now been in existence for 25 years, losing money most of the time, and from time to time drawing addi

tional funds out of the Treasury for its support. The accumulated deficit on its books, as of June 30, 1948, amounted to $14,539,000, and its net deficit from operations during the last three calendar years, January 1, 1946, to December 31, 1948, totaled $6,347,000, or an average of $2,116,000 per year.

It is now proposed to give the enterprise another lease on life, in the form of what is in effect a grant of $18,000,000 of public funds. Before Congress takes any such unbusinesslike step, the following facts call for scrutiny and analysis.

1. The Inland Waterways Corporation, which I shall sometimes refer to hereafter as the Federal Barge Lines, was originally organized as an experimental project. Those who were active in its formation, including the House committee that reported the bill creating it, expressed the belief that an experimental period of operation of 5 years would show whether barge-line service could be made to pay its way. If it proved successful, the enterprise would then be disposed of to private operators; if unsuccessful, it would be liquidated. That experiment has now continued not for 5, but for 25 years.

2. As private water carriers developed their operations on the Mississippi and its tributaries, they found it advisable to shift from lessbargeload to bargeload service. Less-bargeload service has proved generally unprofitable. The management of the Federal Barge Lines, although it is supposed to render a complete common-carrier service for all classes of freight, both large and small, has also shifted its emphasis to bulk and bargeload operations. It is now seeking to become primarily a profit-making enterprise, deemphasizing the idea of experimentation in the field of merchandise or package freight in less-than-bargeload quantities.

3. Throughout a large part of its existence, and especially in recent years, the enterprise has been financially unsuccessful. Not only has it failed to earn its operating expenses but, from time to time, it has been granted additional funds from the Treasury for capital purposes. No return of any kind has been paid on these Treasury grants and now most of the capital itself has been dissipated.

4. This financial failure is the more striking in view of the several kinds of subsidy enjoyed by the enterprse. Its capital has been supplied to it, free of charge, by the taxpayer. On the total Government investment to date of some $24,000,000, not a penny of return has been earned or paid. Its depreciation charges have been inadequate, as recent heavy retirements of worn-out equipment have revealed. In addition, the Federal Barge Lines is the beneficiary of a number of indirect subsidies. Being a Government agency, it pays no taxes and receives other Government concessions not enjoyed by its private competitors. By these means, its stated costs of operation have been arbitrarily and artificially held down. Despite these facts, it has failed to pay its way, or even to conserve its capital.

5. Continuance of the Federal Barge Lines as a subsidized creation of Government is contrary to the spirit of the national transportation policy laid down by Congress in 1940. That policy, among other things, contains provisions designed to promote safe, adequate, economical, and efficient service, to foster sound economic conditions in transportation, and to promote fair competition among the several carriers.