a net change in the downward direction of more than $1,100,000 per year.

Eliminating the war years from the 10-year period, and restricting the story to the three postwar years, 1946, 1947, and 1948, the record continues to be one of heavy deficits, which are now averaging more than $2,100,000 per year, as follows:

Even these figures do not tell the whole story of financial collapse. During the fiscal year 1947, the management of Federal Barge Line, after consultation with the Interstate Commerce Commission and its own Advisory Board, concluded that it has been charging insufficient depreciation against its floating equipment. Accordingly, those depreciation rates were adjusted upward, and retroactively, from 3.12 percent per year on all classes of equipment to 4 percent on barges and 5 percent on towboats.

This drastic adjustment

said the 1947 report at page 4

brings the book value of the Corporation's boats and barges in line with private industry accounting practice and more nearly reflects the current commercial value of the equipment.

Had depreciation previously been charged at the higher rates adopted in 1947, operating deficits to date would have been increased by at least $5,000,000. This is made clear by reference to the balance sheet as of June 30, 1947, at pages 12-13 of the annual report for that year. The report shows that during the fiscal year 1947 a total of 20 towboats, 2 tugboats, and 179 barges were retired from the investment account. These units were either more than 25 years old or, in a few cases, were found to be obsolete. The depreciated book value of these units, less salvage, was $5,672.349, all of which was charged to profit and loss during the year 1947. In other words, operating expenses had previously been understated by that amount, net earnings had been overstated in those years that produced a net, and net deficits had been understated in those years that showed a deficit.

Operating at an almost steady loss during the last 10 years, and at an even greater loss during the last 3 years, at the same time that its equipment has been wearing out, the Federal Barge Line now faces the alternative prospect of going out of business because physically unable to continue, or receiving a shot in the arm, in the shape of further Government subsidies.

No enterprise, even though owned by the Government, can continue idefinitely operating in the red unless Congress is willing to face the prospect of further, larger, and continuous subsidies to such an enterprise in the future. At the same time, even an inefficient and losing Government enterprise can work great harm in the way of unfair

competition to the railroads and to private barge operators on the waterways.

RECOMMENDATIONS FOR LIQUIDATION

I now review some of the recommendations that have been made looking to disposal of the Federal Barge Lines to private interests. The committee appreciates, of course, that from the beginning it has been contemplated that Government ownership and operation would continue only until the enterprise could be sold to private operators. This was true of the original act, and the Denison Act of 1928 laid down specific conditions of sale. Since then, various official studies have been made of the project, each of which resulted in recommendations for liquidation of the enterprise as a Government operation. These studies included those of the Shannon committee, in 1933, the Board of Investigation and Research, in 1944, the Ploeser Committee on Small Business, in 1947, and the Hoover Reorganization Commission, in 1949.

For a number of years, failure of Federal to fulfill the program originally laid out for it has been recognized, and a number of recommendations have been made for abandonment of the program without sinking further public money in it. I shall refer to several of those recommendations.

The Shannon committee: House Resolution 235, Seventy-second Congress, directed a committee of five members, of which Congressman Joseph B. Shannon, of Missouri, was chairman, to conduct an investigation of Government competition with private enterprise. The report of the committee, House Report 1985, February 8, 1933, was the result of a long and exhaustive study of Government business activities. In respect to the Federal Barge Lines, the Shannon committee received testimony from many sources. Its report specifically recommended at page 21

That the service of the Federal Barge Lines, conducted by the Inland Waterways Corporation, should be discontinued and liquidated by sale to private enterprise. The Board of Investigation and Research was created by the Congress in 1940 for the purpose, among other things, of appraising the economy and fitness of the various modes of transportation. After intensive study of the Inland Waterways Corporation, the staff of that Board in 1944 reported its conclusions in the following language:

In view of the record made by this subsidized enterprise over an extended period, it is questionable whether this experiment in Government operation of a transportation service should be continued. It is also to be doubted that the scope of the Corporation's operations should be expanded to include additional waterways. The Congress might appropriately give specific consideration to the future status of the Inland Waterways Corporation and the feasibility of its sale to private operators (Public Aids to Transportation, 79th Cong., 1st sess., H. Doc. 159, September 19, 1944, p. 70).

The Ploeser committee: A report on the Federal Barge Lines was made by a subcommittee of the Select House Committee on Small Business, which committee was set up under House Resolution 18, Eightieth Congress, first session, under Chairman Walter Ploeser. Congressman Evan Howell was chairman of a subcommittee charged with investigating the subject of Government competition with business. It held hearings throughout the country and in Washington.

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The report on the Federal Barge Lines was submitted by Chairman Ploeser to the Subcommittee on Government Corporations of the House Appropriations Committee on May 14, 1947, and was printed as Union Calendar No. 571, Eightieth Congress, first session, House of Representatives No. 1102. The report contained a number of recommendations, the first of which on page 1 reads as follows:

The Government should get out of the barge business, and we are concerned only with recommending when and how that should be accomplished.

The Hoover Commission: During the early part of 1949 reports were made as to the Congress covering wide areas of Government activity, by the Commission on Organization of the Executive Branch of the Government, of which former President Herbert Hoover served as chairman.

That Commission, on March 31, 1949, submitted a report on Reorganization of Federal Business Enterprises. In the prepartion of this report and in the formulation of its recommendations with respect to various Government enterprises, the Commission had before it a so-called task-force report on revolving funds and business enterprises of the Government. Appendix J of the task-force report dealt, among others, with the Inland Waterways Corporation and Warrior River Terminal Company (pp. 142-149), and surveyed briefly the history of those enterprises, with financial results to date.

On the basis of the facts summarized in the task-force report, the Hoover Commission submitted its recommendation regarding the Inland Waterways Corporation. Recommendation No. 20, at page 65, reads as follows:

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

Thus a number of congressional committees and Government agencies have reviewed the status and prospects of the Federal Barge Lines and have recommended that it be either liquidated outright or disposed of to private barge operators. Opinion on this matter, developed in a series of exhaustive studies, from the Shannon committee study of 1933 down to the Hoover Commission study of 1949, has focused on one general theme: Get the Government out of this costly and red-ink competition with private enterprise, and do it quickly.

Despite these recommendations over the years, and despite the accumulated deficit of more than $14,000,000 now come the proponents of the bills under consideration, and reiterate the same arguments that led to creation of the Federal Barge Lines 25 years ago. They admit that large losses have accumulated. They contend, however, that those losses have been due, in part, to experimentation on newly improved rivers-such as the upper Mississippi and the Missouriand to the effort to render package service to small shippers. But they argue that further experimentation should be undertaken on newly improved rivers, and that Federal shall not substantially expand its bargeload traffic where privately owned barge lines and terminals are ready, willing, and able to provide adequate service. This position by the proponents involves a number of inconsistencies.

First, proponents say that with rehabilitated equipment and facilities, such as the proposed new subsidy of $18,000,000 would provide,

Federal can eventually reach a balance between current income and outgo. They admit, at the same time, that losses would doubtless continue for a time, and that it might require an experimental period of 5 years or more, before the success or failure of the experiment could be determined. Of course, proponents do not expect, nor do they suggest, that Federal make any return to the Government on the funds to to be advanced under the bill.

Second, proponents accept and emphasize the provision that experimentation should be continued and in fact expanded, on rivers now newly improved, or in process of improvement, or to be improved in the future. At the same time, they virtually all agree that experimenting of this type is done, and can be done, only at a loss. Some of the proponents have pointed out that private operators are unwilling to take the risks involved and that only the Government can afford to enter so speculative a field. Yet it is claimed that Federal can make money in that field.

Third, proponents support the provision of the bill, couched in very general and somewhat ambiguous terms, that Federal shall not substantially expand its bargeload service where private operators are able and willing to supply similar service. Proponents agree that bargeload traffic is more likely to produce a profit than less-thanbargeload traffic. They are willing to restrict Federal in developing profitable bargeload traffic, but continue to contend that profits can be earned despite such a restriction.

Finally, the proposed restrictions on bargeload traffic expansion are necessarily couched in general terms. H. R. 4978 would bar "substantial" expansion; no definition of "substantial" is provided. It would restrict such expausion only where private operators are willing and able to provide adequate service. Each of these terms, "willing," "able," and "adequate" are susceptible of varying interpretations. The barge-line management would be free to determine the exact nature of the restrictions, and to apply them in such manner as would least tend to reduce its income.

Thus the proposed restrictions, presumably inserted as a protection to private operators now in competition with the Government line, appear to be less of a protection than proponents contend them to be.

LESS-BARGELOAD AND PACKAGED FREIGHT

As I have said, proponents of the bills under consideration agree that bargeload traffic is more likely to produce a profit than less-thanbargeload traffic, which is predominantly made up of merchandise or package freight.

The annual report of the Inland Waterways Corporation for 1942, at page 13, stated that one of the functions of Federal was development of merchandise traffic. However, that class of traffic has sharply declined, whereas bulk traffic has correspondingly increased, relative to the total traffic. The trend for the period from 1941-the earliest

year for which single-count data are available-to 1948 is shown in the following figures:

Percentage of total tonnage handled-Mississippi system single count

The latest annual report covering the fiscal year 1948, stated that the percentage of merchandise freight showed some improvement in that year, the 30 percent shown being the highest percentage since 1943, when it was 37 percent of the traffic handled. On the other hand, Federal in fiscal 1947 was intensifying its effort to expand its bargeload traffic, which for the most is composed of bulk movements. Its report for that year says at page 7:

During this period the Corporation adopted a policy of aggressive solicitation of bargeload shipments of commodities of all kinds and published many bargeload rates at lower levels than current carload rates * *

That Federal has since continued to stress its efforts to increase bargeload traffic, at the same time restricting or suspending less bargeload and merchandise service, is evidenced by the following restrictions imposed in July 1948, substantially as follows:

1. Missouri River service reduced from four sailings per month to monthly sailings to Kansas City, and suspended above Kansas City. 2. Carload and less-than-carload freight suspended to, from and via upper Mississippi River ports above St. Louis and service at St. Louis confined to bargeload traffic.

3. Service to, from and via Baton Rouge, La., suspended except on bargeload traffic.

4. Service to, from, and via Greenville, Miss., and Helena, Ark., suspended except for bargeload traffic and cotton.

5. Service to, from and via Memphis, Tenn., suspended except for bargeload traffic, and for bulk petroleum and grain.

These restrictions continued in effect throughout substantially all the second half of the calendar year 1948, which normally is the period of greatest freight movement for most types of common carriers. Restoration of the service thus curtailed was announced by Federal December 14, 1948, but actual lifting of the service suspensions was not effective at the several ports until various dates from January 3, 1949, to April 13, 1949.

It appears that Federal recognizes that expansion of merchandise traffic is not the solution of its financial difficulties and is now actively seeking to increase its bargeload traffic. Yet proponents of the bills under consideration support the provision that would restrict the barge line in further expansion of its bargeload services. At the same time, they hopefully predict that it can make a profit under such conditions. In the light of the record I have laid before you, this is an