Chapter VI

Route 135,007. Chicago to Burlington (205 Miles). Average Daily Weight, 192,540 pounds.

_Per cent _Per cent _Should Earn _Did
Space_ Earnings_ on Space_ Earn._
Passenger 73.14 74.72 $210,134 $214,671
Mail 17.19 13.74 49,387 39,462
Express 9.67 11.54 27,782 33,170
--------
$287,303

On the basis of space used and facilities provided for the mails, the Burlington road is underpaid $119,000 a year on this route.

Two-thirds of the weight of mail is carried in special trains run at great speed and unusual expense, for which no extra allowance is made. The extension of the route to Omaha is across Iowa, where it is "Land Grant," and subject to land grant deductions.

The Government made a "gift" to the company in 1856 of lands amounting to 358,000 acres and then valued at $1.25 per acre, or $447,500.

The mail pay deductions to June 1, 1910, on account of this Iowa land grant aggregate $1,650,000, and still continue at the rate of $62,000 a year.

Neither in the foregoing six statements of results upon separate mail routes, nor in the general statement of results upon the Burlington Road has any allowance been made for the expense to the company of what is called the "Mail Messenger Service."

At all points where the post office is not over one-fourth of a mile from the railroad station the railroad company must have all the mails carried to and from the post office.

What an important item of expense this amounts to appears in the following extract from the Report of the Wolcott Commission, which states:

"Out of 27,000 stations supplied by messenger service 7,000 are
paid for by the Department at a cost of between $1,000,000 and
$1,100,000 per annum, leaving the other 20,000 stations to be
supplied by and at the expense of the railroads."

Investigation has shown that on mail routes, where the average mail pay of the railroad company is $900 a year, the average cost of this mail messenger service is $400, calculating only $100 as the expense for each station where they are required to perform the service. There are instances where the company pays in cash each year, for delivering the mails between station and post office, considerably more than the Government pays for the entire mail service over its line of road. There is no such feature in the express service.

WHY DO RAILROADS CARRY THE MAILS WITHOUT PROFIT?

The question is sometimes asked why the railroads continue to carry the mails if there is no profit in the business. Carrying the mails is not the only traffic which railroads take upon terms that would bankrupt them if applied to all their business.

There is no profit in running passenger trains on most railroads; that is, the receipts from all the traffic carried on passenger trains are not sufficient to pay a train mileage or car mileage share of operating expenses and taxes and charges for the use of capital. But a large part of this cost of conducting the business of a railroad, such as taxes, interest, maintenance of roadway, general office expenses, and many others, would continue substantially the same if the passenger trains were discontinued. Having the railroad, and its taxes, and interest, and maintenance expenses to meet, anyhow, no railroad can afford to refuse any income from passenger trains that amounts to more than their train operating cost. On the same principle they accept low rates per mile as a share of through passenger fares which, if applied to all passenger fares, would show a loss. The road is there, the trains are running, and the cars only partially loaded; the addition of through passengers may not materially increase the expense, and the road is better off to accept the business at less than the average cost, rather than to reject it. But whatever the passenger trains lose must be made up by the freight trains if the road is to continue in business.

The constant aim of the managers of the railroad is to secure from each class of traffic not only the operating cost peculiar to that traffic, but a proportion of the general cost; but business is not necessarily rejected on which it is impossible to secure such proportion.

Many of the reasons which impel them to run passenger trains without profit apply to their acceptance of the Government mails. They facilitate the freight business; it is better to carry them at a loss than not to carry them at all.

But is that any reason why the Government should not pay fair value for what it receives? Is it good policy for the Government to force upon the companies the alternative of carrying the mails at a loss or refusing to carry them at all?

What are the mails?

They are the letters and packets that are conveyed from one post office to another under public authority.

Who conveys them? The railroads convey nine-tenths of them.

The railroads are the mail service of this country. The Post Office Department states that it receives from the people who use the mails eighty-four dollars on every one hundred pounds of letters and post cards. Who makes that money for them? The railroads. The railroads convey those letters and cards from post office to post office--not the Government.

For a service like that the Government can afford to pay.

What does it pay?

On the great bulk of the business the railroad companies which do the work and earn the money receive less than two dollars a hundred. On every pound of first-class mail the Government collects eighty-four dollars a hundred.

The fact that the Congress, for purposes of general education or other reasons, thinks it is good public policy to carry the magazines and other second-class matter at one dollar a hundred is something about which the railroads have nothing to do and nothing to say.

The mail pay of the railroads has been reduced in the past four years more than eight million dollars a year. Part of this was done by act of Congress, but the greater part came from the arbitrary and illegal Cortelyou order.

These reductions were made without any hearing being granted to the railroads. Hearings were refused by the Committee which reduced the pay three and a half millions, and no pretense of a hearing was made by Secretary Cortelyou when his autocratic order was issued reducing the mail pay approximately five million dollars a year. This order was an arbitrary and unwarranted and illegal exercise of executive power.

The last hearing allowed to the railroad companies on this subject was by the Wolcott Commission, 1897 to 1900, composed of eminent Senators and Representatives. They reported, after two years' investigation, that the mail pay was reasonable and should not be reduced. Upon the question whether railroads should be asked to carry the mails at a loss their report expressed the following views:

"It seems to the Commission that not only justice and good
conscience, but also the efficiency of the postal service and
the best interests of the country demand that the railway-mail
pay shall be so clearly fair and reasonable that while, on the
one hand, the Government shall receive a full _quid pro quo_ for
its expenditures and the public treasury be not subjected to an
improper drain upon its funds, yet, on the other hand, the
Railway Mail Service shall bear its due proportion of the
expenses incurred by the railroads in the maintenance of their
organization and business as well as in the operations of their
mail trains.

"The transaction between the Government and the railroads should
be, and in the opinion of the Commission is, a relation of
contract; but it is a contract between the sovereign and a
subject as to which the latter has practically no choice but to
accept the terms formulated and demanded by the former; and,
therefore, it is incumbent upon the sovereign to see that it
takes no undue advantage of the subject, nor imposes upon it an
unrighteous burden, nor 'drives a hard bargain' with it. The
Commission, therefore, believes that the determination whether
the present railway mail pay is excessive or not should be
reached, as near as may be, upon a business basis, and in
accordance with the principles and considerations which control
ordinary business transactions between private individuals."

THE POSTAL CAR PAY.

The wide credence which has been given to the statement that the Government is paying to the railroads an annual rent for postal cars equal to the cost of building them is remarkable.

The Government does not pay a rental for any car. The idea is an erroneous one, and is based upon ignorance regarding the payment of what is called "Post Office Car Pay."

Originally, the mail business on railroads was the transportation of mail bags, and was essentially a freight traffic. But its character has entirely changed.

The business now consists almost wholly in providing moving post offices, expensive to build and expensive to operate, in which the average weight for which pay is received is about two tons in full postal cars and six hundred pounds in apartment cars.

The Post Office Department weighed all the mails carried in all postal cars and apartment cars in the country during October, 1907, and the average weight of mail on the Burlington road loaded in a forty-foot postal car was found to be less than 2,000 pounds; in fifty-foot cars it was 2,500 pounds; and in sixty-foot cars it averaged less than 4,500 pounds; in apartment cars it was 607 pounds.

The average load carried in an ordinary freight car on the Burlington road is from 36,000 to 40,000 pounds. Railroads, as a rule, haul a ton of paying or productive freight for every ton of dead or unproductive load. In the Government mail business they carry nineteen tons of dead weight for each ton of paying weight.

These cars are fitted up as post offices and are used for distribution en route in order to expedite and facilitate the prompt transmission and delivery of mails. They largely take the place of very expensive distribution offices in cities.

The railroads provide cars for freight traffic, but refused to build, and maintain, and haul these moving post offices with their clerks and paraphernalia, without pay. That is the post office car pay of which so much is said.

The truth regarding this feature of the subject is clearly stated in the following recent letter from the Postmaster-General:

(_Congressional Record_, March 5, 1910, 61st Congress, Second Session, Vol. 45, No. 61, Page 2852.)

LETTER OF THE POSTMASTER-GENERAL RELATIVE TO THE COST OF
FURNISHING AND OPERATING RAILWAY POST OFFICE CARS.

"OFFICE OF THE POSTMASTER-GENERAL,
WASHINGTON, D.C., March 2, 1910.

"Hon. JOHN W. WEEKS,
_Chairman Committee on Post Offices and
Post Roads, House of Representatives_.

"MY DEAR SIR: In response to your inquiry made of the Second
Assistant Postmaster-General in regard to the cost of
maintaining and operating railway post office cars and its
relation to the compensation received by railroad companies for
the same and your reference to the speech delivered by Senator
Vilas on the subject in the United States Senate, February 13,
1895, I have the honor to advise you as follows:

"The Department has not at this time sufficient information upon
this point to give from its own records a reliable estimate. As
you are aware, we have recently asked railroad companies to
submit answers to inquiries with reference to the cost of
operating the mail service, and it is believed that when these
shall have been received we will be in a position to furnish
such information. Inasmuch, however, as it may be of importance
to you to have estimates made from time to time by others and
such incomplete information as we have at present, I submit the
following:

"The cost of operating a railway post office car has been
variously estimated (but not officially by the Department) as
from 15 to 30 cents a car mile. The average run per day of such
a car is about 300 miles. Estimating the cost at 18 cents a car
mile, the total cost of operating such car for one year would
be $19,710.

"The specific items which constitute this total cost are not
definitely known to the Department. However, as to the cost of
lighting, cleaning, repairs, etc., the General Superintendent of
Railway Mail Service furnished the following estimates before
the Commission to investigate the postal service in 1899, viz.:
Lighting, $276; heating, $365; cleaning, water, ice, oil, etc.,
$365; repairs, $350; proportion of original cost of car
(estimating the life of a car at fifteen years and the original
cost at $6,000), $400; total, $1,756. Recent inquiry gives the
following as the approximate cost of maintaining a car at the
present time: Lighting (electric), $444; heating, $150;
cleaning, $360; repairs, $300; oil and brasses, $120; interest
on cost of car (at $7,500), $300; annual deterioration
(estimating the life of a car at twenty years), $375; total,
$2,049. These figures give the cost of a car built according to
the Department's standard specifications. The cost of modern
steel cars being built by some of the railroad companies is from
$14,000 to $15,000.

"The compensation received by a railroad company for operating a
car and carrying the mails in it would be approximately as
follows:

"The pay for a 60-foot car at $40 a track mile per annum, for a
track mileage of 150 miles, would be $6,000. The average load of
a 60-foot car, according to statistics obtained recently, is
2.83 tons. The rate per ton of an average daily weight of 50,000
pounds carried over the route is $25.06. At this rate the
company would receive $10,637.97 per annum for the average load
of mail hauled in the car. This sum added to the specific rate
for the railway post office car ($6,000), makes the total pay
for the car and its average load $16,637.97 per annum.

"Senator Vilas' argument was based upon the theory that the
rates fixed for railroad transportation alone, based on the
weights of the mails carried, are adequate compensation for all
services rendered, including the operation of railway post
office cars, and that, therefore, the railroad companies would
be required to operate postal cars owned by the Post Office
Department for the compensation allowed by law for the weight of
mails alone, including apartment-car space and facilities. Such
theory is not justified by the facts, as will appear from the
following:

"A careful perusal of the debates in both Houses of Congress
which led to the enactment of the present law fixing the rate of
pay for railroad transportation of the mails and for railway
post office cars clearly indicates that the additional
compensation for railway post office cars was intended to cover
the additional expense imposed upon the railroad companies for
building, maintaining, and hauling such cars. The companies at
that time insisted that these cars, which were practically
traveling post offices, did not carry a remunerative load, and
that therefore the amount of pay, based on weight, did not
compensate them for their operation. This led to the specific
appropriation for railway post office cars. In this connection
it should be borne in mind that the purpose of the railway post
office car is to furnish ample space and facilities for the
handling and distribution of mails en route. Therefore, the
space required is much greater than would be required for merely
hauling the same weight of mails.

"In regard to any proposal for Government ownership of postal
cars, other facts as well as the above should be given
consideration. Such cars must be overhauled, cleaned, and
inspected daily. It would be necessary to either arrange with
the railway companies for this service or for the Department to
employ its own inspectors, repair men, and car cleaners at a
large number of places throughout the country, which would
probably be more expensive than the cost to the railway
companies in that respect at present. It would hardly be
feasible to establish a Government repair shop. Therefore, the
Department would be compelled to use the shops of the several
railway companies throughout the country. Without the closest
supervision and attention of the Government's inspectors it
could scarcely be expected that our cars would receive the same
consideration in railroad shops as those owned by the railway
companies. These shops are frequently congested, and it is
probable that the railroad work would be given the preference.

"Yours very truly,
"FRANK H. HITCHCOCK,
"_Postmaster-General_."

The Wolcott Commission carefully investigated the whole subject of Postal Car Pay and their conclusions regarding this form of compensation and its reasonableness are set forth in their report in the following language:

"Until a comparatively short time prior to 1873 the distribution
of the mails in transitu was unknown. Prior to the late sixties
the railroads simply transported the mails, which were delivered
at the post offices and there distributed. Accordingly, 'weight'
as the basis of compensation was at the time of its adoption and
long thereafter entirely adequate.

"For a few years, however, prior to 1873 the distribution of the
mails in transitu had been practiced to a sufficient extent to
satisfy the Post Office Department and Congress that it was a
desirable innovation and a branch of the postal service that
should be very much enlarged. But it was recognized that if the
railroads were not only to transport the mail itself, but also
to supply, equip, and haul post offices for the distribution of
the mails, the compensation upon weight basis that had obtained
up to that time was not entirely adequate and just, and
therefore the law of 1873, as already indicated, contained a
provision allowing additional compensation for railway post
office cars. At first these cars were mostly not exceeding 40 or
45 feet in length and of light construction, similar to baggage
and express cars.

"From the policy of the Department, however, of constantly
demanding better and better facilities from the railroads and
the introduction of every improvement that could be discovered,
it has come to pass that, today, the railroad post office cars,
with the exception of a few obsolete ones that are being
discontinued as rapidly as practicable, are elaborate
structures, weighing between 90,000 and 100,000 pounds; built as
strongly and fitted up, so far as suitable to the purpose for
which it is intended, as expensively as the best Pullman and
parlor cars; costing from $5,200 to $6,500; maintained at a cost
of $2,000 per year; traveling on an average of 100,000 miles per
annum; provided with the very best appliances for light, heat,
water, and other comforts and conveniences; placed in position
for the use of the postal authorities from two and a half to
seven hours before the departure of the train upon which they
are to be hauled, and owing to the small space allowed in them
for the actual transportation of the mails, accompanied on the
denser lines by storage cars for which no additional
compensation is paid by the Government and on the less dense
lines the larger bulk of mails is carried in the baggage cars
without additional compensation for the car.

"These cars are constructed and fitted up by the railroads in
accordance with plans and specifications furnished by the
Department, and the amount of mail transported therein is
determined exclusively by the postal authorities. From these two
facts it results that the railroad must haul 100,000 pounds of
car when the weight of the mail actually carried therein is only
from 3,500 to 5,000 pounds--often very much less, and
occasionally somewhat more.

"Taking in view all these facts, as disclosed by the testimony
filed herewith, we are of opinion that the 'prices paid * * * as
compensation for the postal-car service' are not excessive, and
recommend that no reduction be made therein so long as the
methods, conditions, and requirements of the postal service
continue the same as at present."

MAIL RATES AND EXPRESS RATES.

No feature of this question has been more persistently misrepresented than the relative value to the railroads of the mail business and the express business.

As elsewhere shown, the express business is 52 per cent more valuable to the Burlington road than the Government mails on the mere basis of space used and facilities furnished in passenger trains. There are many other considerations which increase this disparity of value in favor of the express, but reference to them is omitted in order to direct public attention to the following statements of the Postmaster-General in his recent letter upon the subject:

(_Congressional Record_, March 4, 1910, 61st Congress, Second Session, Vol. 45, No. 60, Page 2802.)

LETTER OF THE POSTMASTER-GENERAL RELATIVE TO THE SERVICE
RENDERED BY THE RAILROAD COMPANIES IN CONNECTION WITH THE MAILS
AND WITH EXPRESS.

"OFFICE OF THE POSTMASTER-GENERAL,
"WASHINGTON, D.C., January 31, 1910.

"Hon. JOHN W. WEEKS,
_Chairman Committee on Post Offices and
Post Roads, House of Representatives_.

"MY DEAR SIR: In response to your inquiry as to the difference
between the service rendered the Post Office Department by
railroad companies in the carriage and handling of the mails, and
that rendered express companies, I would state that from such
information as we have been able to obtain in regard to the
service rendered to express companies, the difference is
substantially as follows:

"The Post Office Department requires the railroad company to
take the mail from the post office wherever the office is within
80 rods of the depot, and the company has an agent, and in many
cases to perform the terminal service regardless of the distance
between the post office and the station. Wherever the terminal
service is taken up by the Department, by means of regulation or
screen-wagon service, the contractor delivers the mail at a
specified place at the depot, and from that point the railroad
employees transport it to the cars, and if the amount is so
great that it would impose a hardship upon the postal employees
to load and store this mail, the railroad company is called upon
to furnish porters to do the work. Where the mail messenger or
contractor can drive direct to the cars, he does so. The express
companies haul all of their matter to the railroad stations and
put it in the cars, using their own employees and their own
trucks.

"The cars furnished the Post Office Department and those
furnished the express companies differ very materially. The
former are built according to specifications furnished by the
Department, and are fully equipped with letter cases, paper
racks, drawers, and lockers for registered mail and supplies,
and all of the equipment necessary for the distribution of mail
en route. The cars furnished the express companies have very
little, if any, interior furnishings, and are more like the cars
used for the transportation of baggage. In both cases the cars
used are owned by the railroad company.

"The number of employees transported for the Post Office
Department is very much greater than for the express companies.
There are frequently five or six clerks in the postal cars, and
on fast mail trains, where there are two or three working cars
to a train, the number runs up as high as 23. The express seldom
requires more than two men in a car.

"The Post Office Department claims as much space at depots
without specific payment therefor as may be required for the
storing and handling of mail in transit. The express companies
are required to pay the railroad companies for all space used at
depots.

"On smaller lines a separate apartment must be furnished for the
mails other than baggage mails. The express matter is usually
placed in the baggage car.

"Upon arrival at terminals the railroad company may be required
to unload a mail car, if the quantity is such as to impose a
hardship upon the clerks, and to see that it is loaded into the
contractor's wagons; or, if the terminal service devolves upon
the railroad company, that it is delivered into the post office.
The express company unloads and handles its own matter.

"The railroad and express companies frequently use a joint
employee to handle baggage and express, thereby economizing in
cost of help. That can very seldom be done in connection with
the postal service.

"The railroad company has charge of all baggage mails in transit
and receives them into and delivers them from the cars. It also
handles other mails when necessary to transfer them between cars
or trains. It is held responsible for reasonable care in their
transportation. Deductions are made for failures to perform
service according to contract, and fines are imposed for
delinquencies. The company is required to keep a record of all
pouch mails carried on trains in charge of their employees and
handled at stations where more than one regular exchange pouch
is involved and no mail transfer clerk is located, and to
prepare and forward shortage slips when a pouch is due and not
received. They are required to make monthly affidavits as to
performance of service. It is understood that the company never
assumes control of express matter. The Department is not
informed as to the terms of contracts between railroad and
express companies, and therefore can not state what
responsibility is imposed as to transportation.

"Mail cranes for the exchange of mail at points where trains do
not stop are erected and kept in repair by and at the expense of
the railroad company, whose employees must hang the mail bag on
the crane and adjust it for catching at points where the
company provides side service. The mail catchers are also
furnished by them. No service of this character is rendered
express companies.

"A railroad company is required by law to carry the mails upon
any train that may be run, when so ordered by the
Postmaster-General, without extra charge therefor, and as a
result the mails are carried on the fastest trains and with
great frequency. Express matter is not as a rule carried on the
fast limited passenger trains, nor with the frequency with which
mails are carried.

"In this connection your attention is invited to pages 84 to 94,
516, 517, 860 to 863, part 1, and pages 687 to 696, part 2, of
the testimony before the Congressional Commission which
investigated the postal service in 1900--Wolcott-Loud
Commission.

"Yours very truly,
"F. H. HITCHCOCK,
"_Postmaster-General_."

The Government does not own any railroad, but, under the present system, the Post Office Department dictates to the railroad companies upon what passenger trains and in what kind of cars the mails shall be carried. It insists on such space and facilities as it deems necessary for the mails being furnished on the fastest and most expensive trains and demands that these trains keep their fast schedules; this means that all other trains on the road are side-tracked and delayed whenever that is necessary in order to expedite the mails.

There are no such features in the express business.

Demanding a preference traffic, the Government ought to be willing to pay for it more than express rates. In fact, it pays much less than express rates.

The ablest and most competent witness who appeared before the Wolcott Commission on this subject was Henry S. Julier, Vice-President and General Manager of the American Express Company, who said: "Without question, the Government has the cheaper service by far."

Mr. Julier further stated that seven pounds is the average weight of packages sent by express, and the seven pound package is the typical express package, and therefore the earnings from carrying such packages are the true index of the rates actually received. Some railroads receive as their compensation fifty per cent of the express company's earnings; the C. B. & Q. receives fifty-seven and a half per cent.

Mr. Julier was asked by the Commission to file statements showing from the rates in force exactly the revenue received per hundred-weight by the railroad company from the express in comparison with the mail rates. He filed the following:

_Table Showing Rates Received by Railways Per Hundred-weight for Mails and Rates Received for Express Between Points Named._

EXPRESS.
50 per cent of
MAIL. express companies'
Rate per 100 earnings on fourteen
pounds allowed 7-pound packages
railroad companies weighing in the
under last aggregate 100
weighing, pounds, yields the
including the pay railroad companies
for post office the rate per 100
Distance. cars. pounds noted below.

New York to
Buffalo 440 $1.58 $2.80
Chicago 980 3.57 4.55
Omaha 1,480 5.38 5.95
Indianapolis 906 3.27 4.55
Columbus 761 2.49 3.85
East St. Louis 1,171 4.38 4.90
Portland, Me. 347 1.33 2.80
Chicago to
Milwaukee 85 .34 2.10
Minneapolis 421 1.83 3.85
New Orleans 922 5.27 5.95
Detroit 284 1.34 2.80
Cincinnati 306 1.20 3.15
Cincinnati to
St. Louis 374 1.61 3.15
Chicago 306 1.20 3.15
Cleveland 263 1.26 2.80

Since the filing of these statistics, the rates paid to
railroads for carrying the mails have been reduced almost a
fifth.

The statements of the Postmaster-General and the statistics
confirm the evidence of these returns that the express business
is much more valuable to railroad companies than the Government
mail business.

W.W. BALDWIN,
_Vice-President_.

JOHN DEWITT,
_General Mail Agent_.

MAY, 1910.