Chapter VI (4)

In addition to the furnishing of storage cars, although many R. P. O. routes are paid for on a basis of 40 foot cars, it is not economical for the railroads to construct such cars which are not interchangeable with other equipment and which would have to be thrown aside if through growth of traffic larger cars are afterwards required. As a result, full 60-foot R. P. O. cars have for years been furnished on many 40 and 50-foot routes, the railroad getting no credit for this, whilst on many other routes R. P. O. cars have been run in advance of the fixing of R. P. O. pay for them.

On a number of routes postal car pay has been allowed for running full cars in one direction only, classing such routes as half-lines. This obliges the railroads to move the car in the opposite direction without pay, the small additional compensation of less than 4 cents per mile run received in one direction being entirely inadequate to compensate the road for the empty haul--to say nothing of allowing anything for moving it in direction for which pay is received. To illustrate: The Union Pacific Railroad in one case between Council Bluffs, Iowa, and Ogden, Utah, 1,003 miles, receives no pay for handling east-bound a 60-foot mail car, which is paid for west-bound only, six mail cars being required on this line. The R. P. O. pay per car mile, including movement in both directions, is only 2.24 cents, or about what would be received for transporting a single passenger, although a standard passenger coach has a capacity for 70 passengers.

In connection with the railway postoffice, an item not often considered is the value of transportation furnished clerks in the railway mail and compartment cars. Figuring this at 2 cents per mile, which is about the lowest passenger fare, the total value of this transportation for clerks in railway postoffice cars would be $8,600,000 per annum, or $4,000,000 more than the railroads receive for the handling of these cars, and the value of transportation in the case of apartment cars would be $4,000,000 per annum additional. In addition to this, a large amount of free transportation is required annually by the Postoffice Department for inspectors and other officers of the Department.

The Postoffice Department issues annually about six hundred traveling commissions to postoffice inspectors and other postal officials, and requires railroad companies to honor such commissions for free transportation on all trains on all lines on which mails are carried. In some cases these commissions are issued to Government officials whose official duties are in no way connected with the transportation of mails on railroads. The railroads have no control whatever over the issuance of these commissions and can not even secure from the Postoffice Department a list of them, the Department holding that the list is confidential. These commissions are frequently used for personal travel in violation of the rulings of the Interstate Commerce Commission. In brief, the Postoffice Department in effect arbitrarily issued about six hundred annual passes over every mail carrying railroad in the United States, which is equivalent to about 200,000 annual passes.

POSTAL DEFICIT.

In investigating the subject of railway mail pay, we have been struck very forcibly with changes which have taken place in the revenues and expenditures of the Postoffice Department since 1899, when this subject was last reviewed. Although postal operations still show a deficit, it is a fact that its revenues have increased in a remarkable degree, and the deficit is certainly not due to the amounts paid to the railroads for hauling mail, as these payments are relatively far less now than formerly. Revenues of the Postoffice Department have grown from $102,000,000 in 1900 to over $191,000,000 in 1908, or 87 per cent., this increase in revenue in eight years being as great as the entire increase in the previous thirty-five years.

But in this same period of eight years there was an increase of $100,600,000, or 93 per cent., in Postoffice Department expenditures, of which only $10,900,000, or 11 per cent., was paid to the railroads, $33,935,000, or 34 per cent., going to Rural Free Delivery, $25,000,000, or 25 per cent., to postmasters and their clerks, and the balance to other items.

The following statement shows for the year 1895 and for the years 1899 to 1908, inclusive, postal revenue and postal expenditures divided between amounts paid the railroads, cost of rural delivery and other expenditures:

REVENUE. EXPENDITURES.

Paid Rural
Year. Railroads. Delivery. Other. Total.

1895 $ 70,983,000 $31,189,000(a) $ -- $57,637,000 $ 88,826,000(a)
1899 95,021,000 35,775,000 150,000 65,607,000 101,632,000
1900 102,355,000 37,315,000 420,000 70,005,000 107,740,000
1901 111,631,000 38,161,000 1,778,000 75,616,000 115,555,000
1902 121,848,000 39,519,000 3,998,000 81,269,000 124,786,000
1903 134,224,000 41,377,000 8,102,000 89,305,000 138,784,000
1904 143,583,000 43,971,000 12,682,000 95,709,000 152,362,000
1905 152,827,000 45,482,000 20,824,000 101,093,000 167,399,000
1906 167,933,000 46,953,000 24,774,000 106,543,000 178,270,000
1907 183,585,000 49,831,000 26,643,000 113,754,000 190,238,000
1908 191,479,000 48,155,000 34,355,000 125,842,000 208,352,000

(a) Includes $1,646,741 accrued in favor of Pacific Railroads in 1895,
but not charged to postal expenditures.

The railroads are themselves large contributors to the revenues of the
Postoffice Department. It is ascertained that nine roads, covering
27,500 miles, pay annually $261,000 for postage stamps, or at the rate
of $2,000,000 for the entire railroad mileage of the country.

The next statement shows clearly that the ratio of expenses to receipts of the Postoffice Department would in 1908 have been but 91 per cent. and no deficit but for the expenditures made for Rural Free Delivery, the amount paid the railroads being now only 25 per cent. of the total revenue as compared with 41 per cent. in 1895.

RATIO OF EXPENSES OF POSTOFFICE DEPARTMENT TO POSTAL REVENUES 1895-1908.

Percentage Percentage Percentage
of Postal Rev. Paid to Paid to
Year. Paid to R'ys. Rural Free Del. Other Expenses. Total.

1895 41 0 75 116
1899 38 0 69 107
1900 36 0 69 105
1901 34 1 69 104
1902 32 3 67 102
1903 31 6 66 103
1904 31 9 66 106
1905 30 14 66 110
1906 28 15 63 106
1907 27 15 62 104
1908 25 18 66 109

In order to avoid a deficit, attention has been concentrated on this 25 per cent. of the postal expenditure, which we contend is at least not an unfair compensation to the railroads for services rendered. Though the proportion of the total revenue going to the railroads has fallen one-third in ten years, the deficit still remains, and is it reasonable to suppose that any reduction in railway mail pay would not be speedily absorbed in other directions? On the contrary, ought not efforts be concentrated to bring within reasonable figures the other expenses of the Department, which now absorb 84 per cent. of its revenue as compared with only 69 per cent. in 1900--despite an actual growth in postal revenue in the same time of $89,000,000, or 87 per cent.?

It will be noted from these figures that a reduction of 10 per cent. in the ratio of railway mail pay to total revenue can be entirely wiped out by an increase of only 3 per cent. in other postal expenses, whilst a retrenchment of 10 per cent. in the latter would have put the Department almost on a paying basis, notwithstanding the heavy cost of Rural Free Delivery. From 1895 to 1908 actual totals show that the railroads' pay has increased 54 per cent. for handling 114 per cent. more mail tonnage, whilst in the same period other expenses of the Postoffice Department have grown 178 per cent., revenues increasing 149 per cent.

Increased mail business means a direct increase in postal revenue, as postage remains the same regardless of tonnage, but carrying this increased business on the part of the railroads means less proportionate revenue to them according to volume of tonnage, so that the proportion of the postal revenue they now receive is very much less than formerly. Labor, material, and the price of everything sold in commerce have advanced materially, as we all know, in the past seven or eight years; railway mail pay being practically the only thing that has decreased in the face of conditions that should have raised it.

As a large increase in mail tonnage means to the Postoffice Department about an equal increase in revenue with a decreased payment per ton to the railroads through lower rates, the avoidance of a deficit would seem not a difficult matter if other postal expenses were kept at least within sufficient control, so they would not increase faster than the increase in volume of mail handled.

The Postoffice Department enjoys this peculiar advantage of receiving with the growth of the country an increase in revenue directly in proportion to the increase in business handled. In disbursing this revenue, it must pay less to the railroads in proportion to the density of business, thus retaining to apply on other expenses a larger net revenue year by year. It is reasonable to suppose that the cost of many branches of the Department should not increase in the same ratio as tonnage of mail (for example, that expenses of individual postoffices and administrative and general expenses should not grow in this proportion). Yet, regardless of these favorable influences, expenditures in other directions have absorbed the great net revenues after paying the railroads, and it is in these directions that the cause of the postal deficit must be looked for.

The growth of these expenditures, which since 1900 has been much faster than the rise in mail tonnage, is shown in the following comparison of 1908 with 1898:

1908. 1898. Increase. Pct.
Ton mileage of mails handled
by railroads 484,683,135 272,714,017 211,969,118 78
Postal revenues $191,478,663 $89,012,619 $102,466,044 115
Less paid to railroads 48,155,379 34,379,227 13,776,152 40
Net applicable to other
expenditures 143,323,284 54,633,392 88,689,892 162
Other expenditures 160,196,507 63,654,297 96,542,210 152
Deficit 16,873,223 9,020,905 7,852,318 87
Per ton of mail handled by railroads (cents)--
Postal revenues 39.5 32.6 +6.9
Paid to railroads 9.9 12.6 -2.7
---- ---- ----
Net applicable to other items 29.6 20.0 +9.6
Other expenditures 33.1 23.3 +9.4
---- ---- ----
Deficit 3.5 3.3 +0.2

Note.--The increase in gross postal revenue per unit of mail
handled by railroads is no doubt due to increase in city mail
not handled by railroads.

Chicago, Ill., March 1, 1909.

THE DIMINISHED PURCHASING POWER OF RAILWAY EARNINGS

BY C. C. MCCAIN.

Chairman of the Trunk Line Association, New York, 1909; Formerly Auditor Interstate Commerce Commission.