The Railroad Problem. Edward Hungerford
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operating expenses and taxes are far higher in 1916 than they were in 1914.
Hold this picture up to the light. I have begun to develop the huge plate for you. Now study its details for yourself. An investment of $4,000,000,000—more than ten times the cost of the Panama Canal—produced, at the end of a seven-year cycle, increased transportation earnings of more than $450,000,000; yet it required $500,000,000, or an excess in a single year of more than $50,000,000, to meet the pay-roll, material tax, and other costs of operating the railroads. And in this figure we have not taken account of that annual interest charge of more than half a million dollars a day for the huge $4,000,000,000 investment fund.
That interest charge cannot be ignored. Bankers demand their pay. Add the deficit in a single year—a normal year, if you please. Here it is—$54,698,000 plus $202,100,000—and you have a total deficit of $256,798,000. And this is but a single year. The years that preceded it were no better.
The money that went to meet these deficits was provided from some source. Where did it come from? Most of the big railroaders know. They will tell you, without much mincing of words, that it came from previous accumulations of surplus, or else from money withheld from the upkeep of the physical property of the railroads. Of this last, much more in due course. For the present moment, consider that great $4,000,000,000 expenditure between 1908 and 1914 for additions and betterments. It was none too much—not even enough when one comes to consider it beside the great expansions in service as represented by the showings of passenger-miles and ton-miles. And yet today, as we shall see in due course, the railroads stand in need of far greater development and expansion than ever before in their history. Five or six years ago that supreme railroader, James J. Hill, estimated that the railroads of America would need a further expenditure of $1,100,000,000 a year upon their properties before they would be in shape even to decently handle the traffic that would be coming to them before the end of the present decade. Hill was a master railroader who stood not only close to his properties but close to the great territory which they serve. He knew that the states of the Union which are west of the Mississippi River had been developed to only twenty-seven per cent of their ultimate possibilities. It would be hard to state the lack of development of the railroads of that territory in exact percentage. It certainly would be a figure far less than twenty-seven.
If you are a traveler at all familiar with the Middle West and the South; if you are traveling steadily and consistently these years over all of their rail routes, you must have been convinced of their appalling condition. Many of their main lines are deplorable; their branch lines are unspeakable. Branch-line service in every part of the land has been a neglected feature of railroad opportunity—as we shall see in due course. But in the Middle West and in the South they are at their worst. If they do not actually cry aloud from a physical standpoint for reconstruction, their service, or the lack of it, certainly does. Yet the people, the communities, and the industries which are situated upon them are entitled to a railroad service which shall enable them to compete upon an even basis with the communities and industries which are situated upon rich and efficiently managed railroads. I feel that this is an economic principle to which there can be no dissent. And I think also that there can be no dissent to the wretched plight of many of the roads of the Middle West and the South—more particularly the Southwest. In rough figures, the prosperous railroads of the land, representing some forty per cent of its mileage, are able to give service to their patrons; sixty per cent are unable to render a proper service.
But even in the prosperous sections of the West—of the larger proportion of the country—one who rides and sees and thinks cannot fail to be impressed with another great cost, yet to come. I am speaking of the removal of tens of thousands of highway grade crossings, in our towns and cities and in the open country. Already a good beginning has been made; but it is as nothing compared with the work which remains to be done. The coming of the automobile has hastened the necessity of the completion of this work. The railroads have contrived many ingenious and perfected methods of safeguarding their highway grade crossings. The best of them are most inadequate, however.
The fact remains—a fact that must be particularly patent to you when you ride across Michigan, or Indiana, or Illinois, or Iowa, or any of their sister states—that here is a great and vastly expensive work awaiting the railroads of this country. In the larger cities—New York, Boston, Buffalo, Chicago, St. Louis, Kansas City, to name a few striking examples—many millions have been expended in this work within the past few decades. While the several communities—in some instances the state treasuries—have borne a portion of these expenditures, the burden has fallen invariably upon the backs of the railroads. Fortunately the railroads which have succeeded in absolutely eliminating many of their highway crossings—and, in so doing, reducing a large part of their accident claims—have been the wealthier roads. But that is little satisfaction to a community unfortunate enough to be situated on the lines of a bankrupt road. The chances are that its grade crossings, being more poorly protected, are more dangerous.
One thing more, while we are upon this subject and are speaking particularly of this lack of development of the railroads of the West and of the Southwest. It is an interesting fact that there are but three railroads—the Santa Fé, the Union Pacific, and the Southern Pacific—which have done any considerable amount of double-tracking west of the Missouri River. Yet, as we shall see when we come to the military necessity of our railroads, it is only a double-track railroad which is competent to handle any really considerable volume of traffic. And it is equally true that it is more than foolish to attempt to build or to develop any considerable mileage of branch lines until there are double-track main stems to serve it adequately. James J. Hill had all these things in mind when he made his definite statement as to the financial needs of the railroads of the United States during the present decade. And he did not need to give consideration to the abnormal traffic which the great war has given to our railroads. The normal development of the West, its gigantic possibilities, were sufficient to convince that man of great vision, to set his ready pencil at statistics.
As a matter of fact and in view of the record of these past half-dozen years, the average well-posted railroader of today will tell you that Hill was only conservative in his estimate. But, being even more conservative ourselves, let us allow that, if the railroads had been unhampered during the past decade, they would have expended as high as $1,000,000,000 a year in permanent improvements.[2] Ten billions instead of four! Ten billions of dollars makes dramatic comparison even with our great trade balance that has accumulated during the European war—the excess of exports over imports already amounting to only a little over $3,000,000,000. And as to what it would have meant to industrial America, poured out through many channels, raw materials, manufactured goods, labor—it takes no stimulated mind to imagine. The flush period into which the war has suddenly plunged us can give a fair indication.
Now consider for a moment not the possible expansion that the railroad might have made in the last decade and did not, and see how it has failed in the ordinary upkeep of its property. This last phase of its plight bears directly upon the great railroad financial problem as it exists in this year of grace, 1916—the epochal year in which the roads need to replenish their equipment; the year in which they find the doors of the money markets, open to almost all other forms of industrial investment, all but closed in their faces. By equipment, I now speak in the broad sense of the word not merely of cars and locomotives but tracks and bridges and terminals as well—the entire physical aspect of the properties. Yet take, if you will, the word “equipment” in its narrow and technical sense. The sense of railroad necessity is not lessened.
The other day the Massachusetts Public Service Commission complained that the largest of the railroads operating out of Boston was using in its suburban service some 700 wooden passenger coaches, varying in age from twenty-five to forty years. The railroad did not deny that allegation. It merely said that it had no money with which to buy modern coaches.
Its condition is typical. Week after week in the glorious autumn of the year of grace 1916, the news columns of the commercial pages of our morning newspapers were telling with unvarying monotony of the shortage of freight cars as bulletined by the American Railway Association—100,000 this week, 75,000 last, 150,000 next—who knows? The merchant and the manufacturer know. They know in shipments of every sort delayed; in the delays running into sizable money losses