by
Julius Kruttschnitt,
Director of Maintenance and Operation
of the Union Pacific System
and Southern Pacific Company.

The question of compensation to the railroads of the United States for carrying the mails has been under review before Congress at different times during the past ten years. The subject was exhaustively investigated by a Joint Commission of the Senate and House of Representatives in 1898 and 1899, which reached the following conclusion after full consideration and taking of a mass of testimony on all sides of the question:

(See Report 2284, House of Representatives, 56th Congress, 2d Session.)

This Commission also concluded as to the pay for railway postoffice cars:

Since the above recommendations were made, the operating costs on railroads, and, consequently, the cost of handling the mail, as hereafter shown, have been largely increased, through higher prices for both material and labor, so that if the railways were not over-paid ten years ago, the present rates, being lower than those paid at that time, would be too low and should really be increased to give the railroads a reasonable return. Far from doing this, legislation enacted in the past few years has had the effect of cutting down the mail pay of the railroads, whilst the special requirements as to service and equipment have been made more severe and exacting.

Recent acts of Congress or orders of the Postoffice Department, which have the force of law, that have caused reduction of railroad revenues, are the following:

1. Act of Congress of March 2, 1907, reduced pay on all routes moving in excess of 5,000 pounds per day. This reduced the pay for handling mails $1,740,494.63, or 3½ per cent. of the total earnings. The same act reduced the rental rates for railway postal cars $935,974.09 per annum, or 16 per cent. The total reduction in pay to the railroads under this act was $2,676,468.72, or 6 per cent. of the total compensation for both classes of service.

2. Act of Congress of June 26, 1906, effective July 1, 1906, withdrew from the mails empty mail bags and certain supplies, to be thereafter shipped as freight or express. It may be conservatively estimated that the annual loss in mail revenue to the railroads by withdrawing these shipments from the mails is at least $1,000,000, with practically no reduction in space furnished because of this change.

3. Order of Postmaster-General of June 7, 1907, changing with each mail weighing thereafter the method of computing average weights on which pay is based from that always previously used and theretofore regarded as the proper interpretation of the law. The effect of this on the mail weighings of 1907 and 1908 was to reduce railway mail pay in two sections of the country, $2,222,108.92, or 9½ per cent., or at the rate of $4,500,000 per annum for all roads of the country.

4. Orders of Postmaster-General reducing railway postal car pay by allowing "shorter-car" pay on certain lines than heretofore authorized and changing certain full lines to half lines; that is, reducing pay for return movement, thus causing an annual loss to the railroads of $345,287.06. (Second Assistant Postmaster-General's Annual Report 1908, page 13.)

The effect of all of these reductions on the mail revenue of the railroads aggregate $8,500,000 per annum, or 17 per cent. of the total pay received by them in the year ending June 30, 1908, for handling the mail and furnishing railway postal cars.

These reductions were made without justification and for the purpose of reducing railroad revenues—and, incidentally, the expenses of the Postoffice Department, at a time when the net earnings of the carriers seemed large to the public mind, although under these favorable conditions the returns to the shareholders approximated but 4 per cent., whilst farmers were receiving 10 per cent., manufacturers 15 per cent. and National banks 18 to 20 per cent.

It is true that there has been a large increase in the gross revenue of the railroads in the last ten years, but this has accrued from traffic other than carriage of the mails and has been accompanied by great increase in operating expenses. In fact, were it not for the economies of the carriers, effected by the use of more powerful locomotives and larger freight cars, the increase in operating expenses would, without doubt, have fully neutralized the growth in revenue. In the months preceding the panic of October, 1907, the railroads were quite generally showing decreases in net earnings in face of the largest gross earnings in their history. It was costing them much more than a dollar to handle every dollar increase in gross earnings.

Since the hasty enactment of ill-considered legislation reducing mail pay, the revenues of the roads have been seriously affected by a change in business conditions which has reduced traffic without reducing prices of materials and labor. At the same time, legislation has increased labor costs by reducing hours of service.

In 1898 rates for transporting the mails were too low to cover the cost of service, they are much too low now, and the losses on the mail service as a whole—there are some routes that pay—are borne by freight traffic entirely.

RECEIPTS FROM MAIL AND OTHER RAILROAD TRAFFIC.

The latest statistics of operations of all railroads of the United States are for the year ending June 30, 1907, issued by the Interstate Commerce Commission, July 9, 1908. From them we compile the following exhibit comparing results of 1907 with 1898—when a Commission of Congress, after complete investigation of the subject, recommended that mail rates be not reduced.

The foregoing statement clearly shows the difference between the revenue obtained from passenger trains as compared with freight trains. The control of the former is largely out of the hands of railroad operating officers, as to meet competitive and traffic conditions, heavier and more luxurious passenger cars must constantly be furnished, which, of course, means largely increased expense with very little increase in the paying train load. In fact, as to the mails, notwithstanding an increase in tonnage carried on the average train, the mail earnings per passenger train mile were actually less in 1907 than in 1898, due largely to the automatic reduction of railway mail pay per ton mile. Considering the freight train mile, the composition of which is almost entirely within the control of the railroads, which institute methods for reducing cost of transportation, it will be observed that by such methods the railroads have been enabled to place 58 per cent. more tonnage in a train, bring them 58 per cent. more earnings, which can be applied as an offset to the increase of 54 per cent. in the cost of running a train one mile.

This increase in operating expenses per train mile last referred to has been brought about largely because of the increased cost of labor and materials, which, as is well known, has been general throughout the country.

Comparing results of operation of all railroads of the United States for the year ending June 30, 1907, with 1898, when this question was last up, it is shown by reports of the Interstate Commerce Commission that gross revenue from operations, as well as income from investments, increased $1,380,000,000. This is a very large sum, but let us see what becomes of it. Increased wages paid to employes consumed $577,000,000, or 42 per cent., purchase of material included in operating expenses, $354,000,000, or 26 per cent. of the increased income, and these material purchases represented largely labor involved in their production. Increases in betterments and miscellaneous deductions consumed $77,000,000, or 6 per cent. of the increased income. Larger payments for interest on funded debt and current liabilities consumed $96,000,000, or 7 per cent., and larger taxes 2.5 per cent., leaving $240,000,000, or 16.5 per cent. of the increased income for the owners of the properties, the stockholders. In 1898 dividends were less than 2 per cent. of the capital stock, and in 1907, even with the large increase noted, they were only 4 per cent. Contrast this with the manufacturers' returns of 15 per cent., the farmers' of 10 per cent., and the National banks' of 18 to 20 per cent. on their capitalization.

Reduction in railway mail pay was not justified in 1898; it was far less justified in 1907. On the contrary, there has been a large fall in mail pay per ton mile, and conditions under which mails are transported are becoming more and more onerous. The cost of building a railway postoffice car to the present plans and specifications of the Postoffice Department is at least 50 per cent. more than it was in 1898, although pay received for handling these cars, that weigh from 25 to 30 per cent. more than formerly, has been arbitrarily cut over 16 per cent. by the Act of Congress of 1907, and has since been further cut through readjustment of routes. For the year ending June 30, 1908, the railroads received gross $48,155,379, including railway postoffice pay, for carrying 80 per cent. greater tonnage of mails than in 1898, a sum $12,747,629 less than it would have been but for the reduction of rate from 12.59 cents in 1898 to 9.94 cents in 1908. In face of this, as we have shown, arbitrary cuts of $8,500,000 more have been made, a grand total of over $21,000,000 less paid now than ten years ago.

About eighteen months ago the conclusion was reached that heavier and stronger cars were demanded by changed conditions resulting in heavier trains, greater speed and increased frequency and consequent risk of accident to clerks and mail in collisions and wrecks. After careful investigation and expert testimony the specifications were revised so that full 60-foot cars would weigh about 100,000 pounds instead of 80,000 pounds, and be greatly strengthened by the free use of steel plates and oak timbers. To meet the views of car builders, east and west, two plans and specifications, slightly differing, were adopted as standard, and railroads were given the option of conforming to one or the other. The best known anti-telescoping features were adopted in both plans, producing in the judgment of responsible car builders a car of exceptional resisting and carrying power. When new lines of cars are authorized by the Department, or new cars are ordered to take the place of old cars in service, companies operating the routes are furnished copies of these specifications and the superintendent of division is instructed to see that cars are built in conformity therewith. Inspections are made while the car is in the shop, and when it is completed a full report is made and forwarded to the Department. A decision is then reached as to whether the car is satisfactory and can be accepted.

(Annual Report Postmaster-General for 1905.)

This increase in weight of a postal car might not be thought of much moment, but it means to the railroads the movement of 1,000,000 additional gross ton miles per car per year, costing them $10,000 per annum in operating expenses, whilst, as shown, they receive 16 per cent. less railway postoffice pay now than formerly.

United States Postal Laws and Regulations, Section 1164, provide that the average weight of the mails used in fixing rates shall be established by the actual weighing of the mails for a period of not less than thirty days and "not less frequently than one in every four years." The construction placed upon this by the Department has been the one which reduced to the minimum the pay which the railroads receive for services rendered. If mail traffic were stationary, weighing every four years would not matter much, but the increase of mail matter throughout the United States has been very great, and, because of the policy of the Department, to weigh the mails not more frequently than every four years, heavy losses have resulted through the railroads having to haul tonnage for three successive years following each weighing for which they receive no pay.

As a result of this policy of quadrennial weighings, the roads in Interstate Commerce Groups 7, 8, 9 and 10 (including the territory west of the Missouri river and the Mississippi below St. Louis) between 1878 and 1905 suffered a loss of $19,200,000, or 12 per cent. of the aggregate railway mail pay, compared with what they should have received if the mails had been weighed annually. In other words, this loss is equivalent to a reduction in the rate received per ton mile in these groups of states of 12 per cent. The loss to roads in the western part of the United States is most striking, due as it is to the rapid growth of that section. The same reduction, though to a slightly less degree, obtains in other parts of the United States.

COMPARATIVE RETURNS TO THE RAILROADS FROM CONDUCTING MAIL. PASSENGER AND FREIGHT SERVICE IN THE UNITED STATES.

In order to make a fair comparison of operating results from different classes of traffic, it is necessary to consider them under substantially similar conditions. The best measure of railroad service is work done, or weight multiplied by distance carried; in other words, the ton mileage. A comparison of services differing so widely as the mail, passenger and freight on the basis of ton mileage of such business is, however, unfair, because in the two former an excessive proportion of dead weight must be transported for each ton of paying load, whilst with freight traffic the proportion of dead weight is small. The hauling power of a locomotive is measured not by revenue ton miles, but by ton miles of gross weight, it making little difference to the locomotive as to what this gross ton mileage is composed of, the gross tonnage and the speed at which it must be moved being the factors that consume the energy of the locomotive.

A computation has been made of ton mileage on each individual mail route by multiplying weight carried by length of route; to the sum of these we add the dead weight of cars. The report of the Second Assistant Postmaster-General for year ending June 30, 1908, page 32, gives the number of cars engaged in mail service, which we have multiplied by the average mileage made by the average car, based on experience of the Union Pacific and Southern Pacific Systems, to ascertain total car mileage for the United States. Multiplying this by the dead weight of a car gives the ton mileage of dead weight, which, added to the ton mileage of mails, gives the gross ton mileage, measure of work and cost imposed on the railroads in return for the pay they receive for handling the mails. These computations are shown in the following statements, the results being conservative, as for want of accurate data it has been necessary to omit some work which the railroads do, which, if ascertainable, would increase the cost. For example, we have made no charge for the dead weight of that portion of baggage cars devoted to the handling of pouch mail, such pouch service, according to the Postmaster-General's report, covering annually on railroads and express trains 122,027,597 miles; nor for the dead weight of storage mail cars provided by the railroads. Neither has any account been taken of the value of transportation given mail clerks, which, based on the Postmaster-General's report of 1908, amounted to 629,778,443 miles, which at 2 cents a mile would be $12,500,000; nor for the value of transportation or postal commissions of Postoffice Department officials; nor does it take into account special service rendered by the railroads, such as delivering mail at stations, value of space furnished by the railroads and required of them by the Postoffice Department at important junction and terminal points for mail distribution and accommodation of government transfer clerks.

The statistics of passenger service in the following statements are based on the 1907 Annual Report of Statistics of Railways published by the Interstate Commerce Commission (1908 figures, which would show higher operating cost, not available), with the exception that the average mileage per car per annum run by passenger cars is based on the experience of the Union Pacific and Southern Pacific Systems.

Statistics of freight service are likewise based on the 1907 Report of Statistics of Railways, freight car mileage being actually reported by the Interstate Commerce Commission, dead weight per car being computed from all freight cars handled on Union Pacific and Southern Pacific Systems.

MAIL SERVICE.

Year Ending June 30, 1908.

(a) No portion of mileage or weight of storage cars or cars handling pouch mail has been considered.

PASSENGER SERVICE OTHER THAN MAILS.

RELATIVE COST OF SERVICE.

To determine the relative costs to the railroads of performing mail, passenger and freight service, we must allocate the expenses to freight and passenger service as a whole, afterwards apportioning the latter to mails and other service. Railroad operating expenses apply jointly to both passenger and freight trains, so that, with few exceptions, it is impossible to determine exactly from any published statistics the cost of passenger train service as distinguished from freight. There are some items of train mile expense directly connected with movement which are less for passenger than for freight trains, whilst, on the other hand, many other expenses are greater for passenger than for freight, such as danger from casualties, necessity of expensive terminals, delays to other traffic through preference given to passenger trains, additional main tracks, and, particularly, higher standards of maintenance of roadbed required for high speed passenger train movement.

On account of the impossibility of separating the expenses, we assume that the above factors about balance each other and that the average cost of running all trains can be taken as either passenger or freight train mile cost, respectively, without serious error.

We allocate a proportion of the passenger train cost to the mails on the basis of the gross ton miles handled in each class of passenger traffic.

The relative revenues and expenses are shown on opposite page, mail revenues being as shown by 1908 Report of Postoffice Department, and other statistics as given in the 1907 Statistics of Railways of the United States, published by the Interstate Commerce Commission, or are computed therefrom.

ALL RAILROADS IN UNITED STATES.

Summary of Mail, Passenger and Freight Service.

The above shows that whilst passenger service as a whole is unremunerative, the mail earnings are hardly what they should be to pay a fair share of the railroad operating expenses only, regardless of taxes and interest.

Or, put in another way, our computations have shown that in each passenger train run the railroads haul an average of 43/100 of a mail car, and the contents of this car yielded average earnings of 9.4 cents for each mile run. The computation just made shows that each freight car run, loaded or empty, yields a revenue to the carrier of 10.5 cents per mile. Incredible as this may seem, it is understandable when we reflect that the railroads transport 1.1 tons of dead weight for each ton of freight for which they are paid; with mail they transport 21.7 tons, or twenty times as much. The freight rate is .759c per ton mile, the mail rate 9.94c, or only thirteen times as much.

Arguing in still another way: Average number of cars in each passenger train handled in United States is 3.95, of which mail cars amount to 0.43, or 11 per cent. Eleven per cent. of the average earnings of a passenger train is 13.8 cents, but mail contributed only 9.4 cents. That is, it should pay 47 per cent. more than it does to be made to contribute a fair share to the insufficient earnings of a passenger train. Mails are fairly responsible on basis of space used for 11 per cent. of the cost of running a passenger train, or 16.17 cents, and as dead weight per foot of space is greater with mails, their proportion of train mile cost is even larger. They pay little more than one-half this cost.

By building larger capacity cars and larger engines, the cost of handling freight traffic, entirely in the control of the carrier, has been reduced to follow rate reductions and increased expenses.

On the other hand, because methods of conducting passenger traffic are largely—and mail traffic entirely—beyond their control the cost of handling mail and passengers has been steadily increasing, and, as revenue has not increased, the net revenue or margin of profit has been cut to a point where it is unremunerative.

The argument advanced by advocates of reduced mail pay, that increasing density permitted economies and that lower rates would yield more net, is not applicable when the carriers' hands are tied and measures of economy so successfully applied to handling freight are prohibited. The following will illustrate this:

On routes where pouch service is used mail is handled with express and baggage without much increase of cost over other passenger traffic. A somewhat greater mail traffic obliges the railroads to furnish apartment cars, at increased expense and dead weight for the postoffice feature, but still permitting the railroads to carry other traffic in the same car. A still further increase in weight means the establishment of full R. P. O. lines for which the railroads receive extra, but inadequate, compensation, these cars being used for no other class of traffic and adding largely to the weight and cost of train service. Even after the route has been made an R. P. O. route, the railroads are not permitted to economize by carrying more mail in the car, and as traffic density grows the roads must under the requirements of the Department add more cars, almost in proportion to the business, as the loads carried in R. P. O. cars, as shown by recent special weighing, average only 2¾ tons, and many of them return empty—for which empty haul the railroads often receive no pay. When the mail business has assumed very large proportions and the R. P. O. cars have multiplied in ratio therewith, special trains are then added to carry the bulk of the mail, being run at very high speed and adding to the railroad expense account in a far higher degree per unit of business than any other class of traffic.

In contrast to the above, baggage and express are very generally hauled in the same and a much lighter and less costly car than the mail car, and increase in tonnage is accommodated by hauling greater loads per car. In the case of freight, increased density means larger car and train loads and greatly reduced costs of operating per ton mile.

Despite these differences in conditions, the automatic scale has secured to the Government a larger reduction in mail rates per ton mile in the last ten years than the percentage of fall in freight rates, despite higher labor and material costs of railroad operating. As a result, the mail business—which, according to evidence introduced before the Congressional Committee of 1899, was unprofitable at that time, has been made more unprofitable at the present time by the heavy rate reductions of 1906-7.

As the greatest reduction made deals with mail routes on which traffic is heaviest, a consideration should be given to the following conditions of handling mail on such routes:

HEAVY TRAFFIC MAIL ROUTES.

On very many of the heavy traffic routes where the principal reduction in pay occurred a large part of the mail is now handled in special mail trains run at excessively high rates of speed. Such trains introduce the following conditions:

1. A very much greater liability to accident. A large proportion of the deplorable accidents that have occurred on the American railroads in recent years have occurred to excessively high speed trains, accidents to such trains being almost invariably destructive to life and property. An examination of serious accidents on the Union Pacific System and Southern Pacific Company for the calendar year 1906 shows that 36 per cent. of the property damage from all causes, including negligence, as traceable to trains not under control and excessive speed, whilst 30 per cent. additional damage was due to causes that might prevent inferior trains getting out of their way, such as keeping main line on time of superior trains, failure to observe signals or orders, etc.

2. Mail trains run at excessive high speed are much more expensive to operate than other trains, for the following reasons:

3. Speed of trains carrying mails has been constantly increased, a study made of the speed per hour made on fastest trains on which R. P. O. cars are handled on seventeen of the principal mail routes giving the following results:

Average of fastest train on seventeen mail routes:

With the above increase in speed, rates paid the railroads have automatically decreased whilst expenses have largely increased to provide for the above greater speed and because of increase in prices of labor and materials of all kinds in the past five or six years. This increase in speed has been made coincident with growth of freight traffic, which is the railroads' profitable business, the non-profitable high speed trains delaying the profitable ones, increasing their cost and incurring liability to accident.

4. Earnings of mail trains supposedly high are not higher than other passenger trains, which, as a whole, earn very much less per mile run than freight, relative figures being as shown by last report of the Interstate Commerce Commission—as 100 is to 218, whilst the cost of running passenger trains is as much, if not more. This is particularly the case with high speed passenger trains, which is the most unprofitable business in which railroads are engaged. (On Union Pacific System last year earnings per passenger train mile were $1.71, per freight train mile $4.31.)

5. Passenger engines in hauling fast passenger trains on principal main lines at the present time have assumed, on account of increased weight of equipment and excessive speed required, enormous proportions. We now have in such service on our lines engines weighing exclusive of tender 222,000 pounds, this power being 60 per cent. heavier and twice as costly as locomotives used in the same class of service ten years ago, burning double the amount of fuel. Engineers running these locomotives receive higher pay because of the greater size of these engines—to say nothing of recent increases made in their schedules. Such heavy power moving at fast speed is extremely destructive to the roadbed, requiring a much higher standard of maintenance than formerly, maintenance of way cost in the past few years having gone up 50 per cent. Engine failures are largely confined to fast passenger trains, and, in general, expenses are increased all along the line because of their introduction.

6. As illustrating the additions to expenses because of increased track maintenance on account of fast passenger and mail trains, we have made a study of statistics, using the Interstate Commerce report of 1906 as a basis, of seven roads having a large proportion of fast passenger service and seven roads having a moderate speed passenger service, but with a large proportion of freight service. On the roads first named the average cost of maintenance of way per mile was $2,951, and on roads in the latter class $1,565. The operating expenses per train mile in the former class were $1.47, and in the latter $1.33. The roads in the former class, on account of large number of excessively high-speed trains, were obliged to double-track their lines, which directly increased maintenance expenses.

PAY FOR RAILWAY POSTAL CARS.

The large reduction made by Act of March 2, 1907, in pay for railway postal cars was made in face of large increase in the cost of constructing such cars, due to higher prices of labor and material and greater cost of meeting the more exacting specifications of the Postoffice Department. Changing to steel construction, increases in weight, and generally heavier operating expenses, have created an extremely large increase in cost of moving these cars. The standard railway postal car of only a few years ago, 60 feet long, weighed 80,000 pounds and cost about $5,500. The standard railway postoffice cars, 60 feet long, of wooden construction, used on the railroads with which I am connected, weigh over 100,000 pounds each, or one-fourth more weight, and costs 40 per cent. more, whilst our new standard postal cars of steel construction weigh 108,000 pounds and cost over $9,000, or 60 per cent. more than the car of a few years ago.

An argument sometimes made in favor of a lowering of R. P. O. car pay is that for apartment cars used in runs where mail density does not require a full car, no additional compensation is allowed. But we feel that a fair consideration of the circumstances under which mail is handled as compared with other traffic will justify the conclusion that this is not an argument in favor of reducing R. P. O. pay, but rather for allowing the railroad additional compensation for the apartment cars as well. Both services require the furnishing of special features in the way of traveling postoffices not required except for the convenience of the Postoffice Department to enable it to do work while mail is in transit, such as ordinarily performed in office buildings. The full postal car is more expensive to the roads, as it always means additional car service, whilst in some cases of apartment cars the space not occupied by the traveling postoffice is adequate to take care of baggage and express, though very frequently this service also means additional car movement that would not be necessary but for the postoffice feature.

The saving to the railroads from reduction in car mileage that would be possible if it were not obliged to furnish traveling postoffices, but could use the space occupied by racks and other postoffice features by loading additional mail in cars, would be many times the revenue allowed by the railway postal cars.

To illustrate: The car mileage of postal cars (changing apartment cars to full cars on basis of length) is 232,180,000 per annum; the ton mileage of mail 484,683,135, or 2.09 tons per car. From figures obtained from the Postoffice Department, average car weights shown on page 59, table "EE," special mail weighing of 1907, it is ascertained that storage mail cars, which, of course, contain no postoffice features, carry an average of 7.04 tons of mail. At this rate the whole mail business could be carried by the movement of 68,844,000 car miles, or 163,336,000 less than actually employed, due to the postoffice features. The total railway postal car pay is only $4,567,366, or only 2.8 cents per additional car mile, whilst the operating expenses chargeable to running these 163,336,000 car miles, of 70 per cent. of the total movement, amount to $67,000,000.

But for the postoffice feature, the combined weight of an entire route could many times be handled in a single car such as is used for express instead of several heavy and expensive postoffice cars, whilst often extra cars for storage mail must be added, for which no extra pay is allowed, the cost of running these storage cars also not being included in the computation of cost of service, as no accurate statistics of their number or car mileage are available.

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:

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.

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:

Chicago, Ill., March 1, 1909.

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