This impressive group of national organizations, which is broadly representative of the interests affected through Government cut rates, are all seeking correction of the present situation. In addition, the Interstate Commerce Commission itself has recommended that the privilege of negotiating Government rates outside of the Interstate Commerce Act be withdrawn, except in the time of war, threat of war, or other time of national emergency. The Hoover Commission Transportation Subcommittee also recognized that this privilege was being badly abused and recommended eliminating the privilege of moving passengers or Government property at free or reduced rates. The National Council of Farmer Cooperatives recently announced support for legislative revision to provide for the movement of Government traffic on the basis of commercial rates. In view of this broad general support for withdrawal of this special privilege to Government, we urge this committee to recognize the urgent need for correction and we suggest that since the committee has before it H. R. 525, it give consideration to reporting it promptly so that action in the Senate can be possible during this session. We feel the broad general support for this proposal justifies the priority requested. No other issue in the pending legislation enjoys such general support. In summary, we believe that the use of the section 22 privilege by Government has grown to the extent where it increases the cost to commercial shippers, plays one carrier off against another, and is disruptive of the national rate structure. We urge its elimination. Speaking only for the chamber, and not implying unanimity of opinion among the groups I have referred to previously, we feel also that in justice to the railroads an amendment should be made to H. R. 525 which would relieve them from complying with the long- and short-haul provisions of the fourth section of the act in filing Govern ment rates. No other form of transportation is subject, statutorily, at least, to these provisions. The time required in requesting relief in specific instances places railroads, and especially those with circuitous routes, at a disadvantage in competing for Government business. To relieve them by statute from the application of the long- and short-haul provisions on Government traffic would not affect the commercial relationships of intermediate communities, which the provisions were intended to protect. We therefore hope that such an amendment to H. R. 525 will receive your favorable consideration. CONCLUSION In concluding, I will summarize the chamber's recommendations on the several issues involved in the following manner: (1) That the national transportation policy statement include language which would direct that in prescribing rates there be allowed revenues sufficient to enable the carriers, under honest, efficient, and economical management, to provide the service needed by the public. (2) That the Interstate Commerce Commission be empowered to order discontinuance of curtailment of unprofitable intrastate rail services where these situations place an undue burden on interstate commerce. (3) That favorable consideration be given the proposal which removes the authority of the ICC to establish precise rates, unless it is conclusively shown that it would be contrary to the public interest. (4) That the present 7 months' suspension period be reduced. (5) That the rule of ratemaking include the principle that the Commission should not disapprove rates simply because they will have an adverse effect on other forms of transportation. Also, that the directive to the Commission to consider the effect of rates on the movement of traffic of the carrier proposing them be eliminated. (6) That the proposed extension of regulation to cover dry-bulk commodities not be approved. (7) That special rates to Government be eliminated by reporting out immediately H. R. 525, amended so as to waive the long- and shorthaul provision on Government traffic. In the name of the chamber, as well as personally, I wish to express appreciation for the opportunity of appearing before this committee. I would be glad to elaborate on the statement I have so far made, or read part 2 or any portion of it, or endeavor to answer any questions you may have. (The documents accompanying Mr. Arnold's statement follow :) ADDENDUM POLICYMAKING PROCEDURE OF THE CHAMBER OF COMMERCE OF THE UNITED STATES The Chamber of Commerce of the United States has in its membership approximately 3,200 affiliated business organizations (primarily local chambers of commerce and national trade associations). They in turn have total membership exceeding 1,700,000 American businessmen. The chamber's policy positions are arrived at through a vote by these organizations, and through them, their underlying total membership. Under this system of policy development, any affiliated organization or individual business member may submit policy proposals for study and consideration. Such proposals are referred to the appropriate committee for thorough study. The issues involving transportation and communication are referred to the chamber's transportation and communication committee, which is composed of 44 nationally recognized businessmen in this field. (A list of this committee is attached for information.) Committee recommendations are later submitted to the chamber's policy committee, the board of directors, and finally to the member organizations— either through a referendum or in annual meeting. Chamber policy, therefore, is developed through careful deliberation by wellqualified businessmen, with all segments of our business economy from all parts of the country participating. TRANSPORTATION AND COMMUNICATION COMMITTEE, 1955-56 *J. H. Carmichael, chairman, president, Capital Airlines, Inc., Washington, D. C. Russell B. Adams, vice president, Pan American World Airways System, Washington, D. C. A. G. Anderson, general traffic manager, Socony Mobil Oil Co., Inc., New York, N. Y. Grant Arnold, general traffic manager, E. J. Lavino & Co., Philadelphia, Pa. *Thomas A. Ballantine, president, Louisville Taxicab & Transfer Co., Louisville, Ky. Charles E. Beard, president, Braniff Airways, Inc., Dallas, Tex. J. G. Breslin, traffic manager, California & Hawaiian Sugar Refining Corp., San Francisco, Calif. Carl D. Brorein, president, Peninsular Telephone Co., Tampa, Fla. John H. Burke, owner-manager, Wiley Post Airport, Oklahoma City, Okla. J. L. Burke, president, Service Pipe Line Co., Tulsa, Okla. *Walter F. Carey, president, Automobile Carriers, Inc., Flint, Mich. A. D. Carleton, manager, traffic department, Standard Oil Company of California, San Francisco, Calif. Paul J. Coughlin, executive vice president, National Carloading Corp., New York, N. Y. Charles L. Dearing, senior staff member, The Brookings Institution, Washington, D. C. Harry A. DeButts, president, Southern Railway System, Washington, D. C. James D. Edgett, president, North American Van Lines, Inc., Fort Wayne, Ind. M. G. Gamble, president, Esso Shipping Co., New York, N. Y. T. B. Gittings, vice president, Western Union Telegraph Co., New York. N. Y. A. L. Hammell, president, Railway Express Agency, Inc., New York, N. Y. John F. Hendon, president, Hendon & Co., Inc., Birmingham, Ala. Arthur M. Hill, chairman, executive committee, the Greyhound Corp., Washington, D. C. Leland James, chairman of the board, Consolidated Freightways, Inc., Portland, L. E. Judd, director, public relations, Goodyear Tire & Rubber Co., Akron, Ohio. W. H. Ott, Jr., traffic manager, Kraft Foods Co., Chicago, Ill. D. H. Overmeyer, president, D. H. Overmeyer Warehouse Co., Toledo, Ohio. D. W. Rentzell, chairman of the board, Slick Airways, Inc., Oklahoma City, Okla. L. J. Rowley, manager, traffic and transportation, Lockheed Aircraft Corp., Burbank, Calif. Walter F. Schulten, vice president, Pittsburgh Consolidation Coal Co., Inc., George H. Seal, vice president, C. H. Sprague & Son Co., Boston, Mass. James B. Sinton, Avenales Cattle Co., Paso Robles, Calif. *Arthur E. Stoddard, president, Union Pacific Railroad Co., Omaha, Nebr. Harley L. Swift, president, Harrisburg Railways Co., Harrisburg, Pa. G. C. Taylor, president, Mississippi Valley Barge Line Co., St. Louis, Mo. Kenneth L. Vore, general traffic manager, Westinghouse Electric Corp., Pittsburgh, Pa. D. G. Ward, director of transportation, Olin-Mathieson Chemical Corp., New York, N. Y. William W. Ward, president, Ward Trucking Corp., Altoona, Pa. E. H. Wasson, vice president, American Telephone & Telegraph Co., New York, N. Y. F. B. Whitman, president, the Western Pacific Railroad Co., San Francisco, Calif. Gerald W. Collins, secretary, manager, transportation and communication department, Chamber of Commerce of the United States. PART II. EXPLANATION OF RECOMMENDATIONS 1. Changes in the national transportation policy The national chamber believes that each form of transportation should be regulated only to the degree clearly required by the public interest. The specific proposals for changes in the wording of the national transportation policy (sec. 2) has not been passed upon by our membership and we therefore are not in a position to comment upon it. However, we do wish to emphasize that one of the chief obstacles to achieving a healthy transportation system, which is the objective of the statement of national transportation policy in the Interstate Commerce Act, continues to be the unfavorable financial condition of most types of common carriers. This is Member United States Chamber board of directors. especially true from the long-range standpoint. Just compensation to the carriers is necessary to provide for modernization and expansion of transport facilities and to attract new capital. The existing policy statement lacks definite and specific reference to carrier financial needs. It fails to mention an important principle set forth in section 15a of the act, which states that in the exercise of its power to prescribe rates the Commission shall give due consideration to the need of revenues sufficient to enable the carriers, under honest, economical and efficient management, to provide the service needed by the public. Embodiment of that principle in the policy statement would constitute a mandate to the Commission and a guide to other Government agencies in their rate negotiations with the carriers. This belief is based upon the controlling significance which the Supreme Court has assigned to the policy statement in interpreting the various provisions of the act. The Interstate Commerce Commission is already required to consider this important factor by section 15a of the act. However, other Government agencies apparently do not feel bound by section 15a. We believe they would be more inclined to feel bound by a similar statement in the national transportation policy. If this principle were incorporated into the policy statement, it would constitute specific recognition of the fundamental principle that when the Government assumes the power to regulate the rates of public utilities in the public interest, it accepts the corresponding duty to authorize rates adequate to assure a financial return sufficient to pay the reasonable cost of providing the service and to produce a return adequate to support credit and attract capital for the proper discharge of its public duties. We urge, therefore, that this principle be specifically incorporated in the statement of national transportation policy. 2. Discontinuance of unprofitable services Section 6 (a) and (b) of H. R. 6141 would amend section 13 of the Interstate Commerce Act by empowering the Commission, among other things, to order discontinuance or curtailment of unprofitable intrastate rail service when it is found that it unduly burdens or will unduly burden interstate commerce. This proposal is directed at a partial solution to what perhaps is one of the most pressing railroad problems today-the tremendous passenger-train deficits. These deficits have been rising steadily in the past decade and are expected to amount to around $650 million for 1955. Solving this complex problem involves several steps, one of which is dealt with in this proposal. That is the difficulty of railroads to obtain State permission to eliminate or curtain passenger-train services, usually on branch lines, that have become hopelessly unprofitable due to a lack of patronage, caused primarily by the diversion of traffic to the private automobile. A number of cases have been cited where the railroads must move a passenger train on a regular schedule even though the crew regularly outnumbers the passengers. The difficulty in obtaining State approval stems primarily from two causes. One is that local considerations and pressures are given preference over the national interest, or even to the overall effect on the particular railroad. The other, which can be corrected only by legislation, is the existence of laws in certain States which do not permit the State regulatory authority to permit a railroad with a charter obligation to discontinue the last passenger-train service on its line or portion of its line. The Interstate Commerce Commission at present does have authority, and the Supreme Court has upheld it, to permit the abandonment of a complete line, whether it is interstate or intrastate. However, such power does not extend to a situation where the railroad wishes to continue a profitable freight service, but discontinue a continuously losing passenger-train service. The courts have stated on several occasions that this can be corrected only by Congress and not the courts, even though the particular railroad may be forced to suffer severe losses in furnishing unpatronized service. The chamber therefore supports the objective of section 6 (a) and (b) to give the Commission authority to act, following denial by State regulatory authorities or failure of such authorities to act within a reasonable period of time, on the right to discontinue intrastate services that unreasonably discriminate against, or place an undue burden on, interstate commerce. 3. Maximum-minimum rate regulation Under section 7 (a) of H. R. 6141, the present authority of the Commission to fix precise rates would be limited to the setting of just and reasonable minimum or maximum rates. The Commission has testified that the power to fix precise rates, or minimum and maximum rates, has been seldom used. In the large majority of cases, where it has been necessary for the Commission to act, it has found it appropriate to fix either minimum rates or maximum rates, but not both. It believes, however, that its present authority should be continued for use in the occasional cases where it appears necessary. On the other hand, it is argued that the regulated carriers, and especially the common carriers, should be allowed more latitude in the pricing of their services in order that they may compete on a more equal basis with less regulated or unregulated carriers. The national chamber, as previously pointed out, believes that each form of transportation should be regulated only to the degree required by the public interest. It also believes that regulatory agencies should not substitute their judgment for that of management with respect to the effect of carrier rate proposals on the volume of business and the revenue to be derived therefrom. In view of the slight need that is anticipated for the authority to fix precise rates, and the greater flexibility claimed for carrier management to exercise its business judgment, it would appear that favorable consideration should be given to the proposal unless a strong showing is made that the public interest requires the additional control. 4. Reduction of suspension period Section 7 (c) of H. R. 6141 proposes, among other things, that the period of suspension of new rates by the Interstate Commerce Commission pending decision as to their lawfulness, be limited to 3 months. The chamber believes that, in the interest of the public as well as of the regulated industries, there is great need to speed up decisions of both Federal and State regulated bodies. It also believes, specifically, that the present 7 months maximum suspension period authorized by statute to permit investigation in rate cases before the Interstate Commerce Commission should be reduced. It has previously been pointed out that competing carriers file approximately 90 percent of ICC suspension applications and shippers only 10 percent, and that most of the suspension cases arise from protests against rate reductions. It also has been suggested that frequently the power of suspension has been used by competing carriers merely to delay decisions. When a lower rate is proposed in behalf of a shipper, and it is suspended on protest of a competing carrier, not only the proposing carrier, but the shipper loses. In other words, the shipper, rather than being helped by carrier competition for his business, is denied the lower rate for the period of suspension. In order to minimize such losses, therefore, we believe that every effort should be made to speed up decisions. We feel that the present 7 months statutory maximum is unnecessarily long but, at the same time, recognize that hecause of unavoidable procedural delays, a statutory maximum of 3 months would be too short. We suggest a maximum somewhat less than 7 months. 5. Repeal of the rule of ratemaking Section 8 of H. R. 6141 would repeal the present rule of ratemaking contained in section 15a of the act and substitute new standards in ratemaking procedures. Section 15a of the act lays down three specific standards for the Commission to consider in arriving at a reasonable rate. The first states that it shall consider "the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed." We do not feel that regulatory bodies should substitute their judgment for that of management with respect to the effect of carrier rate proposals on the volume of business and the revenue to be derived therefrom. We approve, therefore, of the removal of this standard from the act. The second standard directs the Commission to give consideration to the need. in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service. There is no objection to the retention of this standard. In connection with the third standard, "the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to pro |