TRANSPORTATION POLICY THURSDAY, JUNE 14, 1956 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TRANSPORTATION AND COMMUNICATIONS Washington, D. C. The subcommittee met at 10 a. m., pursuant to adjournment, in room 1334, New House Office Building, Hon. Oren Harris (chairman of the subcommittee) presiding. Mr. HARRIS. Let the committee come to order, please. Col. Joseph K. Carson, Jr., is here from Portland, Oreg. Colonel Carson, I am advised, is representing the Willamette National Lumber Co. We will be glad to hear you. STATEMENT OF JOSEPH K. CARSON, JR., PORTLAND, OREG., REP- Mr. CARSON. Mr. Chairman, you wish me to testify now. Mr. CARSON. Mr. Chairman, I can make this rather brief and ask that a part of the statement that I do not read be entered into the record, except exhibit B, which is surplusage and would serve no good purpose in being printed. Mr. HARRIS. You may have permission to include your entire statement, less the exhibit referred to. I might say, in order that the record may show it, our distinguished colleague from New York, Mr. Keogh, has expressed an interest in your presentation here. We are glad to have his expression of interest in your behalf. Mr. CARSON. Thank you, Mr. Chairman. My name is Joseph K. Carson, Jr. I am a resident of Portland, Oreg., and pro hac vice, represent Cascade Plywood Corp., Santiam Lumber Co. and Willamette National Lumber Co., all of that city. From 1933 to 1941 I served as mayor of Portland and as such was the appointing authority of the Commission of Public Docks. Accepted appointment to the United States Maritime Commission in 1947 and remained there until May 1950. During part of my time in the District of Columbia I commanded the 2907th Transportation Group with the rank of colonel. I am, at present, a member of the Oregon State Senate. I am not an expert in transportation operation but have been interested in all modes of that industry as they affect the public and particularly the people of Oregon and the Pacific Northwest. 1621 STATEMENT OF OUR POSITION ON MINIMUM RATES We, as shippers, are opposed to allowing the ICC and other regulatory bodies to prescribe a minimum rate for a carrier, unless and until it has been established in a hearing that the rate fixed by the carrier is unjustly discriminatory, unlawfully preferential, or unreasonably low because it is noncompensatory. No rate, in our opinion, can ever be so low as to be "unreasonable" except one which is below cost of service and we include in the cose of service the reasonable return to the carrier. And it follows that we believe regulatory agencies should be prohibited from suspending a minimum rate established by a carrier until after adequate hearing. Nor should the carrier have the burden of proof in justification of the lowered rate because there is a presumption that a common carrier acts lawfully and this can only be overcome by competition evidence to the contrary. To permit the suspension of a minimum rate upon the basis of a complaint of a would-be competing carrier is tantamount to giving the complainant a veto over the business practice of the other carrier. This is particularly true when the law permits a long lapse of time between the suspension date and a determination of the facts. In the case of desired seasonal movements or those of unusual character the benefits which would inure to the public and the shipper are lost. This does not mean, Mr. Chairman, that we favor cut-throat competition. No provident shipper wishes any mode of transportation, which he has or may use, driven from competition. The varying conditions under which a shipper must act to get his product into the market place makes it imperative that he have the widest choice possible as to the means of transport he will employ to accomplish that purpose. The shipper simply wants the best service obtainable at the lowest cost at which such a service can be priced. I would just like to insert this one suggestion here. Yesterday, Mr. Chairman, you asked a very incisive question of one of the witnesses and asked him if it was his understanding, on the rates he mentioned, that there should be an allocation of certain business. I do not think that a complete answer was ever given. At least, it did not convince me. What we believe is that there should be no interference with the minimum rate so long as it is compensatory. We believe that suspension of a rate which is compensatory is tantamount to an allocation of business or allowing those to participate in it who are not able to compete with other carriers, who are able to furnish that service and at the same time make a profit. Mr. HARRIS. What is your interpretation of "compensatory"? Mr. CARSON. Compensatory is that which would cover out of pocket-I should say it would also cover things such as normal depreciation, and to be truly compensatory, it must return to the operator a profit, so that he can keep going. In other words, according to sound business practices, he should recover his out of pocket and, as I mentioned before, depreciation, and enough so that he can replace his equipment and at the same time realize a profit which would make it attractive for people to invest in that business. Mr. HARRIS. That includes interest, taxes, and so forth? Mr. CARSON. It includes everything that is incident to the cost of doing business. Mr. HARRIS. In other words, you are talking about 100 percent compensatory? Mr. CARSON. Fully compensatory; yes. If it is not, I do not see how a thing can be compensatory in part, if my interpretation of the word is correct, I mean, you are compensated for what you do. Mr. HARRIS. This record is replete with statements from so many people who have appeared here, that fully compensatory means justout-of-pocket costs. Mr. CARSON. Well, I would not say just-out-of-pocket costs is compensatory at all, because they have to replace their equipment; they have to stay in business. Mr. HARRIS. Do you agree with the information in this record which has been given time and time again, that the out-of-pocket cost, estimated, as far as the railroad industry is concerned, at approximately 80 percent, is correct? Mr. CARSON. I would not know what the percentage is. Mr. HARRIS. Would you know what the percentage is for the motor carriers? Mr. CARSON. NO; I would not know that. Mr. HARRIS. Very well. COMPETITION Mr. CARSON. The abundant life we enjoy in the United States is attributable to our free enterprise system, the most essential ingredient of which is competition. Too frequently, competition is regarded simply as the desire of one to take all or participate in the business which another enjoys. But true competition is more than that. For our purpose, true competition exists only when two or more carriers, equally equipped to serve, offer their service to those who have the right to a choice. It is not competition, in the true sense, when the shippers are deprived of bargaining power. It is contended by some that to have real competition in transportation will result in monopoly. There is, of course, no longer a monopoly of transportation in the United States. But that does mean that there are not some modes of transportation which have the movement of certain commodities practically to themselves. Even in such cases there is still competition. They must compete for the consumer's dollar. This is particularly true of the transportation of such Pacific Northwest commodities as agricultural and wood products. Competition in transportation has, within little more than a generation, brought about changes in the industry which are revolutionary. These changes have been accomplished in spite of the snail's pace at which Government has moved. If one mode of transport is incapable of carrying certain commodities at rates which another can do profitably, then it is not a true competitor. Laws or regulations which would force one mode to charge more than it requires to realize a profit, in order that the other participate in the business, do not promote competition, they merely confer an economic benefice at the expense of the shippers and the public. NEED FOR A TRANSPORTATION TEAM We have a transportation team in the United States and despite the legislative and regulatory fiat under which it has been compelled to function, it has done rather well. It is estimated that the intercity freight traffic in the United States, in millions of ton-miles, will total nearly 1,300,000 in 1955. This will exceed any World War II year and be nearly 22 times that of 1939. All modes of transport have increased their business, some as much as 5 to 1. Shippers need, in one way or another, the services of all modes of freight transport. We take the side of no one mode. All we ask is that we have available to us the best service that each can furnish and at the least cost consistent with a fair profit to the carrier. NEED FOR REVISION OF OUR TRANSPORTATION POLICY The need for a revision of our transportation policy is no longer questioned by unbiased students of our economy. Railroads at one time had a near monopoly in the passenger and freight business but certainly not now. The planes, trucks, buses, and private automobiles have changed the situation greatly. Under present policy and its application by the ICC and other regulatory agencies the public and the shippers are not receiving the consideration to which they are, of a right, entitled. Instead of vouchsafing to the public (and the shippers) the benefits which would normally flow from improvements in each mode of transportation, these regulatory bodies are, in many instances, depriving the people of the best and most economical transport service which would be available except for unrealistic interference. If there were no other reason for a revision of our transportation policy there is one which would suffice. It is: Under present policy and its interpretation by some regulatory bodies, the province of management is invaded, particularly with respect to competition between rail, water, and highway transportation concerning rates. Regulatory bodies are not only usurping the prerogatives of management but are challenging the ingenuity of our men of science. The strides which have been made in metal alloys to enable them to withstand high temperatures and thereby increase the motive power obtained from fuels have not been taken into proper account. It will be claimed by some that unless regulatory bodies have the power to fix and suspend minimum rates that competition will be destroyed and worthy competitors driven out of business. The answer to this can very well be to give an injured carrier a right of reparations against the offending carrier. INERTIA TO CHANGE Legislation has usually been found lagging far behind economic changes in the field of transportation. In recent years and beginning in the administration of President Hoover there have been several attempts to bring about reforms in our laws obviously needed to meet technological and economic factors which have changed the relative. importance of the several modes of transport. Despite these attempts, there has been little change in stated policies and implementing legislation. The National Transportation Committee, composed of Calvin Coolidge, chairman, Bernard M. Baruch, vice chairman, Alfred E. Smith, Alexander Legge, and Clark Howell, met October 7, 1932, and organized. It made many valid recommendations but few were adopted. On March 10, 1934, Joseph B. Eastman, Federal Coordinator of Transportation, presented his report to the ICC on regulation of transportation agencies. Little happened. Again, in May 1942, the National Resources Planning Board, consisting of Frederick A. Delano, chairman, Charles E. Merriam, and George F. Yantis, submitted its report on transportation to the President. Negligible action. Came December 1, 1949, when Secretary of Commerce, Charles W. Sawyer, submitted a report on the issues involved in a unified coordinated Federal program for transportation. Never really implemented. But the issue, namely, revision of our transportation and needed laws to effectuate rational policy changes, still confronts the Nation. The Presidential Advisory Committee on Transport Policy and Organization made its report more than 1 year ago. It is hoped that constructive action will result. But inertia to change, claims to vested rights in privileges enjoyed under existing legislation and self-arrogated practices of regulatory agencies together with cumbersome legislative machinery (inescapable) have made and are making needed reforms in the Nation's transportation policy difficult to achieve. Meanwhile the expanding economy of the country is fraught with strictures which are retarding normal growth. CONCLUSION We have read and considered the report made to the President by the Presidential Advisory Committee on Transport Policy and Organization and are in agreement with many of the recommendations in it but we believe it does not go far enough with respect to minimum rates of common carriers and the suspension of such rates without a hearing. Suspension of a tariff in some cases, for a period not to exceed 3 months, would nullify the objective for which a minimum rate was established. Regulatory agencies should be shorn of power to invade manage ment. We fear that if the ICC is left with authority to prescribe minimum rates which are not less than "just and reasonable" will lead us into much the same position as we are today. And the same goes for its power to suspend. In dealing with the question of a minimum rate we do not believe the ICC should be permitted to consider (a) The effect of the proposed reduced rate on the traffic of any other mode of transportation. (b) The relation of the proposed reduced rate to the rates of other modes; nor |