The question is sometimes asked why the railroads continue to carry
the mails if there is no profit in the business. Carrying the mails is
not the only traffic which railroads take upon terms that would
bankrupt them if applied to all their business.
There is no profit in running passenger trains on most railroads; that
is, the receipts from all the traffic carried on passenger trains are
not sufficient to pay a train mileage or car mileage share of
operating expenses and taxes and charges for the use of capital. But a
large part of this cost of conducting the business of a railroad, such
as taxes, interest, maintenance of roadway, general office expenses,
and many others, would continue substantially the same if the
passenger trains were discontinued. Having the railroad, and its
taxes, and interest, and maintenance expenses to meet, anyhow, no
railroad can afford to refuse any income from passenger trains that
amounts to more than their train operating cost. On the same principle
they accept low rates per mile as a share of through passenger fares
which, if applied to all passenger fares, would show a loss. The road
is there, the trains are running, and the cars only partially loaded;
the addition of through passengers may not materially increase the
expense, and the road is better off to accept the business at less
than the average cost, rather than to reject it. But whatever the
passenger trains lose must be made up by the freight trains if the
road is to continue in business.
The constant aim of the managers of the railroad is to secure from
each class of traffic not only the operating cost peculiar to that
traffic, but a proportion of the general cost; but business is not
necessarily rejected on which it is impossible to secure such
proportion.
Many of the reasons which impel them to run passenger trains without
profit apply to their acceptance of the Government mails. They
facilitate the freight business; it is better to carry them at a loss
than not to carry them at all.
But is that any reason why the Government should not pay fair value
for what it receives? Is it good policy for the Government to force
upon the companies the alternative of carrying the mails at a loss or
refusing to carry them at all?
What are the mails?
They are the letters and packets that are conveyed from one post
office to another under public authority.
Who conveys them? The railroads convey nine-tenths of them.
The railroads are the mail service of this country. The Post Office
Department states that it receives from the people who use the mails
eighty-four dollars on every one hundred pounds of letters and post
cards. Who makes that money for them? The railroads. The railroads
convey those letters and cards from post office to post office--not
the Government.
For a service like that the Government can afford to pay.
What does it pay?
On the great bulk of the business the railroad companies which do the
work and earn the money receive less than two dollars a hundred. On
every pound of first-class mail the Government collects eighty-four
dollars a hundred.
The fact that the Congress, for purposes of general education or other
reasons, thinks it is good public policy to carry the magazines and
other second-class matter at one dollar a hundred is something about
which the railroads have nothing to do and nothing to say.
The mail pay of the railroads has been reduced in the past four years
more than eight million dollars a year. Part of this was done by act
of Congress, but the greater part came from the arbitrary and illegal
Cortelyou order.
These reductions were made without any hearing being granted to the
railroads. Hearings were refused by the Committee which reduced the
pay three and a half millions, and no pretense of a hearing was made
by Secretary Cortelyou when his autocratic order was issued reducing
the mail pay approximately five million dollars a year. This order was
an arbitrary and unwarranted and illegal exercise of executive power.
The last hearing allowed to the railroad companies on this subject was
by the Wolcott Commission, 1897 to 1900, composed of eminent Senators
and Representatives. They reported, after two years' investigation,
that the mail pay was reasonable and should not be reduced. Upon the
question whether railroads should be asked to carry the mails at a
loss their report expressed the following views:
"It seems to the Commission that not only justice and good
conscience, but also the efficiency of the postal service and
the best interests of the country demand that the railway-mail
pay shall be so clearly fair and reasonable that while, on the
one hand, the Government shall receive a full _quid pro quo_ for
its expenditures and the public treasury be not subjected to an
improper drain upon its funds, yet, on the other hand, the
Railway Mail Service shall bear its due proportion of the
expenses incurred by the railroads in the maintenance of their
organization and business as well as in the operations of their
mail trains.
"The transaction between the Government and the railroads should
be, and in the opinion of the Commission is, a relation of
contract; but it is a contract between the sovereign and a
subject as to which the latter has practically no choice but to
accept the terms formulated and demanded by the former; and,
therefore, it is incumbent upon the sovereign to see that it
takes no undue advantage of the subject, nor imposes upon it an
unrighteous burden, nor 'drives a hard bargain' with it. The
Commission, therefore, believes that the determination whether
the present railway mail pay is excessive or not should be
reached, as near as may be, upon a business basis, and in
accordance with the principles and considerations which control
ordinary business transactions between private individuals."