Criticism of the railroad law has been directed, first, to the section
laying down the rule by which rates are fixed, and providing for payment to
the Government and use of excess earnings; second, to the method for the
adjustment of wage scales; and third, to the authority permitting
consolidations.
It has been erroneously assumed that the act undertakes to guarantee
railroad earnings. The law requires that rates should be just and
reasonable. That has always been the rule under which rates have been
fixed. To make a rate that does not yield a fair return results in
confiscation, and confiscatory rates are of course unconstitutional. Unless
the Government adheres to the rule of making a rate that will yield a fair
return, it must abandon rate making altogether. The new and important
feature of that part of the law is the recapture and redistribution of
excess rates. The constitutionality of this method is now before the
Supreme Court for adjudication. Their decision should be awaited before
attempting further legislation on this subject. Furthermore, the importance
of this feature will not be great if consolidation goes into effect.
The settlement of railroad labor disputes is a matter of grave public
concern. The Labor Board was established to protect the public in the
enjoyment of continuous service by attempting to insure justice between the
companies and their employees. It has been a great help, but is not
altogether satisfactory to the public, the employees, or the companies. If
a substantial agreement can be reached among the groups interested, there
should be no hesitation in enacting such agreement into law. If it is not
reached, the Labor Board may very well be left for the present to protect
the public welfare.
The law for consolidations is not sufficiently effective to be expeditious.
Additional legislation is needed giving authority for voluntary
consolidations, both regional and route, and providing Government machinery
to aid and stimulate such action, always subject to the approval of the
Interstate Commerce Commission. This should authorize the commission to
appoint committees for each proposed group, representing the public and the
component roads, with power to negotiate with individual security holders
for an exchange of their securities for those of the, consolidation on such
terms and conditions as the commission may prescribe for avoiding any
confiscation and preserving fair values. Should this permissive
consolidation prove ineffective after a limited period, the authority of
the Government will have to be directly invoked.
Consolidation appears to be the only feasible method for the maintenance of
an adequate system of transportation with an opportunity so to adjust
freight rates as to meet such temporary conditions as now prevail in some
agricultural sections. Competent authorities agree that an entire
reorganization of the rate structure for freight is necessary. This should
be ordered at once by the Congress.