Lower Rates, More Traffic?

Lower Rates, More Traffic?

The railroads and their prosperous revenues are caught in a cross fire. Last week OPA, acting for Economic Stabilizer James F. Byrnes and the Department of Agriculture, petitioned the ICC to cancel the 6% freight-and 10% passenger-rate increases granted last spring. In Chicago this week the five operating Brotherhoods (trainmen, engineers, etc.) are expected to ask for a 10-15% increase in wages. The 15 non-operating Brotherhoods (signalmen, track workers, etc.) have already demanded a wage boost of 20-c- an hour, minimum pay 70-c- an hour. The proposed reduction in rates based on current traffic would reduce the railroads' gross income by $500 million per year; the wage increases, if granted in full, would add some $600 million to their payrolls in 1943. These two actions would wipe out all railroad profits in sight for next year.

The case against the railroads is that their gross profits, before interest and rentals this year will be approximately $1.5 billion, their net profits a little over $900 million. This, in Leon Henderson's opinion, is rank profiteering at the Government's expense, since the Government is the railroads' biggest customer. Furthermore Henderson has always claimed that high railroad rates are inflationary. The railroads' case against Henderson's reasoning is: railroad profits this year will still be approximately 5% less than the 5 1/4% return on invested capital allowed them by Congress. These profits are being used to pay off debts (which is anti-inflationary), and cash is being put aside as a reserve for the post-war cost of rehabilitation. Finally, a reduction in passenger rates would only tend to increase the amount of civilian travel which the Office of Defense Transportation is now frantically trying to reduce.

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