New Ticket for Transport

Moving to aid the most overregulated of major U.S. industries, John F. Kennedy last week wrote a heady new prescription for the nation's trains, planes, buses and barges. The prescription: less Goverment control, more competitive freedom.

In the most ambitious message on transportation that any President has addressed to Congress, Kennedy proposed an entire complex of fresh laws to replace "a chaotic patchwork of inconsistent and often obsolete legislation." The President sought to spur the U.S. Government into a coherent and long-overdue adjustment to the changing economic facts of life in the transportation business.

Bail for Rails. A central problem is that the U.S. simply has too much transportation capacity. Last year the nation's airlines used only 57% of their total seat capacity, ran $34 million in the red. The big Eastern railroads lost $96 million. But federal, state and even local regulators have stubbornly continued to foster uneconomic competition by artificial means.

They have often refused to permit the carriers to merge, expand, diversify or drop money-losing runs. They have gouged the railroads outrageously with discriminatory taxation.

Most of the punitive regulation was written in the days when the railroads were bad and fat, and was deliberately designed to pare them down to size. But the railroads no longer hold their old, arrogant monopoly over the nation's transport. Recognizing this, the President's program would help the hard-pressed railroads most of all, and do some damage to their less heavily regulated competitors--notably the barge lines and truckers. Kennedy's key proposals: FREIGHT RATES. The ICC could no longer set minimum rates, only maximum rates. At present, the commission firmly fixes all railroad freight rates, while allowing truckers to set their own rates for farm goods and permitting barge operators to charge what they want for bulk commodities such as grain, ore, oil and coal.

Under the Kennedy plan, all carriers, including the railroads, could cut rates as low as they wished, though not below their actual costs of operation in cases where such cuts were aimed at driving a competitor out of business. This delighted railroadmen who have long argued that they would be much more competitive if they were permitted to reduce their rates for bulk goods--which now account for 70% of all railroad tonnage and 90% of the tonnage carried on waterways.

PASSENGER RATES. To stimulate travel, the railroads, airlines and buses would be allowed to reduce passenger rates at will. This would permit selective reductions, such as the recent plan proposed by Continental Air Lines--and rejected by the CAB--to create a new "economy" class of domestic air fares.

TAXES. The 10% tax on rail and bus tickets would be eliminated; on plane tickets, it would be halved to 5%. The Government would impose new taxes of 2-c- per gallon on jet fuel and barge fuel, which would help to defray the Government's costs of dredging waterways, building airports and running the air lanes--and also help to quiet the railroaders' complaints that their competitors enjoy many indirect subsidies. Direct subsidies to the nation's small "feeder" airlines, now amounting to $68 million a year, would be stopped.

COMMUTERS. Straying somewhat from his anti-subsidy theme, Kennedy urged massive federal grants to help cities build, expand or modernize highway systems and commuter rail lines. Proposed first step: a $500 million grant over the next three years, with Washington committed to put up $2 for every $1 allocated by local authorities.

MERGERS. Implicit in Kennedy's message was a more relaxed Washington attitude toward railroad and airline mergers that would help to eliminate duplicate facilities. Where the Government has previously tended to focus chiefly on the antitrust aspects of mergers, greater weight now seems likely to be given to purely economic considerations. The President pointedly ignored requests by the rail unions that he restrain mergers which might endanger jobs.

How Soon? Predictably, the President's program collided head-on with some of Washington's most potent lobbies. The truckers and barge lines loudly condemned it, and the airlines geared for battle against the proposed tax on jet fuel. The President called for prompt action on his entire package, but with Congress heading toward adjournment in early summer, one Capitol Hill insider prophesied: "It doesn't look as if there will be a helluva lot of legislation coming out of this message this year." Chances for action this year are dimmest for Kennedy's most meaningful and controversial proposal--to cut the floors out from under bulk commodity and farm-product rates. Prospects are much brighter for early enactment of the two proposals sure to prove popular with lobbyists and voters alike--scrapping the transportation tax and handing out millions to help unsnarl city traffic.

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