Eastman Measures Subsidies

Ever since their monopoly vanished and their earnings began to fall, U. S. railroad men have squawked about Government subsidies to their competitors, especially inland waterways and trucks.

Said the Association of American Railroads, more than once: "All we ask is an equal chance." In 1933 Congress appointed a Federal Coordinator of Transportation to study, among other things, subsidies.

Nearest thing to an ideal man for this thankless job was quiet, learned, earnest, long-laboring Coordinator (now ICC chairman) Joseph B. Eastman, whose honesty is honored by railroad men, railroad-baiters and shippers alike. Last week, after seven years' study, the Coordinator's subsidy report was published. It did not make pleasant reading for railroad men.

Annual Government subsidies* found (1935-36): to waterways, $128,528,000; to railroads, $35,635,000; to air transport, $21,010,000; to motor transport, less than none at all.

No quarrel had railroad men with the findings on inland waterways. To everyone but a few big shippers, a few Army men, they have long been an economic scandal.

In return for the $19,500,000 cost in public funds (1935) of the Mississippi, Warrior and Illinois River systems (said the Eastman report), barge routes saved shippers less than $7,000,000. Last week the Senate-House conference committee agreed to report out the Wheeler-Lea bill, which would put inland water transportation under ICC control.

Nor did railroad men quarrel with the findings on their own subsidy. Total public aid given them through 1936 was figured at $1,443.000,000. Of this, $114,560,000 was the net benefit of RFC loans; $516,000,000 was the value of all land grants. But current benefits of land grants were considered "small and probably negligible." Recommended for favorable action was an old railroad plea--that the Federal Government, which has always been a cut-rate shipper in consideration of these ancient grants, henceforward pay full rates.

Motor transport figures were something else again. Taking highway users in the mass, Coordinator Eastman's report concluded that in four years (1933-37) they had paid in State and local gasoline and license taxes $276,961,000 more than their fair share of the cost of the roads. Items (in 1932): Tractor-trailers (more than five tons) paid $832 in taxes, should have paid only $545 of road costs. School busses paid only $77, should have paid $5 more. Passenger cars paid $26, hit their responsibility on the nose. Underlying these estimates was a basic assumption: that since all roads have "general social and economic" as well as commercial transport uses, vehicle owners should pay only a part of their cost: 45%.

Quick to attack this figure was jib-nosed John Jeremiah Pelley, president of A.A.R. Testifying before TNEC next day, he called Analyst Eastman's road-cost allocation an "astonishing assumption," defended "home owners, farmers and others who pay general taxes" against the implicit charge of paying less than their share. A.A.R.'s own conclusion: that vehicle owners should pay 75% of all road costs, Government the rest. Eastman's: "Their [the railroads'] contentions impress me as being carried to extreme limits." But Railroader Pelley also reminded his hearers why railroad and truck taxes cannot, should not be compared--the railroads own and pay property taxes on their right of ways, highway haulers do not.

*Current contributions plus amortization of investment.

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