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Show namely, that the railroads or the public using the railroads gain something from cutting rail rates to out-of-pocket cost bases, is now known to be a fallacious one. Exhaustive studies over the past several years by the Cost Finding Section of the Interstate Commerce Commission have estab- lished the fact that over the long term all railroad costs, both capital and operating, go up and down with the volume of traffic. Even for the short term of 1 to 5 years, at least 80 percent of the total costs varies with the volume of the traffic. These studies indicate, in general, that railroad rate reductions, as much as 20 percent below the full cost plus normal return level to meet water competition, yield nothing in terms of profit. If any considerable volume of traffic moves on such rates beyond the short term, even a 20-percent reduction means a loss to the railroad which must be compensated for by increasingly higher than normal rates on other traffic, or permanent de- preciation of rail net revenues. The railroads, water carriers, and public alike will be better off if each type of carrier transports traffic for which it is inherently adapted at its normal rate. This might seem, on first thought, to mean the doom of the railroads as profitable private enterprise, if the waterways take a large part of the tonnage away from them. Such reasoning overlooks the fact that the waterways create more traffic than they take away. Slow-moving, heavy freight, it is true, can move much more cheaply on the inland waterways than on the railroads. An increasing tonnage of such freight naturally may be expected to move by water as improved channels become available. But it is also clear tfyat railroad traffic, especially of the higher-grade manufactured and processed commodities, grows with the increased volume of low-grade freight moving on the water. Along the Great takes and the Atlantic and Pacific coasts, for example, the development of water- borne commerce provided stimulus to increased industry and population. The heaviest densities of railroad tonnages are found in the areas of heavy density of water-borne commerce. The waterways are only links in the chain of transportation from raw material through the processor to the consumer and user of the finished product. The railroads are an essential part of this chain, and as long as the rates for the service they render yield a profit, their place as essential and profitable enterprises will be secure. There is reproduced, in appendix 5, a study made for this Commission by the Navigation and Trans- portation Branch of the Tennessee Valley Author- ity on the question "Do Federal Expenditures for Navigable Waterways Impair the Economic Use of the Nation's Transport Resources?" It contains much interesting and enlightening in- formation on this subject. Criticism of Waterways It is stated that river tonnage consists of only a few bulk commodities for the benefit of a few large industries who retain for themselves the advantages of low-cost water transportation, so that the general public gains little or no benefits. Thus, at the hearings on Senate Resolution 50 before the Senate Subcommittee on Interstate and Foreign Commerce on April 20, 1950, the state- ment was made that: "In the year 1948 a total of 169,697,866 tons of domestic traffic moved on the inland waterways, of which 83.8 percent con- sisted of eight commodities." These, including grain and grain products, coal and coke, ore, sand, gravel, stone, iron, steel and scrap, and chemicals, allegedly moved principally by private carriers for the benefit of a few large shippers. It should be understood that the preponder- ance of tonnage of the railroads, as well as the water carriers, consists of these same commodity groups. Interstate Commerce Commission Com- modity Statistics of Class I Railways for 1948 show that the tonnage carried by the railroads in the same groups was 69 percent of their total tonnage. The commodity groups named are in fact the basic commodities of agriculture and industry on which transportation charges are such a substan- tial percentage of total value that their values, movements, processing, and marketing follow the lines of least transportation costs to the shipper. It is because these commodities are of basic im- portance to our whole economy and because they 208 |