special for that reason. So there is no increased cost to the railroad company because the shipment is made in Chicago, at Fort Wayne, at Mansfield, or at Pittsburgh. The charge would be local in every case, for at the intermediate points the warehouse charge is paid by the shipper and not by the railroad. I do not know that the railroads own a single warehouse. I am not sure that the great Pennsylvania road owns any warehouses at all. The warehouses are owned by private parties and the shipper pays the expenses of the warehouses, or if it is included in the freight charges it is done as a matter of convenience in the process of collecting.

So there is no ground of equity whatever why a discrimination should be made against the intermediate points. Sometimes it is said that the railroads can not afford to run through freight from Chicago to New York unless they do it at a very low rate. If the object is to enable them to run their through freight at the very lowest possible rate at the cost of the local freight, that is a ground of public policy. If that is the ground upon which this bill is to be based, then the fourth section should be stricken out of it entirely, and the railroads should be allowed to fix their own rates for the through freight without respect to local charges.

That was the view that I took of this subject two years ago. I thought we could not legislate upon the subject; that where railroads came in competition with each other and with water transportation it would be better to let them alone; but since that ground is abandoned you must go further and make no discrimination at all. It is sufficient to say that if they charge as much for the short haul as for the long haul, that is a discrimination against all intermediate points; but that nobody proposes to change. But when you go beyond that and say that they may charge twice, three times, or ten times as much from an intermediate point to the point of shipment in the West as they charge from Chicago on the freight from the far West, then as a matter of course you utterly destroy all the industries of the interior towns and cities.

One of the great evils of our times in commercial transactions is the vast concentration of capital and labor in great commercial centers. What has built up Chicago? It is simply because Chicago has enormous advantages over every interior town. Wheat in a warehouse in Chicago is worth more than in any spot in Ohio, under the plan heretofore adopted by the railroads. They would charge less in some cases for wheat from Chicago to New York; and the bill will allow them to charge from the interior points of Ohio where it is shipped in great quantities, and the same articles are charged more than is charged from Chicago; so that wheat in Chicago will be worth more than wheat in Ohio.

Mr. MILLER. The Senator will allow me to suggest that I have failed to find any such provision in the bill as he speaks of as will permit charging twice, or three times, or five, or ten times as much from an intermediate point as from the termini. Certainly the Senator must infer it from some language used.

Mr. SHERMAN. Not at all. It is here plain as print.
Mr. MILLER. I ask the Senator to point it out.

Mr. SHERMAN. I will do so. In the absence of the provisions of the bill it is plain that the railroads, if left to themselves, can make such charges as they see proper, subject only to the limitations of their charters. Take that broad principle in connection with this language:

That it shall be unlawful for any common carrier to charge or receive any greater compensation in the aggregate for the transportation of passengers or

property subject to the provisions of this act for a shorter than for a longer distance over the same line in the same direction

If you stop there, then no discrimination could be made; but it goes

on

and from the same original point of departure.

If goods are shipped from Chicago to New York is there any prohibition there against charging less for that transportation than for goods shipped from Fort Wayne, Ind., to New York?

Mr. MILLER. Will the Senator permit me to ask him another question?

Mr. SHERMAN. Certainly.
Mr. MILLER.

Does he think it would be just or reasonable upon the part of railroads to charge twice or five or ten times as much for carrying wheat from Mansfield to New York as is charged from Chicago to New York?

Mr. SHERMAN. I know what the Senator is driving at.
Mr. CAMDEN.

Will the Senator allow me to answer that question? Mr. SHERMAN. I think I can answer it. The Senator from New York now refers to a general provision in the bill that they shall not be guilty of extortion. I ask the Senator from New York to read the clause on which he would rely to justify his argument.

Mr. MILLER. If the Senator will look at section 1 of the bill, lines 27 to 31, he will find the following:

All charges made for any service rendered or to be rendered in the transportation of passengers or property as aforesaid, or in connection therewith, or for the receiving, delivering, storage, or handling of such property, shall be reasonable and just.

Then, if the Senator will read section 2 he will find that it prohibits special rates, rebates, and drawbacks, prevents any special privileges being granted to any particular person, company, or place.

Mr. SHERMAN. I have read all that. Now, let me ask the Senator from New York a question.

Mr. MILLER. Certainly.

Mr. SHERMAN. Would it be reasonable and just to charge more from Mansfield, Ohio, to New York, than from Chicago to New York? I ask the Senator that question.

Mr. MILLER. In that particular case I should say no.

Mr. SHERMAN. Then, why do the Senators object to the amendment proposed by the Senator from West Virginia? If those words are stricken out, then such a thing could not be done; then no greater amount could be charged from Mansfield to New York than from Chicago to New York. But the very fact that the fight on this bill turns upon these few words shows that the object and meaning is to leave all the intermediate points to a law of justice and discretion to be administered by whom, and when, and where? If you must regulate the long haul and the short haul by legislation, give us a rule that is fair and just, and not by an express exception make a distinction between a short shipment over the same line and a long shipment over the same line. There is the answer, and that is the whole of it.

I intend to vote to support the action of the committee, although I doubt very much whether the fourth section will not bring trouble. I believe that it will be repealed within a short time, and for this reason I believe the fourth section will create so much embarrassment that it will at once raise the rates of through freight. I appeal to every railroad man who hears me. The companies can not afford to reduce the IS C- -8

local rates if by doing that they are prevented from competing at low rates for the through freight. If they are compelled to put on reasonable local freights, then they will be compelled to put on reasonable through freights, and when they attempt to do that, as a matter of course they must raise the freights for long hauls in order to give them even a living profit on their railroads.

Mr. MILLER. I understood the Senator at the beginning of his remarks to say that he is in favor of the amendment as proposed by the Senator from West Virginia.

Mr. SHERMAN. I am.

Mr. MILLER. That amendment is to make the provision for short and long hauls absolute, starting from any and all points.

Mr. SHERMAN. I did not say that.

Mr. MILLER. That is undoubtedly the meaning.

Mr. SHERMAN.

When the Senator gets through

Mr. MILLER. I do not want to interrupt the Senator if he does not care to be interrupted.

Mr. SHERMAN. When the Senator says I am in favor of the same rate per ton per mile over all roads or over the same roads owned by the same persons, he is very much mistaken; but when you speak of the rates through the same places by the same road, the same ownership, I say if you adopt the rule that the long haul shall not be less than the short haul, as a matter of course you must carry it out to its logical sequence. We know very well that this long-haul project has enormously reduced the rates in this country for through freight. It is an advantage which the cities along the Mississippi River and in California have had and enjoyed all the time.

That low charge for through freight is based on the idea that every railroad is built as a local road first, and the local rates are expected to pay what are called the fixed charges; that is, the interest, the cost of the road, and all that sort of thing; and then if they can get through freight for the mere operating expenses, it strengthens the road and enables them to carry on their operations and make money. They therefore have based their charge for through freights, for long freights and long distances on the mere cost of operating the road. I know that is done on all the great railroads. They have carried freight from Chicago and some of the Western points to the city of New York for less than operating expenses.when they were competing with each other, and they usually have fixed those charges at little more than the operating expenses. When I speak of operating expenses I suppose every Senator knows what I mean-the cost of the fuel, repairs to the engines, payment of the engineers and firemen, without any regard whatever to the cost of the road and what are called the fixed charges, the interest on the bonds and the like.

That has been the custom, but if they are compelled to abandon that rule then, as a matter of course, they will look first to their charges for local freight and adopt their through charges simply so as to keep within the language of the law. In some cases some of the roads will lose all their through freight, and the result will be a general advance in the through freights on the long lines. That will be the effect of it, and when that effect is produced, then gentlemen will come here and complain of it and say that by the operation of our legislation the freights have been increased from Iowa and the far Western country to New York.

Mr. HARRIS. Will the Senator allow me to ask him, just in that connection, with the discretionary power which this section gives to the railroad commission, does he not suppose that the commission would

make an exception in favor of a road such as he suggests when it was in danger of losing all its through freight?

Mr. SHERMAN. Then if that is so why not leave out these words? If they can make a special rule for freight from Chicago to New York why put in these words?

Mr. HARRIS. I will tell the Senator that I think the words ought to be stricken out; I am for the amendment, but I do not think there are any circumstances under which with the discretionary power which this section gives to the commission any through line would be likely to lose its through freights.

Mr. SHERMAN. I wish to vote with the committee just as far as I can. If the bill prohibited any discrimination between a shipment from New York to Pittsburgh and a shipment from Chicago to New York, or, rice versa, between a shipment from New York to Cleveland and a shipment from New York to Chicago, if the point of commencement is the same, then the bill operates; but suppose the point of commencement is not the same, but is an intermediate point, why should not the same rule apply?

Mr. MAXEY. I should like to ask the Senator a question. Are not the exceptional advantages given to the long haul by railroads necessarily compensated by compelling the intermediate points to make up for that loss, as the Senator says the loss is made up sometimes on the long haul? Practically do not the intermediate points where the larger charge is have to make up that loss?

Mr. SHERMAN. Railroad men know precisely and can give you to the fraction what proportion of their earnings is from local freight and what proportion is from through freight; and they take care that the local freight, which is almost invariable and changes but little except from the nature of the crops, will pay them at least a reasonable return for the capital employed, the interest on bonds, and the like; in other words, they will make it provide for the fixed charges, and then they will hope to get enough out of the through traffic to help carry on the operating expenses of the road. That is a general rule among railroad men.

Mr. MAXEY. But if the charge on the long haul, as the Senator has said, is sometimes less than the actual cost, and they have the privilege of making a short haul pay a greater rate than a long haul, do they not necessarily compensate themselves by making the short-haul men pay for the loss, and thus the shippers at the intermediate points will be the losers?

Mr. SHERMAN. All I desire is that this section shall be made logical. The words "and from the same original point of departure" are put in so as to limit the operation of the section and in order to make a discrimination against all interior points. Indiana, Ohio, West Virginia, and Pennsylvania would all be deeply affected by this arrangement, and so with Iowa and other States; where the shipment is from a distance west of Iowa they would be affected by it. It seems to me that it would make the work of the committee more perfect, and these words of limitation are put in here not in the interest of the principle of the section but for the purpose of defeating it and restraining it.

Mr. MILLER. Mr. President, I confess that I am not quite able to understand the position of the Senator from Ohio upon this matter. That is undoubtedly due to my own obtuseness in the premises. If I understood him, two years ago when a similar bill was before the Senate he opposed any amendment to it looking to the control of the long and short haul, but at the present time he proposes to support the proposition as it is now found in the bill. However, if I understood his

argument, it was entirely in favor of the amendment proposed by the Senator from West Virginia and not in accordance with the provision of the bill.

When I first began to investigate this matter in committee I confess that I was myself disposed to favor the proposition in precisely the same form found in the amendment offered by the Senator from West Virginia; but after a careful and painstaking investigation of the matter, after listening to the views of a large number of people concerned, shippers as well as railroad men, I came to the conclusion that we could not afford to go further in this first measure than the proposition as found in the bill, that is, limiting the charge for a short haul from the same initial or starting point and in the same direction. I believe there is no difference of opinion so far expressed in the Senate as to the provision that this limitation should apply to freight moving in the same direction, and therefore it is not necessary to discuss that at all. It was believed by some of the committee that the provisions contained in the first section, from lines 27 to 31, were sufficient, without any short-haul provision whatever, and that the declaration there made that all charges should be reasonable and just would, if fully carried out and enforced by the commission, result in producing substantially the result which is sought to be brought about by the provision found in section 4, but it was finally concluded that it would be better that there should be some definite declaration upon this question in regard to making the charge for the short-haul no greater than for the longhaul. As a result of that, section 4 was inserted.

It has been assumed, Mr. President, thus far by all the Senators who have discussed this question, or who have spoken in favor of the amendment of the Senator from West Virginia striking out the provision as to the initial point, and also the provision giving power to the commission to make special exceptions, that this amendment was in favor of the people and against the railroads. I deny it in toto. If that amend!ment is adopted and that provision is put in there it will increase the earnings of the great railroads of this country 50 per cent. in the next year. Unquestionably so, and that 50 per cent. will all come out of the producers and consumers of this country. There can not be any question about it whatever. Heretofore we have trusted to competition to regulate freight charges in this country. In some directions it has worked well. It has brought about the cheapest railroad freights known in the world. It has reduced the cost of transporting a bushel of wheat from Dakota to New York to an infinitely small figure. Let that provision prevail as suggested by the Senator from West Virginia, and you will inevitably when the water communications are closed increase the rate of freight upon flour and grain and produce from the West from 50 to 100 per cent.

The railroads will take advantage of that provision, for this law is to apply to every one of the great trunk lines; it does not touch a little side road within the limits of a State; but it touches every one of the great corporations crossing this continent, every great corporation reaching from the Mississippi to the seaboard; and when you say to them all alike substantially, "Your local rates are to be almost in exact proportion to your through rates," the railroad companies will meet you by saying, "We must have such a rate for our through freight as will enable us to earn living dividends upon all the securities which represent our roads, no matter whether they are watered or bona fide." Put in that provision as suggested by the Senator from West Virginia, and you will strike not at the railroads, but you will strike at the farmer in the West and the laboring man in the East. That is where it all comes. You