Campaign Address on Railroads at Salt Lake City, Utah

My friends:

I am having, as I have repeated many times these past few days, a glorious time — a delightful time. Never have I met people more cordial, more interested, more enthusiastic in their hospitality. To my mind it is no mere personal tribute to me. I think this enthusiasm, this interest, are an expression of the hope that people have that a new deal will mean better and happier days for all of us. This, it seems to me, is what I have learned as I have passed over the westward trail of the pioneer.

My visit here in Salt Lake City is, I assure you, one of the brightest spots of a happy trip. As I have viewed the scene in this valley, it is easy to see how a distinguished citizen of your State, arriving in this place eighty-five years ago, exclaimed: This is the place! And every time I come back to it I want to pay a new tribute to those splendid American pioneers who made it possible in the early days.

Pessimists tell me that for some of the great problems of American life, such as the prices the farmer gets for his products and the prices the miner gets for his toil, nothing can be done because these things are locked in the jaws of an unchangeable economic law. But when I see, as I have seen here, what human beings have done in the work of reclamation and in other attempts to change, through the efforts of man and for the benefit of man, the face of nature itself, the complaint of these pessimists seems just a bit absurd. It is clear to me that if we can change the conditions of nature that made a place a desert, we ought to have faith in the possibility of changing the economic conditions sufficiently to bring the producer and the consumer more closely together for the benefit of each.

The tasks that we face in the reordering of economic life are great. They call for courage, for determination and what you have abundantly out here, the hardihood of the pioneer. We still have before us, as had those who settled this great West, battles with hunger, battles with human selfishness and, what is more important, the battle with our own spirits, seeking, in the face of discouragement, the means of restoration and relief.

As the life of the pioneer came to be more widely extended with the coming of the railroads and the development of commerce, things that were local came to be national, and things that were national came to be international. Interdependence is the watchword of this age. For example, when due to unwise tariff schedules of our national Government in Washington, some faraway Nation is driven to retaliation, we know now that the farmers in Iowa, in Kansas, in Colorado, and in Utah suffer. I need not tell you of the importance of these far-flung relationships. For example, the independence of the Philippines, five thousand miles away, which, by the way, our Party in its platform heartily advocates, is not without significance to you in your daily lives and in your future happiness.

And one of the greatest of these questions of international relationship, let us say it frankly, is that of money, of gold and of silver! I am glad to take official notice of the fact that the administration in Washington apparently has at last come to recognize the existence of silver. To move in the direction of consideration of that question is in thorough accord with the Democratic platform, which says: "We favor a sound currency to be preserved at all hazards and an international monetary conference called on the invitation of our Government to consider the rehabilitation of silver and related questions."

The elements of this question, of course, have changed profoundly in the past generation. The economists of the world have come to recognize that the problem of money is largely one of international concern. I propose to speak of this in more detail very shortly, outlining the difference between the platforms and policies of the two major parties.

I have spoken tonight of the building of the West. In that great development the railroad, of course, was the dominant factor. For ninety years railroads have been the means of tying us all together in national unity. I need not tell you that in this development we have seen great heroism, great faith and, unfortunately, also great injustice. When the railroads first stretched out across the plains and into these mountains and valleys, they were regarded as a miracle, challenging the imagination of the people. Later there came an age when the railroads, controlled by men who unfortunately did not recognize the large public interest at stake, were regarded by these same people as an octopus, crushing out their life and sapping their substance. But that day has passed. The railroad is becoming more and more a servant of the people, largely owned by the people themselves. It is this new relationship of the railroad that should and must guide our consideration of its problems. The railroad that was first a miracle, and then a sinister threat, has now become a part of our national economic life. We are concerned with the preservation of the railroad of the Nation.

My friends, the problem of the railroads is the problem of each and every one of us. No single economic activity enters into the life of every individual as much as do these great carriers. It is well to pause a moment and examine the extent of this interest. As I have done before in other matters, I want to think the issue through in terms of individual men and women. Directly a "railroad" affects three great groups. Indirectly it affects everyone within its vast territory.

First, take its owners. These are not, as too many suppose, great railway magnates sitting in luxurious offices and clubs. They are the people throughout the country who have a savings bank account, or an insurance policy, or, in some measure, an ordinary checking account. Figures, though they may be dull, nevertheless do talk. There are more than eleven billions of railroads bonds outstanding — about half as great an amount as there are United States Government obligations outstanding. Of these eleven billions nearly five billions are owned by savings banks and insurance companies; that means that they are owned, not just by the banks and insurance companies, but by the millions of policy holders and savings bank depositors. When you put money in the bank or pay that insurance premium, you are buying an interest in the railroads. Some two billions more are held by churches, hospitals, charitable institutions, colleges and other institutions of endowment. The remaining bonds are scattered far and wide among a host of people whose life savings have been invested in what has come to be a standard American industry. Even railroad stocks are held in small units of a few shares here and there, by school teachers, doctors, salesmen, thrifty workmen in every State. Experts in railroad finance know that perhaps thirty million people out of our population have a stake, a direct stake, in these great American enterprises.

Next are the people who work in the railway systems, either directly on the lines, or in the industries which furnish railroad supplies. There are over 1,700,000 railroad employees required to handle normal traffic; and to these must be added, in direct interest, hundreds of thousands of other men and women who supply coal, forge rails, cut ties, manufacture rolling stock and contribute labor to maintain the systems.

And then, most numerous of all, are the people who travel or ship goods over our steel highways. And that includes just about all of us.

Now there is no reason to disguise the fact that the railroads as a whole in this Nation are in serious difficulty. They are not making both ends meet. I do not share the opinion which has been aired recently that the railroads have served their purpose and are about to disappear. Capable students of American transportation do not support that view. As Professor Ripley of Harvard pointed out, if you tried to carry all railroad freight by motor truck you would have to have a fleet of trucks which would make a solid line, bumper to bumper, all the way from New York to San Francisco; or, to put it differently, you would have a ten-ton truck moving every thirty seconds over every mile of improved highway in the United States. That brings it home!

Let me put it another way. In a normal year, our railroads are called upon to transport over thirty million people one thousand miles each, and to transport 440 million tons of freight one thousand miles. No other machine in existence today is available to carry that load. And that is why I say that the day of the railroads is not over yet.

No, there is no danger of the railroads going out of business. They have a great economic place in the scheme of things for a good long time to come.

Why, then, the difficulty? In the first place — let us be frank with ourselves — we did unbalance the system of things, as we have had a habit of doing, badly. We built — properly — hundreds of thousands of miles of first-class, hard-surfaced highways directly parallelling the railway tracks. These we paid for out of our taxes, or, in some cases out of bond issues. Today many thousands of buses and trucks engaged in interstate commerce use these rights-of-way, built by the people — use them and pay nothing for the investment. You and I, in our annual tax bills, of course, pay for most of the maintenance of the highways and interest charges on their construction. The motor vehicles pay only a small part. Naturally, that being so, they can often haul passengers and freight at a lower rate than the railroads. They can operate with a relatively smaller overhead and capital, lower taxes and lower maintenance costs for their right-of-way. Also we, the National Government, allow them to operate free from many restrictions that would insure a greater safety to the public and fairer working conditions for labor. We must not give to these buses and trucks any unfair competitive advantages over the railroads themselves.

We do not desire to put motor vehicle transportation out of its legitimate field of business, because it is a necessary and important part of our transportation system; but motor transportation ought to be placed very definitely under the same Federal supervision as railroad transportation itself.

Second, while thus forcing the railroads to meet unfair competition we have not only permitted but frequently required them to compete unreasonably with each other. In regulating the railroads, we preserved the policy that at all times, between principal points, there must be competing railroad systems. There is a great deal to be said for that policy, so long as — let us make this clear — so long as there is traffic enough to support the competing lines. As long as you have that traffic, the competition helps to insure efficiency. But as the railroads have been allowed to increase their capacity far beyond traffic needs, the wastes of competition have become more and more insupportable. Now we have to face the issues: Shall we permit them — in fact, force them — to bankrupt each other? Or shall we permit them to consolidate and so to economize through reducing unprofitable services? In other words, shall we permit them to divide traffic and so eliminate some of the present wastes? No solution is wholly attractive, because we have the problem of an overbuilt plant, of partially unemployed capital, a problem similar in its difficulty to that of unemployed labor. But a definite sound public policy actually carried out will hasten improvement. We cannot, my friends, as the present Republican leadership has done, rest upon a feather-bed of false hopes.

Third, we can cut out some expensive deadwood in the shape of unnecessary or duplicated facilities. The public generally does not realize that thirty percent of railroad mileage in this Nation carries only two percent of the freight and passenger traffic. This does not mean that all that mileage can be or ought to be immediately scrapped. But it does suggest that a considerable amount of — what shall I say — judicious pruning gradually can be done in this unpaying mileage without public detriment.

Finally, there has been entirely too much maneuvering for position among the railroads themselves in the past ten years. We have had an epidemic of railroad holding companies whose financial operations were, to say the least, not generally beneficial to the orderly development of transportation. They were financial comets, free to rove through the system, spending other people's money in financial gambles and in acquiring side enterprises outside of the direct sphere of railroading itself. A great deal of money throughout the Nation has been lost, and a good deal of damage has been done, by these companies. This policy, I can assure you, will have no sympathy from the National Administration that takes charge in Washington next March.

All that I have said should indicate that one chief cause of the great present railroad problem has been that typical cause of many of our problems — the entire absence of any national planning for the continuance and operation of this absolutely vital national utility. The individual railroads should be regarded as parts of a national transportation system. That does not mean all should be under one management. Indeed, the principal doubt of the efficiency of consolidations has been caused by the repeated demonstration in our history that a great railroad is made by good executives; and experience has shown that the mileage over which one manager can be effective is limited to a small fraction of our national mileage as a whole. In other words, as in most things, the human equation enters.

But it is necessary that a single railroad should have a recognized field of operation and a definite part to play in the entire national scheme of transportation. It is necessary that each rail service should fit into and be coordinated with other rail services and with other forms of transportation. Let it be noted, for instance, that our postal service uses every variety of transport: rail, automobile, steamship, and airplane; but it controls few of these vehicles. We might well approach the railroad problems from a similar point of view, survey all of our national transportation needs, determine the most efficient, the most economical means of distribution and substitute a national policy for national lack of planning, and encourage that growth and expansion which are most healthful to the general welfare. In common counsel and in common purposes we shall find the corrective of the present unhappy tendency to look for dictators. The wisdom of many men will save us from the errors of supposed supermen.

I do not share the view that Government regulation per se is responsible for any great amount of the present difficulties. Had this been true, we should have known it long before the depression came. In the words of one of our own railway presidents, "there is no question whatever that the regulation of the railroads of the Nation has been in the public interest." Regulation, in fact, has protected investors as well as patrons, and I think no enlightened railroad man would care to go back to the old days when unregulated railroad operation landed one-third of the railroad mileage in receivership.

When the depression came with its great loss of tonnage, the combined effect of uneconomic competition, unproductive and overextended mileage, imprudent financial adventures, and frequently ill-advised management resulted in a situation where many railroads literally were unable, are still unable, to earn their interest charges on their own debt. The Government then undertook to tide over the emergency by lending money freely to the railroads, with a view to keeping them afloat. I am glad to approve this policy as an emergency measure, though I do not go along with many of the details of the methods. As far as it goes, this policy — and I speak in the broader sense of the word policy —is good. We had far too great a stake in the situation to allow a general smash-up. If elected, of course I shall continue the policy of trying to prevent receiverships. But I do not believe that it is more than a stop-gap just to lend money and more money. Lending money is all right if — but only if — you put your borrower into a position so that he can pay you back.

Let us face the facts squarely. We may as well realize first, rather than last, the fundamental issues. Railroad securities in general must not be allowed to drift into default. The damage done to savings banks, insurance companies and fiduciary institutions generally would be too great.

But, let me make it clear that the extension of Government credit will be largely wasted unless with it there are adopted the constructive measures required to clean house. In individual railroads these turn on the financial conditions peculiar to each case. In certain situations, where fixed charges impose an unsound overstrain on the road, they must be reduced. In general, corrective measures must be adopted making for a sounder financial structure along the lines I now propose to set out. Unless the underlying conditions are recognized, you and I are wasting our time and our money.

Concretely — and I have to be fairly concrete in this campaign — I advocate:

First: that the Government announce its intention to stand back of the railroads for a specified period, help of the Government being definitely conditioned upon acceptance by the railroads of such requirements as may in individual cases be found necessary to readjust top-heavy financial structures that are strangled half to death today, through appropriate scaling down of fixed charges. I propose the preliminary development of a national transportation policy with the aid of legislative and administrative officials and representatives of all interests most deeply concerned with the welfare and with the service of the railroads, including investors, labor, shippers and passengers. I propose that in the application of this policy to the railroads the Reconstruction Finance Corporation, working, of course, with the Interstate Commerce Commission, shall share the work of planning the reorganization or readjustment, for the protection of public investments and those of innocent security holders.

And I also propose that when such plans have been worked out, the same agencies shall indicate a specified period of support to see the railroads through, in the carrying out of these plans.

Second: To aid in the rehabilitation of roads which are unable to meet the present unprecedented strain or which may succumb to past or future mismanagement, I propose a thorough overhauling of the Federal laws respecting railroad receiverships and indeed of all kinds of public utility receiverships. As the usual procedure in bankruptcy now stands, it suggests Mr. Dooley's famous dictum that it is arranged so that every member of the Bar may get his fair share of the assets. Yes, and I speak as a lawyer myself. There is urgent need to eliminate a multiplicity of court actions, a maze of judicial steps, a long period of business chaos and a staggering expense account allowed to lawyers, receivers, committees, bankers and so forth world without end. Included in that revised procedure there should also be a provision by which the interests of security holders and creditors shall be more thoroughly protected at all points against irresponsible or self-interested reorganization managers.

Third: I advocate the regulation by the Interstate Commerce Commission of competing motor carriers. Where rail service should be supplemented with motor service to protect the public interest, the railroads should be permitted in this manner to extend their transportation facilities; and indeed, they should be encouraged to modernize and adapt their plant to the new needs of a changing world.

Fourth: I believe the policy of enforced competition between railroads can be carried to unnecessary lengths. For example, the Interstate Commerce Commission may well be relieved of requiring competition where the traffic within the competitive area is insufficient to support competing lines, recognizing, of course, the clear and absolute responsibility for protecting the public against any abuses of monopolistic power.

Fifth: After many long years of getting nowhere, the proposed consolidations of railroads, which are lawful and in the public interest, should be pressed to a conclusion. At the same time the provisions of the law should be revised in line with the policies here proposed and with repeated suggestions of the Interstate Commerce Commission and of representatives of the shippers, the carriers and their employees, to insure further protection of public and private interests involved. All the appropriate agencies of the Federal and State Governments should have a part in a national effort to improve the health of these great arteries of commerce.

Sixth: So-called "railroad holding companies" must be definitely put under the regulation and control of the Interstate Commerce Commission in like manner as railroads themselves, because we cannot let our fundamental policies be blocked by screens of what we call corporate complexities.

Last of all, we must realize that Government encouragement and cooperation, more than mere restriction and repression, will produce lasting improvement in transportation conditions. The economy and efficiency of railroad operations will depend upon the capacity of railroad management and its freedom from undue burdens and restraints when this is balanced by acceptance of public responsibilities. It will depend also in large measure upon the competence and morale of railroad employees, constituting perhaps the largest body of skilled workers functioning as a unit in all of our industrial life. Transportation is not a mechanized service. It is a service of human beings whose lives are worthy of even more intelligent care than that necessary to preserve the physical mechanisms which they operate. And it is very clear to me that all the men and women who are employed on our great transportation systems are entitled to the highest possible wages that the industry can afford to pay.

You and I know in the last analysis that every great economic interest in the Nation requires the continuous, efficient operation of the railroads. The products of our farms, our mines and our forests flow into the markets. The fabricated products of our manufactures flow back to these primary producers along the highways of steel. We must pay the fair cost of this transportation, which is in truth a tiny fraction of the selling price of commodities themselves. But we cannot burden our producers or restrict their markets by excessive costs of transportation. So the constant improvement in the economy and efficiency of transportation is a matter of ever-present national concern. Under stimulus of good times and under pressure of hard times also, much has been done in the way of this improvement. More can be done still, and I assure you it is going to be done.

The net situation today is that most of our railroads throughout the Nation, railroads owned by us, are failing month by month to earn the fixed charges on their existing debts. Continuance of this failure spells only one thing—bankruptcy.

Here is the difference in a few words between the policies of the President of the United States and policies which I propose.

The President suggests only this as one of his nine points relating to the economics of the Nation — the extension of further credits to the railroads, thus obviously increasing their debt and increasing their fixed charges. That policy, my friends, may put off the evil day for a short period but, standing alone and by itself, it makes the day of reckoning more tragic for the Nation when it comes.

My policy goes to the root of the difficulty. While I would do everything possible to avert receiverships which now threaten us, I seek to bring the operating balance sheets of the railroads out of the red and put them into the black. In other words, I want the railroads to stand on their own feet, ultimately to reduce their debts instead of increasing them and thereby save not only a great national investment, but also the safety of employment of nearly two million American railway workers. I make the point clear that the maintenance of their standard of living is a vital concern, not only to us, their fellow citizens, but to the national Government itself. 1

In this great task of reordering the dislocated American economics, we must constantly strive for three ends: efficiency of service, safety of financial structure, and permanence of employment. The railroad mesh is the warp on which our economic web is largely fashioned. It has made a continent into a Nation. It has saved us from splitting, like Europe, into small, clashing, warring units. It has made possible the rise of the West. It is our service of supply. These are not matters of private concern; they have no place in the excesses of speculation, nor can they be allowed to become springboards of financial ambition. Such readjustments as must be made, should be so made that they will not have to be done again; and the system must become, as it should be, secure, serviceable, national in the best sense of that word.

That, my friends, is the transportation policy of the Democratic Party.

The problem today may be new in form, but it is old, very old in principle; and principles have not changed.

Avoid financial excesses; adjust plant to traffic; protect the workers; coordinate all carrier service in a great national transport policy, and, above all, serve the public, serve them reasonably, serve them swiftly, serve them well.

That is the road to economic safety, and I ask you to choose that road.