if this increased volume of capital were shown, the percentage of loss would in fact be larger than 5.72 per cent.

This statement I submit answers President Garretson's suggestion or inquiry as to whether the recent large wage increases have been absorbed, and it shows that they have not been. If the commission desire, I shall be glad to file this statement for incorporation in the record. It shows in red the decreases for each carrier.

The CHAIRMAN. Would it be possible to condense it in some way and make it a little briefer?

Mr. ALEXANDER. Some of the columns could, perhaps, in the judg ment of the secretary, be omitted. The one of vital interest, I think, to your commission is the one indicating the loss in net operating revenue, and I would suggest that if but one column is to be incorporated that that should be the one. However, I will file the statement for such use as the commission may desire.

Statement of net operating revenue before deducting taxes of railroads over 500 miles in length for the year 1911, showing the increase or decrease over the figures of the same roads for the year 1910.

Statement of net operating revenue before deducting taxes, etc.—Continued.
DECREASES SHOWN IN ITALICS-Continued.

While on this subject, if you please, Mr. Chairman, I desire to call the attention of the commission to certain figures which were presented to the Interstate Commerce Commission at the time of the hearings in re the recent "General Advance in Freight Rates" cases, contrasting the volume of capital invested in the railroads and the earnings thereon with the amount of capital invested in manufactures and agriculture, our two other large industries, and the earnings thereon. The figures which I submit are taken from the United States Census reports as to manufactures; as to the railroads, from the reports of the carriers filed with the Interstate Commerce Commission, and compiled by its statistical department; and, in matters of agriculture, from the Year Books of the United States Department of Agriculture, and they are also, I should add, incorporated in a recent work by Mr. McPherson, entitled "Freight Rates."

In 1890, in manufactures there were $6,525,156,468 invested; in railways there were $9,437,343,420 invested; and in agriculture $18,082,267,689. In other words, agriculture then had nearly twice the amount of capital the railways had, and the railways had about 50 per cent more than manufactures.

During the next 10 years the ratio changed, for in 1900 manufactures had $9,817,434,799 of capital invested, and the railways $11,491,034,960, or only about 25 per cent more; and agriculture had

$22.939,901,164 invested.

Then five years later, in 1905, the capital invested in manufactures amounted to $13,872,035,371; and in railways to $13,805,258,121,

Thus the manufactures had then passed the railways in the volume of capital invested, and in agriculture, in 1905, $30,043,000,000 were

invested.

Now, why did this startling change take place? It seems to me that one of the most potent reasons, one of the controlling reasons. was the fact that the rate of return upon the capital employed in manufactures and in agriculture was greater than the rate of return on the railway capital, for it is a truism that capital will seek the field where the profit with the same degree of safety is the largest. The CHAIRMAN. The field was greater.

Mr. ALEXANDER. Of course, the field was greater, but the field for railway expansion has not by any means been exhausted; we are not filling it this year as we should. We all recall the assertion by that great railroad authority, Mr. James J. Hill, who has done so much in developing the northwestern section of the United States during the last 30 years, that the railroads should have a billion dollars a year of new capital in order to keep pace with our development as a Nation. I do not mean to take time to go into detail, but I have very vividly in mind the stage route running back from Rifle, in the State of Colorado, to Meeker, some 40 or 50 miles, and then on up into Routt County, where I happened to be very recently, and there the freight rates for haulage are something enormous and there is a great opportunity for railway expansion tapping a vast field. Routt County alone is large enough to embrace the entire State of Massachusetts, is subject to irrigation, and is rich in mines. I merely throw that out as an illustration. They could be multiplied indefinitely. The field for expansion is large, but owing to the uncertainty as to the results of governmental regulation and control the field is far from inviting to capital.

Now, the point which I particularly desire to make in this connection is that in 1900 each $1,000 of capital invested in agriculture produced $92. In 1905 it produced $98. In the case of manufactures, in 1900 each $1,000 of capital invested produced $194, and in 1905, $151. Now, compare these rates of return with that on railway capital, and you will find that in 1900 each $1,000 of capital invested in railways, according to the reports of the Interstate Commerce Commission, produced but $41, as against $194 in that year in manufactures and about $92 in agriculture.

In 1905 the railways for each $1,000 of capital invested produced $44 as against $151 for manufactures in the same year and $98 for agriculture. I am quoting these figures from my oral argument for the Alton in the freight rate cases at pages 4510 and 4511 of volume 7, printed as Senate Document No. 725, Sixty-first Congress, third session, this document containing the evidence taken before the Interstate Commerce Commission and also the arguments and briefs of counsel. This particular volume contains the arguments of counsel, and if you desire to follow the matter more in detail you will find on page 4512 of the same volume (No. 7) figures giving in detail concerning these various industries-manufactures, railroads, and agriculture-in much greater detail than I have stated them, showing capital, wages, gross value of products, cost of materials used. total salaries, wages, net returns, etc.

The point, if it pleases the commission, which I desire to leave with you is that the carriers of the country are not securing on the

capital investment anything like the amount of revenue which is brought into the two other large industries, and this is a factor, which I submit should be considered very seriously in enacting legislation and by you as a commission in proposing legislation-the effect which such legislation is going to have upon the revenues of the railroads of the country.

Now, it has been stated on behalf of the commission during these hearings that the railroads of the country are now paying on accident claims to employees approximately $12,000,000, but that, according to the estimate of the commission, not more than $5,000,000 reach the employees, and that $7,000,000 disappears in attorney fees, legal expenses, etc. In other words, that there is an economic waste to that extent. If this estimate is correct, this new system will result, even if only the $12,000,000 is distributed, in the employees receiving, in addition to the $5,000,000, at least $6,000,000 more, even though the administration of the system may possibly cost a million dollars, which, of course, it will not. But on any theory, according to the figures of the commission, the employees will, under the new system, secure at least twice as much; that is, 100 per cent more than they are now receiving under the old system. Now, in the light of this and the small return on railroad investments, should you establish a schedule which will tax the railways of the country $15,000,000 instead of $12,000,000? Why not start this system upon the theory that you intend to stop merely the economic waste, and let your schedule be based upon a distribution of the twelve millions which the carriers are now paying, rather than upon a distribution of $15,000,000? I submit that from a tactical standpoint those of us who favor the enactment of this Federal legislation along the lines proposed by the commission will be better able to secure a favorable opinion from the Supreme Court of the United States if you do not, by the schedule which you are proposing, impose, by your own estimates, an additional burden of $3,000,000 upon the carriers, for, in the last analysis, in the very essence of the problem, that will mean that you are actually taking from the treasuries of these railroad companies $3,000,000 more per annum than they are now paying and distributing it to the employees in the light of your judgment as to their needs.

Now, that proposition is sailing very close to a violation of the "due process clause of the Constitution. Why not make your schedule cover a distribution of $12,000,000 upon the accidents upon which your figures are based and let this great question go before the Supreme Court of the United States, not as one involving the taking of additional money from the treasuries of the companies, but merely as a plan whereby you will eliminate the economic waste? Then, after the constitutional principle has been fixed, unembarrassed by this additional tax upon the revenues of the carriers, you can-that is, Congress may, and I hope it will be through the medium of the Interstate Commerce Commission-take up this question of the schedule, if it is believed to be wrong, and a schedule worked out which the carriers in the light of their revenues will be able to pay-that is, one which is just and reasonable. If you do not provide automatically by some apt words that the revenues shall be increased to meet this additional burden, but merely increase the burden without doing that, 30198° S. Doc. 33, 62-2, vol 2——88

I submit the whole scheme of legislation is seriously endangered upon constitutional grounds.

You gentlemen of the commission realize, I am sure, that you are dealing with a great economic problem, perhaps one of the most important and far-reaching in its ultimate effects that has come before Congress within the last generation, and that we are merely. despite the careful study which you have given to it, on the threshold of the consideration of it and the subjects closely related to it, for it seems to me that in the background-back of this legislation-looming large upon the horizon, is Lloyd George's entire scheme of oldage pensions, sickness, and nonemployment benefits, etc., which, if this legislation is held constitutional, it seems to me, will in time, and perhaps very early, become a vital issue in this country; and I, while in full accord with the general purpose of the legislation which you advocate, can not but

The CHAIRMAN. Of course, we can not deal with that subject. It is pretty clear that that has to be dealt with by the States.

Mr. ALEXANDER. That is a subject, Mr. Chairman, which is so vast that I will not take up your time to advance any thought upon other than this: If it be true that the fathers in establishing the Constitution intended to give jurisdiction to the Federal Government of every problem which in its operation affected more than one State, it may be that such a subject as old-age pensions, for example, would come within your purview upon the same theory that

The CHAIRMAN. I do not agree to that construction of the Constitution.

Mr. ALEXANDER. Upon the same theory, Mr. Chairman, that this workmen's compensation legislation will be constitutional on the ground that it makes travel safer for the reason that the employeethe man operating the railroad; and I think I have heard this view expressed on this point by the chairman of this commission during our sessions is relieved from the strain of anxiety which he otherwise would be under. If that be true, I submit that the same argument would warrant an old-age pension. However, the subject is too subtle and too remote

The CHAIRMAN. Not by the Federal Government; that could not be tied to any power conferred upon the Federal Government.

Mr. ALEXANDER. I do not propose to advocate before this commission such a matter as old-age pensions as a practical matter probably coming within the purview of the Federal Government to-day. Mr. MOON. You certainly are not here urging it.

Mr. ALEXANDER. No; I am not advancing that theory. Now, Mr. Chairman, it seems to me that by the particular plan which has been presented in this tentative bill there are grave dangers threatened in the future. The labor element and the corporations have met here. and there has been in their conferences, in their conversations, much unanimity of feeling, and the expression of the view that their interests are in this matter identical, as in so many others. As I understand the theory of this legislation, it is that you desire to impose upon the industry the burden of the risk of the employment. If that be true, of course, the practical, concrete problem is, How is that to be done? If it be true, as reported by the Interstate Commerce Commission, that the carriers of the country during the last few years