Senator BRANDEGEE. Which they may do, or may compete for the traffic?

Mr. OUTERBRIDGE. That divorces them from many other lines not going through the Panama Canal.

Senator BRANDEGEE. It is through the Panama Canal and everywhere all through the country?

The CHAIRMAN. It embraces the Lake connections?

Mr. OUTERBRIDGE. Yes; I understand that.

Senator BRISTOW. Has not the Mallory Line a connection with the Santa Fe Railroad?

Mr. OUTERBRIDGE. I do not want to make any statements here that may be inaccurate, and I am not sufficiently informed to answer that question.

The CHAIRMAN. You may give your impression, if you have one. Mr. OUTERBRIDGE. My impression is that they are not owned or controlled. They may have intercommunicating freight connections.

Senator BRISTOw. They have at Galveston, have they not?
Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. Do they not handle exclusively the Santa Fe business from Galveston, between Galveston and New York?

Mr. OUTERBRIDGE. My impression is no; they carry any and all freight.

Senator BRISTOW. Does the Santa Fe have any other connections? Mr. OUTERBRIDGE. They may handle that freight; they may be the only line handling Atchison freight, but that is not the only freight the line handles.

Senator BRISTOWw. You spoke of the railroad transportation being next to agriculture the most important. You made an illustration that was interesting to me. You said if there was a great failure of crops that it resulted in the railroads' inability to purchase, etc.

Mr. OUTERBRIDGE. I beg pardon, sir: I drew a comparison. I said that if there is a great failure of crops we all know it is indisputable what the effect upon general business was; that if the railroads were crippled in their purchasing power that was a matter about which there was not by any means so clear an apprehension, was the statement I made. It pro

Senator BRISTOW. Agriculture is a productive industry. duces wealth, does it not?

Mr. OUTERBRIDGE. Unquestionably.

Senator BRISTOw. Transportation simply handles the product? Mr. OUTERBRIDGE. I did not speak of transportation at all, sir. Senator BRISTOw. Railways are engaged in transportation, are they not?

Mr. OUTERBRIDGE. Yes; but I spoke of the effect of the purchasing power of the railroads.

Senator BRISTOW. But I was trying to get at the basic effect. Is it not a fact that transportation is the handling of products? Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. That is the business of transportation?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. It is the handling of products. The products are handled for a fee, a charge?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. It is a tax, is it not, upon the production?
Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. The transporting of it from one place to another?
Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. The more expensive the handling of that product why of course the greater burden it puts upon the production, does it not?

Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. Now, in order to enable the railroads to make more purchases, the purpose of the purchase is to equip itself for handling business, for moving commerce; production?

Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. The enabling of a railroad then to make additional purchases is to permit it to charge rates that will produce a revenue in order that it may meet a business requirement?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. Is not an increase in freight rates an increased burden on the commerce of the country?

Mr. OUTERBRIDGE. The rate of freight is not nearly so important as the fact that freight rates should be established and uniform to everybody.

Senator BRISTOW. Pardon me; I see the point. It is that they shall be uniform to everybody, that is, to the business man who has commodities to sell. If you are selling your commodities in a certain section of the country, you want to be able to figure that it will cost just so much to get your commodity to your market, and that there be established a fixed amount so that you can depend upon it in your business transactions. As to whether it is large or small is not of so much consequence to you as it is to your customer, is it? Mr. OUTERBRIDGE. The ultimate consumer.

Senator BRISTOW. I say, your customer, and of course any tax, I understand, on a product is borne ultimately by the man who consumes it?

Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. Now, the cost of that freight, the rate of that freight, is of consequence to your customer because you charge that amount; he has to pay it, does he not?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. You do not care what it is, but he does because he has to pay it; you simply charge it up to him?

Mr. OUTERBRIDGE. Yes; and he does not care if I am charging the same amount to everybody.

Senator BRISTOw. If he can charge it up to his customer and the consumer finally has to pay it?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. When you are increasing the rate you are increasing the price to the consumer, of course, and increasing the burden upon the consumer?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. It is a tax upon the commerce?

Mr. OUTERBRIDGE. Yes.

Senator BRISTOw. I was interested in knowing how you figured that an increase in the tax increases the prospective prosperity to the business of the country.

Mr. OUTERBRIDGE. The increase in the tax to the consumer on a small unit is so infinitesimal that it almost disappears, but the increase figured on the enormous tonnage which the system carries represents an amount which it in turn can spend for extensions, which vivify the trade of the country in which everybody participates. Senatar BRISTOW. That is, you tax the consumer and the producer of wheat. We will say you are dealing in the products of wheat. When you tax that, we will say, a few cents a bushel, you take the money from the producer of the wheat and you give it to somebody else and thereby you help the somebody else?

Mr. OUTERBRIDGE. I do not understand it so.

Senator BRISTOW. How can you vivify it without

Mr. OUTERBRIDGE. The man sells his wheat in the market and the man who buys the wheat pays the cost in freight rates, whatever the freight may be, and by the time that wheat is ground into flour and baked into bread and distributed to the individual consumer the margin of additional freight between a low freight and a high freight, or a paying freight and a nonpaying freight is so small that the only way it can find an expression in a loaf of bread is perhaps by the loaf being a trifle smaller size, rather than a higher price, because you can not apply that unit; but when you carry hundreds of millions of bushels on a railroad, that infinitesimal fraction of a cent per bushel or per hundred pounds higher freight results in the aggregate sum of money it gets as a whole for its expenditure and adds a very large factor in stimulating trade.

Senator BRISTOW. But if the wheat grower in Kansas was seeking a market for his product in New York, his wheat in Kansas is worth the New York price less the freight to New York, is it not? Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. Now if you increase the freight from Kansas to New York you lessen the value of that wheat to the grower in Kansas, do you not?

Mr. OUTERBRIDGE. Not necessarily, because the market may rise proportionately.

Senator BRISTOW. How would you induce the market to rise by increasing the tax on the wheat?

Mr. OUTERBRIDGE. Well, if I buy as I do all the time large quantities of flour in the West direct from the miller and offer it to a foreign merchant anywhere else I add the freight. I can not get the flour any cheaper if the freight goes up; I have got to pay the miller his price for the flour; if the freight goes up the other man has got to pay it. Senator BRISTOw. The miller has got to accept the price you offer him for the flour, has he not?

Mr. OUTERBRIDGE. It has never been my experience that a slight fluctuation in freight rates, that you can get it taken off the producer at that end. It has got to work at the other end; it has got to be paid by the consumer at the other end.

Senator BRISTOW. Suppose you ship to Europe?

Mr. OUTERBRIDGE. I do not, but I ship to the British Provinces. Senator BRISTOw. Well, to the British Provinces then.

Mr. OUTERBRIDGE. I do ship some goods to Europe, but not the goods we are talking about now, breadstuffs.

Senator BRISTOW. Who are your competitors there in that market for flour?

Mr. OUTERBRIDGE. Oh, a large number of firms.

Senator BRISTOW. Firms from what countries?

Mr. OUTERBRIDGE. Local firms there and other firms established in New York who are shippers, as I am.

Senator BRISTOW. Local firms in the British Provinces ?

Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. Are there any shipments from Argentine?
Mr. OUTERBRIDGE. No.

Senator BRISTOW. How is the price fixed in these British Provinces for this flour of yours?

Mr. OUTERBRIDGE. They buy in the cheapest markets in the world; they have no tariff; they have removed the duty which formerly existed there and buy now in the cheapest markets in the world.

Senator BRISTOW. The market there is controlled by competition? You have got to sell for an equal amount with your world competitors? Mr. OUTERBRIDGE. Yes, sir.

Senator BRISTOW. If you increase the cost of that carload of flour from Junction City, Kans., to the British Provinces where it is destined through your commercial operations you have got to sell it; that is, the miller at Junction City, Kans., has got to take less for it than he otherwise would have to take, has he not?

Mr. OUTERBRIDGE. If some other markets were ready to sell cheaper, yes.

Senator BRISTOW. If you were competing in the British Provinces with other markets in the world and the cost of delivering that flour to its final destination is increased, then you have got to pay the Junction City miller less?

Mr. OUTERBRIDGE. That is unquestionably so.

Senator BRISTOW. Then I am unable yet to see how you are going to help his prosperity by increasing the rates which he has to pay on the freight.

Mr. OUTERBRIDGE. Well, it is quite a long story to try to point out how a great purchasing power filters its way down through every factory and every mill and to every homestead in the form of income. That is what happens, and if the cost of certain articles of consumption goes up it does not matter so much to the man if his income is going up proportionately and if he is employed every day in the year at an ascertained scale of wages. But if he is knocked out for two days a week, or his wages are curtailed because industry languishes, which is the present position to-day, he loses a great deal more of his income by that decline than he would suffer through the increased cost of living by the other means.

Senator BRISTOw. But, as I understand your proposition, it is to increase the prosperity of this man who is producing the wealth of the world by increasing his expense in reaching his market. Now, you say you will increase the prosperity of the country. You increase the prosperity of the country by placing a tax on the producer of the country then?

Mr. OUTERBRIDGE. But if the prosperity of the country is at a low ebb, that man is suffering in the price of his product in consequence of it a great deal more than the infinitesimal advance in his freight rate would signify, or that in the aggregate would increase the general prosperity.

Senator BRISTOw. But you tax him in order that he may prosper. That is, you tax his production and make it more expensive to market it in order to give him prosperity, because you use that tax to contribute to somebody else's prosperity. How do you contribute to his prosperity by taxing him for somebody else's goods?

Mr. OUTERBRIDGE. I just stated that my belief-my confident belief is that when business and industrial activity is at a high movement, at a high state of prosperity, it is expressed in the values of all products, and the man who is a producer is reaping the benefit of it in the value of his product. When industry is at a low ebb and prosperity is in a very poor state, the value of the man's production decreases and therefore he is not getting for his product anything like the prices that he would normally get for it if business is active and prosperous and everybody is happy and able to spend money freely. It seems to me we are getting into an economic discussion that is far from the Panama Canal tolls question.

The CHAIRMAN. It is very interesting.

Mr. OUTERBRIDGE. I had hoped-I did not want to impose on the committee a lot of ideas which I did not come here for.

Senator SIMMONS. I should like to ask one question germane to that. Is not the whole theory of protective tariff in this country based upon the theory that you increase the prosperity of the country by increasing the prosperity of the factory and the profits of the factory? Mr. OUTERBRIDGE. I should so interpret it.

Senator WALSH. Do you adhere to that doctrine?

Mr. OUTERBRIDGE. Personally?

Senator WALSH. Are you favorable to that doctrine?

Mr. OUTERBRIDGE. So long as this country had a continued live and an abnormally growing population and great natural resources to be developed, I could see great virtue in the protective theory, but I believe that ultimately this country must come as closely as possible to free trade, if it is going to continue to grow when it becomes densely populated and settled, because it must reach out for the foreign markets; it can only get a barter business. We can not sell our products abroad for gold; we have got to sell them for the products of other countries, and we can not get them in here if we have a wall against them.

Senator WALSH. Coming back to the question about which you spoke originally. Is wheat and flour carried abroad in tramp ships generally, or line steamers?

Mr. OUTERBRIDGE. Tramp ships almost altogether. Formerly liners carried some for ballast. They used to present the owner with a chromo if he carried wheat for ballast. That day has passed and grain is carried almost exclusively in tramp ships.

Senator WALSH. What do you say then as to the character of ships which carry grain from Pacific ports, Seattle, Portland, and Tacoma, for instance, to New York.

Mr. OUTERBRIDGE. I do not think there would be any carried to New York. You mean coastwise or transshipping? There might be grain carried here for transshipping, undoubtedly, abroad. What about the character of the ships?

Senator WALSH. Yes.

Mr. OUTERBRIDGE. They undoubtedly would have to be ships designed for that class of cargo.