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present and for the future convenience and necessity; thus, even if the railroad in the overall operations is operating under a profit.

And I wish to read from this month's issue of the Forbes magazine, page 22, the following:

The Pennsylvania Railroad is one of the richest companies in the United States. Its assets, consisting of $2.8 billion, make it larger than such industrial giants as Chrysler or Bethlehem Steel. Its holdings of other companies' common stock have a market value of over $450 million, exceeding those of most mutual funds.

The Pennsylvania owns over $200 million in nonoperating real estate. Its 25,000 commercial and industrial leases alone yield more than $12 million a year. Its mineral rights

This is something I never heard of

include the largest coal deposits of any railroad in North America.

At its most conservative figure, the Pennsylvania book value is $130 per share, but the more realistic estimate of Pennsylvania's worth would bring it to over $150 per share.

The Pennsylvania's total debt, including these last obligations is not much over 30 percent of the railroad's total assets. This is a conservative debt ratio for a railroad.

It has a tax credit which will shelter its earnings for years to come.

And I repeat again: Thus, if the railroads in the overall operation are operating under a profit, under this bill, they can call upon the Government to pay for all the items enumerated, thus relieving themselves of the cost and increasing its profit.

This is the old game of heads I win and tails you lose.

The railroads give up nothing while gathering in the millions. It is a great game, if they can get away with it.

There is nothing in this bill which provides for lowering the fares or increasing schedules, which is something that is desperately needed. The railroads are a public necessity, and should operate for the greatest convenience of all, and not for the most profit, while giving the public the least amount of service at the higher fares.

Because of their policies of high fares and complete neglect of services, the railroads have brought on the commuter crisis, and have caused economic and social hardship to millions of people who are, by law, entitled to ride at the lowest of fares and to receive adequate service.

By charging the higher instead of the lowest fares, the railroads are acting like a private corporation instead of like a public utility, which they are.

This is a misuse of their public function, illegal, and against public policy.

Mr. Chairman, the direct overseers of the railroad, the State public service commissions, and the Interstate Commerce Commission, have for years been asleep at the switch.

The rails were permitted by these agencies to neglect their equipment, to cut schedules, and to neglect the appearance of their stations. As I was riding down on the New Haven from New York City, I noticed many of the stations badly in need of painting and completely neglected.

The communters are harassed, abused, left without seats in many instances, and many seats, in many instances-and I am referring to my experience on the Long Island Railroad-are dirty, cars are dimly lighted, overheated or underheated, with windows which are stuck and can't be opened.

Added to this is the almost constant threat of discontinuance of service, unless they get their fare increases, like holding a gun to one's head.

Railroad deficits have been called phantom deficits by one of the outstanding accounting firms in the world, Arthur Andersen & Co., and are accounting maneuvers in a nonrealistic accounting system in the Interstate Commerce Commission.

Senators Robert Kennedy, Jacob Javits, and Abraham Ribicoff are all ill advised in supporting this bill.

A real effort to solve the commuter problem can be made by insisting that the public service commissions compel the railroads to clean up and to properly maintain their equipment and also provide adequate and necessary equipment to operate its passenger lines, and not at the highest fares but at the lowest.

The Governor of New York and other Governors would perform a great public service if they will demand strict enforcement of the public service laws instead of insisting on paying more millions to the railroads.

Mr. Heidemann, the president of the Chicago North Western Railroad, has illustrated how to run a commuter railroad at a profit without constantly increasing fares or cutting services.

Why not turn our eastern railroads, the commuter railroads, over to him and sit back and enjoy that cigar?

Adequate railroad mass transportation at low fares will save millions of dollars for our taxpayers, and vast savings on highways. It will cut down the present bumper-to-bumper travel, relieve congestions in the city streets, save billions of dollars in the present loss of manpower, hours which will help the economy of the cities and the surrounding communities, and will be a great asset to our people, who can again visit the museums, cultural centers, and just plain visit.

It will help the businesman and will stabilize the value of our property.

Transportation, like education, should be the best and within the reach of all.

Railroads have received, as an item of expense, depreciation on cars and other equipment and property.

Instead of setting aside this money to purchase new equipment and rehabilitating its cars and stations, these railroads have seen fit to pay out interest on bonds and dividends on stock.

Mr. Harry Haggerty, financial vice president of the Metropolitan Life Insurance Co., testified before the Senate Subcommittee on Commerce that his insurance company stood ready at all times to make equipment loans to the railroads at reasonable prices, rates, something which our eastern railroads seem to shy away from.

It is high time that a full scale congressional investigation is made of the operation and control of all our eastern railroads.

Thank you very much.

Senator PASTORE. Thank you, Mr. Klein.

Our next witness is Mr. Irwin A. Schiff.

Mr. SCHIFF. Senator, gentlemen of the committee, I learned about this meeting just a few minutes ago, when I read about it this afternoon in the


I don't represent any organization. I don't have the background of some of the people who have testified here today.

However, I think I raise a question that so far has remained silent. It seems that most of the problems of the New Haven Railroad can be solved, supposedly, by reliance on more Federal aid. I personally don't believe any Federal aid is necessary, because Federal aid will merely treat the symptoms of what is wrong with the New Haven Railroad, and not treat the cause of what is wrong with the New Haven Railroad.

However, while I don't agree with more Federal aid, I don't understand the pure logic, that large amounts can be spent, $8 million on airlines, and farmer subsidies, paying the farmer not to grow food, and many other uneconomic projects, while letting an economic service like the New Haven Railroad go by the boards.

I can't understand the logic which would compel the people of New England to contribute to the people in Tennessee through a TVA program, but force them to forgo, through this Federal jargon, and in the transfer of tax money, this much needed transportation system. Now, we are not going to buy Federal progress with more money. We are going to buy Federal progress with actual things.

Now, it might be that the price we are going to have to pay for this experiment, in getting us to the moon, it may mean that the John Q. Public will not be able to get from Stamford to New York City.

If Federal aid is designed to help somebody, we always look at who is being helped.

But Federal aid must be taken from somebody to give to somebody else.

If we are going to look who are we going to help, we have to look who are we going to hurt. Somebody, some individuals are going

to be hurt.

I have yet to sit here and hear anybody say that one of the problems of the New Haven may be the problem of archaic labor laws. I would like to find any prominent businessman here who can tell me you can talk about mismanagement all you want, and inadequate equipment, and what have you I would like to ask you how long they would stay in business if they were forced to employ help they really didn't need.

Let's face it. How many businessmen would stay solvent, if they had to operate under the type of labor legislation that the railroads are forced to operate under?

I can't understand reasonable men trying to skirt this fundamental issue.

I am sorry, I have to go through these rough notes, I have not a prepared statement with me.

Senator PASTORE. Go ahead.

Mr. SCHIFF. Is it going to be that the political bureau, and, for a better word, versus that of job security, they are going to pursue it because of business policies?

Fundamentally, there is no such thing as job security.

If there was, we wouldn't have men in the oilfields of Pennsylvania, or where have you, we would still have whalers off the coast of Nantucket, if they had job security.

A free enterprise and a changed society can't have job security, because if you are going to permit new industry to come in, I believe that the old industries will have to die, and the people will have to be retrained.

In other words, will the economic lifeline of New England be sacrificed because statesmen-and, Senator, I regard you as a statesman— will not have the courage to pass reasonable labor laws, because, in the end, even labor is going to suffer. We can give him palliatives, but this is not going to help him. It is not going to cure him.

You mentioned before about Federal highways, and people don't want to ride on trains.

This past summer I went to Mount Washington for a little vacation with my wife.

Senator PASTORE. I didn't say that.

Mr. SCHIFF. I am sorry if I misunderstood you.

Well, anyway, I was driving along there, and there is a huge highway that goes through New Hampshire; it cuts a swath about 100 yards wide up through the countryside.

Right alongside this highway is a little railroad. I couldn't help but say to my wife that that little road would move more people and freight in comfort than the billions that were really being spent on the New Haven.

Believe me, if I could have taken the train up to Mount Royal, I would have preferred it. But the costs of the rail transportation have made it prohibitive, not because of the railroad, but because of the circumstances under which they were forced to operate.

Now, Senator, many businesses have failed because of every day you pick up a paper you see business failures. Many businesses fail because they couldn't cope with the current labor legislation.

You see minimum wage standards, double time, overtime standards, in addition to the ever-increasing level of Federal, State, and local taxation, which adds to the total cost of running a business. These same facilities are in operation here. And, under those conditions, naturally, a business is going to fail. That is the business that is now going to fail.

And that is true with the lower class of business, the corner grocery store, because he can't stay in business because of the same factors. That is true with the New Haven. Here it is, the fundamental business, and now we are searching for palliatives for this ailing New Haven Railroad.

Now, is this Federal aid sought just so it can subsidize inefficient labor?

In other words, I don't know; what does the New York, New Haven & Hartford estimate that the unnecessary labor costs come to per year?

I didn't know I was going to come up here and testify. Otherwise, I would have brought some facts with me.

I really believe that they are operating under laws that are about 50 years old, when railroads were presumed to be a monopoly.

But, gentlemen, when you say the railroads are monopolies, they really are not, because you can move by air, you can move by automobile, you can move by bus, you have a choice by which to move.

If you want to buy electricity, of course, you have to get it from the current electric company, so you have to use them. That is a monopoly. But no longer are the railroads a monopoly. And yet they are being treated as a monopoly.

They are paying taxes to support the competing methods of trans

portation. In other words, the Government will build roads for the trucks, and tax the railroads.

They will build roads, and when a conflict develops, they protest there is a wide difference.

They will build roads for trucks, but every railroad is presumed to be able to build its own bridges, and up until recently they were able to write it off.

Of course, you would say, what is the life use of a railroad bridge or tunnel?

What business can operate and stay solvent without this type of writing off policy?

But the question I would like to find out is, suppose there is no solution, and the New York, New Haven might go out of business. But it can stay in business if the railroads were able to operate with the kind of men and the amount of men they really needed.

In other words, they don't really need a fireman on diesel trains. They say they don't.

Are we going to lose this fundamental service because firemen have more powerful forces than we can talk about people's lives?

These questions that I have raised, Senator, I feel might offer, in substance, some solution to the problem.

And, oh, yes-in other words, we have a basic cost, and more and more private businesses, Senator, are going to be inundated under the high raising on all levels, city, State, and Federal taxation.

If the Government wants to take out in the current cash budget, as opposed to the proposed budget, the cash flow of about $130 billion, where is the money going to come from to finance the Government projects? Individually, these projects are going to suffer.

Now, unfortunately, the businesses that have failed, they have been small ones to date, but the number is rising steadily, and the only way that you are going to stop it is by starting to reduce waste and inefficiency on the part of the Federal Government.

We gave Sukarno $1 million. What did it cost us?

We gave to the poultry farmers $20 million. What did it get us? All these projects were unsuccessful, and it is a big difference as to where you put the money.

I have one closing remark, Mr. Chairman, to make.

Fundamentally, and I think this was said several times, no organization can continue to spend more dollars than they take in.

Unfortunately, the Federal Government—and this is importanthas been doing it for the last 22 years. And now we are beginning to pay the price.

Thank you.

Senator PASTORE. Thank you.

Professor Fred Zimmermann.

Professor ZIMMERMANN. Senators, members of the committee, I am here on behalf of Senator Max Berking, of the New York State Senate, who is tied up with legislative business, and he has asked me to come here today.

Senator Max Berking lives in an area of New York State, in Westchester, which is served by the New Haven Railroad.

Obviously, the communications, business enterprises, the very life of these communities is involved.

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