tolls a sufficient amount ultimately to meet the debt which we have assumed, and to pay the interest."

The Panama Canal act is in harmony therewith. It merely needs good management and up-to-date accounting.

In the fixing of tolls, the President is vested with some discretion. A maximum and a minimum rate are fixed for foreign commerce using the canal. The amount imposed on the traffic must cover carrying charges, as that is understood in modern business, as soon as it can be done without exceeding the maximum rate fixed by the canal act. The Panama Canal act is thus in harmony with the foregoing view expressed by ex-President Taft.

The policy that the United States should adopt in the management of the Panama Canal is expressed as follows by Professor Johnson:

"The United States should adhere to business principles in the management of the Panama Canal. The Government needs to guard its revenues carefully. Present demands on the general budget are heavy and are certain to be larger. Taxes must necessarily increase. Those who directly benefit from using the canal, rather than the general tax payers, ought to pay the expenses of operating and carrying the Panama Canal commercially.”

The following statement by Professor Johnson is now apropos:

"In considering the effect of exempting the coastwise shipowners from toll payments it is possibly well to bear in mind that the charges that have been fixed by the President for the use of the canal-one dollar and

twenty cents for each one hundred cubic feet of the earning capacity of vessels, with a reduction of forty per cent in the rate for vessels without passengers or cargo-are not the highest rates that might have been imposed without restricting traffic, nor are the rates such that higher charges would have lessened the revenues from the canal. The tolls are neither all the traffic would bear, nor have they been fixed with a view to securing maximum possible revenues.

"It is obvious that with a given rate of tolls the canal revenues will be larger if all vessels using the canal are charged tolls, and will be smaller if any class of vessels, as the American coastwise shipping, is exempted from the charges.

"It is likewise self-evident that if it be desired to secure an income of a definite amount, as, for example, revenues that will cover outlays for operation, maintenance, interest and amortization-revenues that will make the canal commercially self-supporting-the rate of tolls must be increased proportionately with any reduction of the tonnage resulting from the exemption of any class or classes of shipping from the payment of the charges.

"These statements are, of course, mere truisms. There will be nothing new or unusual about the Panama Canal finances. If the canal does not support itself, the taxpayers must support it. The amount required to meet the current expenses and capital costs of the canal can be derived only from the tolls paid by those who use the waterway or from taxes paid by the public who own the canal; and, as regards the income from tolls, the sum received must be affected both by the rate of charges

and by the share of the tonnage that is subject to or exempted from the charges.

"It is estimated that $19,250,000 will be required annually to make the canal commercially self-supporting. This total is made up of $3,500,000 for operating and maintenance expenses, $500,000 for sanitation and zone government, $250,000 which is the annuity payable to Panama under the treaty of 1903, $11,250,000 to pay three per cent on the $375,000,000 invested in the canal, and $3,750,000 for an amortization fund of one per cent per annum upon the cost of the canal.

"It has been ascertained by a detailed study of the traffic that might advantageously use the Panama Canal and of the rate at which that commerce is increasing that, during the first year or two of the canal's operation, that is in 1915, the ships passing through the canal will have an aggregate net tonnage of about 10,500,000 tons. Of this initial tonnage about 1,000,000 net tons will consist of shipping employed in the trade between the two seaboards of the United States. The evidence as to the past rate of growth of the world's commerce justifies the estimate that by the end of the first decade, that is, in 1925, the total net tonnage of the shipping passing through the canal annually will be about 17,000,000 tons, of which at least 2,000,000 tons will be contributed by the coastwise shipping."

It is likely that growth in the amount of the traffic that will be shipped through the canal will continue in later decades in even larger volume than during the first decade. This points to the possibility of making the canal commercially self-supporting.

Professor Johnson says in another place:

"Tolls are to be levied and collected at Panama presumably to pay the expenses for running and maintaining the canal and for meeting the interest charges on the funds invested in the canal; and it is to be expected that it will be the policy of the United States to make the canal commercially self-supporting, if the traffic is large enough to secure the requisite revenues without unduly restricting the usefulness of the waterway. It will not be the policy of the United States to obtain profits in excess of the revenues required to meet operating, maintenance, interest, and amortization charges; but, if the traffic proves to be as large as it seems probable that it will be, the policy of the United States will doubtless be to have the canal carry itself commercially— to limit the canal expenses borne by the general taxpayers of the United States to the military and naval outlays required for the defense of the canal and for the maintenance, at the isthmus, of forts and naval bases.

"If it shall be, as it ought to be, the policy of the Government to make the canal commercially self-supporting, it is obvious that the rate of tolls imposed must be affected by the tonnage upon which the charges are levied; and that, if the toll-bearing tonnage is reduced by the exemption of the large volume of shipping owned by the individuals and corporations engaged in the coastwise trade, the rate of charges payable by the owners of American ships in the foreign trade and by the citizens owning vessels under foreign flags must be higher than the rate would be if all vessels using the canal were required to pay tolls."

Ex-President Taft says:

"The tolls have been fixed on the canal for all the world on the assumption that the coastwise traffic is to pay tolls. Our giving it immunity from tolls does not, in our judgment, affect the traffic of the other countries in any other way than it would affect it if we had voted a subsidy equal to the tolls remitted to our ships."

Why insist on a method of granting a subsidy to our coastwise shipping claimed to be repugnant to the HayPauncefote treaty if no pecuniary advantage is aimed at. If no part of the revenue that would have been contributed by our coastwise shipping is to be levied against other shipping through the canal, it is not clear why this method of granting the subsidy should be so stubbornly insisted on. Something other than method of granting a subsidy is aimed at. Monopoly power in the management of the Panama Canal is the goal of champions of tolls-exemption.

Could it have been intended as a permanent policy to estimate the amount of our coastwise shipping through the canal and to consider it in fixing the rate to be charged other shipping? There is no evidence that that was to be or could be the policy of the United States. There is evidence that it was to be the policy of the United States to treat our coastwise shipping as we treat our public vessels through the canal.

The question arises as to whether the canal can be made commercially self-supporting under those conditions. It seems probable. It will take a longer development (initial or deficit) period and thus a deferred date when the whole liability incurred in construction can be