Mr. TAYLOR. I think as a realistic proposition, yes, because we have got that system. There is no serious movement to do away with it. But you are bound to admit it is socialistic. Mr. REUSS. Then your line between permissible socialism and nonpermissible socialism is if you have it, it is permissible? Mr. TAYLOR. I would put the post office in a special category as far as I am concerned, sir. As you say, we had it practically since the beginning of the country and I do not know anybody who is going to do anything about it. Mr. REUSS. Actually I think a good many decades of our national history elapsed before the Federal Government entered that field. Mr. TAYLOR. We have had it for the past 150 years. I will put it this way, that the post office, while a socialistic enterprise, has more or less gained the acceptance of long being established, and the fact that while it does of course compete with private enterprise, apparently it is just one of those situations that nobody can do anything about. Mr. REUSS. I have just returned from several days of hearings in the Florence-Sheffield-Tuscumbia complex down around Muscle Shoals where we heard witnesses from all walks of life-bankers, industrialists, and farming people. They all seem to accept the Tennessee Valley Authority down in that region, at least, as something that was established. I wondered if applying your economic analysis to that situation if you would not be willing to include TVA in the category of permissible socialism? Mr. TAYLOR. No, we would not. Mr. REUSS. Why is that? Mr. TAYLOR. Well, TVA is a comparatively new thing. When was it started? 1935? Mr. REUSS. About 20 years ago, roughly. Mr. TAYLOR. It is a comparatively new thing. It was started on a theory totally different from what has worked out in practice, namely, that it was primarily a flood control and navigation project. Steam plants were undreamed of at that time. As I say, it does compete directly with privately owned utilities. Mr. REUSS. Thank you. Now, turning to one other point you made on the question of subsidies, you are aware, of course, of the large program, the rather large program of tax amortization certificates which have been granted industry by our United States Treasury and the Internal Revenue Department? Mr. TAYLOR. Yes, sir. Mr. REUSS. In the last 5 or 6 years? Mr. TAYLOR. Yes, sir. Mr. REUSS. Ranging over a whole variety of industrial commodities and utilities, basic materials, machinery, et cetera. Are you, in the Southern States Industrial Council, in favor of or opposed to the tax amortization program? Mr. TAYLOR. Well, we assume that the Government has found that they need these plants for the national defense and that they are willing to subsidize them to that extent. We, therefore, do not question that. Mr. JONES. Let me ask you a question at that point. Then what you say is you are for private subsidies and not for public subsidies. Is that it? Mr. TAYLOR. Well, these plant amortizations you have talked about are public subsidies, are they not? Mr. JONES. Yes. Mr. TAYLOR. They come out of the Public Treasury. Mr. JONES. Yes, but the immediate beneficiaries are private concerns which pay dividends on the profits enjoyed by the corporation which receives them. Mr. TAYLOR. On that, Mr. Chairman, we just go back to our original and main proposition here, which is in the broadest sense that the Government should not compete with its own taxpaying citizens. Mr. REUSS. Now, further on this question of subsidies, as you know a considerable amount in dollar value of tax amortization certificates have been granted. Mr. TAYLOR. That is right. Mr. REUSS. I might say very properly to private utility companies situated in all parts of the country. You have no objection to that, I trust. Mr. TAYLOR. I assume that the Government's yardstick for doing that is that the expansion which is thereby brought about will broaden and strengthen the national defense, and they can afford to pay that price. Mr. REUSS. It is a fact, is it not, that a considerable portion of the electric power output of the Tennessee Valley Authority system is dedicated to the national defense? Mr. TAYLOR. That is right. Mr. REUSS. The figure has been given in these hearings that the percentage of TVA output which goes to the Federal Government's installations themselves, leaving aside private defense industry, is in the order of 60 percent of that total. You have no reason to challenge that figure, do you? Mr. TAYLOR. You mean the electricity that goes to the Atomic Energy Commission? Mr. REUSS. Yes. Mr. TAYLOR. I do not know the figures but I have no reason to question that. Mr. REUSS. But your feeling is that it is perfectly proper for the Federal Government to assist a private utility whose power is used for the national defense but improper for it to assist the Tennessee Valley Authority to accomplish the same thing? Mr. TAYLOR. That is right. That is correct. Mr. REUSS. What is the feeling of you and your organization in regard to the subsidies presently given to newspapers and magazines by the Post Office Department, due to rates less than the actual cost of handling newspapers and magazines? Mr. TAYLOR. The organization has not taken a position on that, Mr. Congressman. My own feeling is that that is one of the most vicious of all subsidies, because it is tampering with the well springs of public opinion. Mr. REUSS. But you do not think that the subsidy granted to industry and utilities through rapid tax amortization is vicious? Mr. TAYLOR. No, sir, not if it is for national defense. 70818-56-pt. 6———4 Mrs. GRIFFITHS. I would like to ask you a question. At some point you suggested that you thought flood control would be permissive because private industry was not interested in that sort of thing. There seems to be a dispute on Hells Canyon. There is a group of people in that area who would be consuming the power who would like a high-level dam, and the private industry would like to put in, I understand, three low-level dams. They are not even going to compete with the Government. They simply will not consider building a highlevel dam, if I understand the facts correctly. Would you consider, then, that since the Federal Government has no real competitor at the high level, that it should be permitted to build the dam? Mr. TAYLOR. No, I would not. Mrs. GRIFFITHS. Why not? Mr. TAYLOR. As long as you have private enterprise ready and willing to do the job and put up the money and save the expense to the Federal Government, the Federal Government should not enter into it. Mrs. GRIFFITHS. But they are not comparable. The dams are not comparable. Mr. TAYLOR. My understanding is a little bit different from that, namely, that the three low dams would serve all of the essential purposes of the one high one. Mrs. GRIFFITHS. I believe the testimony we have is not to that effect. But you feel that under any circumstances, even if it served fewer people, we should have three low-level dams in place of the high one? Mr. TAYLOR. I feel that the considerations where you have private enterprise which is willing to do a job as against the public doing it through taxes are such that I would tend to give the benefit of the doubt to the private enterprise. Mrs. GRIFFITHS. No matter how inadequately they want to do the job? Mr. TAYLOR. You say no matter how inadequately. There is a difference of opinion as to whether these three low-level dams would not do the same job as the one high one. Mrs. GRIFFITHS. Thank you. Mr. JONES. Mr. Lipscomb. Mr. JONES. Thank you very much, Mr. Taylor. We are glad to have you with us today. Our next witness will be Mr. John P. Cole, representing the Association of Southeastern Railroads. Is that correct? STATEMENT OF JOHN P. COLE, STATISTICIAN, ASSOCIATION OF SOUTHEASTERN RAILROADS; ACCOMPANIED BY ROBERT L. CORNELIUS Mr. COLE. Mr. Chairman, my name is John P. Cole, statistician of the Association of Southeastern Railroads, Washington, D. C. Mr. JONES. Would you have a seat, Mr. Cole? Mr. COLE. I would like to introduce my assistant, Mr. Robert L. Cornelius, who prepared the underlying study which forms a basis. for our presentation. Mr. JONES. Fine. You may proceed. Mr. COLE. The purpose of my statement is to bring to the attention of your committee the enormous annual cost of Federal aid to navigation on certain inland waterways, as recently computed by our office. At the outset, I think it is appropriate to quote from the progress report of the Domestic Land and Water Transportation Subcommittee, pursuant to Senate Resolution 50, 81st Congress: The Federal Government has spent vast sums of money on the improvement and maintenance of inland rivers and harbors. The users of these Governmentprovided transportation facilities pay no toll or other charge. The entire cost is paid by the general taxpayer. The fact that transportation on inland rivers and harbors is 'subsidized has been recognized in so many studies that no extensive citation of authority for this fact is required (p. 30). The particular inland waterways which will be covered in this statement are the Missouri, Tennessee, Mississippi, Illinois, and Ohio Rivers. The detailed cost calculations for each of these streams are incorporated in a separate exhibit. I would like to have that inserted in the record. Mr. JONES. That is the computation of annual cost of Federal aid to navigation on selected inland waterways? Mr. COLE. Yes, sir. Mr. JONES. Without objection, the table will be included immediately following your statement, and also the testimony given by you and Mr. Cornelius. Let me say this, to interrupt you. The Chair ruled on yesterday, and will rule again today, that since this is a document of some length, the committee will have the opportunity of recalling the witness in the event there is some question which arises at a later date as to certain portions of the charts and tables in the exhibits offered in the testimony. The reason why I do that, I say to the members of the committee and the witness, is to analyze and digest the statements of this length, with all of the charts, and study them and know their contents, would take considerable time of the committee. We would have to vacate our proceedings until such time as we had an opportunity to review and scrutinize these documents. Therefore, when the Chair receives a document of this size it must be with the understanding that the witness will be subject to recall for examinaion or any questions on the statement and report. Mr. COLE. Yes, sir; I understand that, and Mr. Cornelius and I will be available. Mr. JONES. Thank you very much. Mr. COLE. The costs which have been determined for each of the selected waterways do not represent the full cost of Federal aid attributable to navigation, but rather, only that portion of Federal expenditures for waterway improvement which can be readily ascertained and reasonably assigned to navigation. Limitations of available data preclude a more accurate ascertainment of such costs. The cost of such aids to waterway navigation as may come from the Coast Guard or Weather Bureau are not included in the calculations. Among the Federal agencies which publish expenditure records on an individual project basis, the Corps of Engineers of the United States Army is of primary importance, since most waterway improvements have been provided by them. The corps' records must necessarily be supplemented by those of the Tennessee Valley Authority in determining costs pertaining to the Tennessee River. In addition to expenditures, the annual report of the Chief of Engineers includes complete statistics of traffic volume on all inland waterways, which permits determination of the average cost per ton and per ton-mile for Federal aid on each of the aforementioned rivers. One of the most comprehensive studies ever made of Federal aid to navigation on domestic waterways is embodied in a report of the Board of Investigation and Research entitled, "Public Aids to Domestic Transportation." That report, hereinafter referred to as the BIR study, was published in September 1944, as House Document No. 159, 79th Congress, 1st session. As far as was practicable, the methods used and figures shown in that report were incorporated into our calculations. The method prescribed in the BIR study consisted of the following basic steps: 1. Computation of the total capital cost of improvements useful to navigation in the year under study. 2. Amortization of such cost over a 50-year period allowing for interest of 3.5 percent, and using a sinking-fund method to determine annual charges. 3. Computation of a 5-year average cost of maintenance predicated on the assumption that any 1 year's maintenance would be of benefit to navigation fo ran average of 5 subsequent years. 4. Evaluation of annual capital and maintenance costs in terms of traffic volume. The BIR study reflects the cumulative cost of facilities useful to navigation in 1939, and the average annual maintenance costs for the years 1935 through 1939. Our study, in substance, brings the BIR study up to date. It reflects the cumulative cost of facilities useful to navigation in 1954, and average annual maintenance costs for the years 1950 through 1954. In computing annual costs, we have used a 65-year amortization period, in lieu of the 50-year period used in the BIR study. My exhibit shows cumulative capital expenditures of $970,550,995 on the several streams, as follows: Mr. JONES. Just 1 minute at that point. That figure of $163,441,768 for the Tennessee River-is that carrying the interest rate of 32 percent? Mr. COLE. No; that is the basic cost and the original cost of the capital expenditures on the river. Mr. JONES. I see. All right. Mr. COLE. To continue, the capital expenditures are as follows: Mississippi River: From reservoirs at headwaters to mouth of Missouri River___ $174, 968, 973 From mouth of Missouri River to mouth of Ohio River. From mouth of Ohio River to New Orleans, La Total_ Illinois River__ Ohio River. Total, 5 rivers____ 76, 968, 247 170, 527, 864 422, 465, 084 49, 706, 869124, 823, 081 970, 550, 995. |