The CHAIRMAN. We are very fortunate to have, and I am especially pleased to welcome this morning the chairman of the Senate Commerce Committee as our first witness. As I stated a moment ago, that committee has a very vital interest in this proposed legislation.

Senator Magnuson, we welcome you. We are most happy to have you as our first witness to give us your thoughts as the committee begins consideration of this proposal.

Senator MAGNUSON. Thank you, Mr. Chairman.

The CHAIRMAN. Do you have a prepared statement?
Senator MAGNUSON. Yes, I have a statement.

The CHAIRMAN. All right. You may proceed in your own way.

STATEMENT OF HON. WARREN G. MAGNUSON, U.S. SENATOR FROM THE STATE OF WASHINGTON

Senator MAGNUSON. Mr. Chairman, as chairman of a Senate committee myself, I know the desirability of making statements short, and of witnesses coming right to the point.

My statement is a little longer than I anticipated, but I think it will save time in the long run-as stated by the chairman-because it does express many of the informal views of the Committee on Commerce, which has such a deep interest in this matter.

Mr. Chairman, my appearance this morning is in my individual capacity as a Senator, but I have had many informal discussions with members of the Commerce Committee on this very complex and important proposal. The members of the committee are, of course, currently evaluating the whole proposal, and have not yet decided on a committee position on the details.

In the meantime, there are several thoughts that I wish to leave with you. They are based, of course, upon a deep involvement in transportation since my congressional service began, particularly in the last 11 years as chairman of the Commerce Committee.

With the changes hereafter suggested, I support the establishment of the Department and urge the early enactment of S. 3010.

The creation of a Department of Transportation will provide a better governmental organization to meet the present and future needs of our national and international commerce. Our present transportation network required over 175 years to develop. In a scant 35 years, a population nearly double that of today will need a 21st-century transportation system to move the travelers and goods of a new America. The Cabinet Secretary of Transportation can provide leadership in the development of a transportation system for the expanded needs of America in the coming century.

The creation of a Department of Transportation will bring together under one head our various transportation research and development programs. The Secretary of Transportation can, and should, provide vision and imagination to stimulate significant advances in supersonic transport aircraft, in ocean-vessel concepts, and swifter and safer surface transport. With a new Department of Transportation, we can begin to apply the new tools, and utilize the full resources of our knowledge now scattered in many, many places.

The creation of a new Department of Transportation will be a significant step toward reducing the tragic waste in human lives and eco

nomic resources from the rising toll of transportation accidents. President Johnson said that no function of this new Department-no responsibility of the new Cabinet Secretary-will be more important than safety.

We have bills now pending in the Commerce Committee, and one on the floor this afternoon, involving automobile safety. If these bills become law, they would be transferred-they now go to the Secretary of Commerce-they would be transferred by this bill to the new Department of Transportation.

The Secretary would have both the responsibility and the means to insure the safety of our travelers and transportation employees in national and international travel by land, sea, and air.

Our present transport system is the best in the world. I believe this is because, uniquely, America depends upon the genius of its private enterprise system in public transport, and we are the only country in the world that has a private system of transportation.

The health of our private enterprise transportation system can be best illustrated by a few statistics from the latest annual reports of the ICC and the CAB.

The rail ton-mile figure for 1964 was 5.9 percent above calendar year 1963, and the highest since 1945. The ton-miles transported by motor carriers reached a new high, and operating revenues were 7.10 percent higher in 1964 than in 1963. Bus operating revenues reached another successive peak in 1964.

Water carrier net income last year from water-line operations rose 8.5 percent, and from both carrier and noncarrier operations increased by 48.8 percent. Freight forwarders transportation revenues were up 3.7 percent over the previous year. Oil pipelines continued their uninterrupted growth in operating revenues.

The CAB reports and here is a field the Department of Transportation can do something about in the future-the CAB reports that airline domestic passenger-miles are up 158 percent over 10 years ago. U.S. scheduled flag carriers passenger-miles in foreign commerce are up 269 percent. Domestic cargo ton-miles are up 289 percent, and U.S. flag carriers international cargo ton-miles are up 354 percent over 10 years ago. And this growth probably will be duplicated in the next 10 years.

In only two areas is our national transportation system in shocking decline. Rail passenger traffic in 1965 again decreased by 5 percent. Our merchant marine system is in dire need of improvement if it is to survive.

"THIS IS A COMPLEX PIECE OF LEGISLATION”

As I said on the floor of the Senate in introducing this bill, this is a complex piece of legislation. It is probably the most significant bill affecting our overall transportation program since the original Interstate Commerce Act. Because of its broad scope, I know there will be some portions of the bill that need correction. The administration has no particular pride of authorship, but is sending up S. 3010 to make a start toward the establishment of a Department of Transportation.

It should be noted that the President has wisely separated regulatory functions from administrative or promotional functions, and only

proposed the transfer of the latter to the Department of Transportation. This division in no way interferes with these constitutional powers of Congress delegated to regulatory agencies while, at the same time, permitting the President to streamline the executive branch so that he might better carry out congressionally defined administrative goals.

I hope my suggested changes will make S. 3010 a better bill. These are intended as constructive suggestions and should be discussed by the witnesses to follow.

FREIGHT CAR SHORTAGES

First, freight car shortage. No transportation problem is more pressing than the economic strangulation of shippers and communities across this Nation by chronic car shortages. Year after year the shortages continue to cost grain, plywood, and other shippers, and communities and labor dependent on these industries, severe losses of many millions. These shortages, critical in time of peace, could be tragic in time of war. Since the termination of the Korean war, in plain boxcars alone, our national railroad ownership has declined by about 200,000. In terms of aggregate capacity, we have had a net decrease in boxcar capacity of over 42 million tons.

I see four of the members of this commitee, and particularly three of us who come from the Far West, who have been so concerned about freight car shortages for many, many years.

CAR SERVICE AND CAR SUPPLY FUNCTIONS TO NEW DEPARTMENT

Section 6(e) of the bill would transfer to the proposed Department of Transportation all car service functions of the ICC, with_one exception. I strongly support the transfer of all car service and car supply functions to the new Department. A cabinet-level Department, with the resources at its command, could give greater attention and expanded budgetary effort to this critical matter. The new Department with its coordinating, promotional, and planning responsibilities would be in a better position to evaluate proposals such as improving the timing of shipments, revamping our railroad equipment tax-incentive policies, and modernizing the level of per diem

rates.

There is a direct and immediate relationship between the size of our national car supply and the severity of our car shortages. With our national car fleet at a 20th century low, already this year freight car shortages, in the words of ICC Chairman Bush, "are near the maximum daily shortage of peak periods in previous years." In the next few weeks, the normal spring upturn in business will occur, and possibly a record grain harvest. I fear that these factors, coupled with heavy defense shipments, could produce within a matter of weeks the severest car shortages in peacetime history.

Last week 29 other Senators joined me in cosigning a letter requesting that the Commission utilize all emergency powers at its command to alleviate the current extreme hardships. The ICC thereafter took unprecedented action by approving exclusion orders covering Great Northern and Northern Pacific boxcars, and promulgating nationwide railroad car supply operating regulations.

The Senate last June passed S. 1098 to provide a long-range solution to chronic car shortages. This bill would end freight car shortages by authorizing the ICC to prescribe per diem (rental) rates at a level to provide economic incentives to the Nation's railroads to increase the size of our national car fleet. It was ordered reported favorably by the Senate Commerce Committee, passed by the Senate, and ordered reported favorably by the House Interstate and Foreign Commerce Committee-all without a dissenting vote. Unfortunately, the House of Representatives has not had a chance to work its will on this measure. The powers embodied in S. 1098 should be added to the arsenal of weapons at the command of the new Department to alleviate current hardships and to provide a long-range solution which will once and for all end this national crisis.

I know of no reason to split car supply functions between the new Department and the ICC. The car service provisions, section 1, paragraphs 10-17, of the Interstate Commerce Act, were added as a unified whole in 1917. Commissioner Webb of the ICC in a recent speech noted:

Car service is not essentially a matter of economic regulation. There is no particular reason why car service matters should be handled by an independent regulatory agency.

Chairman Bush of the ICC in a recent speech indicated that the entire ICC supports the transfer of car service functions to the new Department.

Neither the 1949 Hoover Commission Task Force on Transportation nor the 1961 report of the Special Study Group of the Senate Commerce Committee advocated any split in car service functions between the ICC and a Department of Transportation. If the fixing of per diem rates remains with the ICC, we would be left in the incongruous situation that shipper rental rates ("demurrage" and "detention" charges) would be fixed by the new Department, but railroad rental rates ("per diem") would be prescribed by the ICC. It is not wise to split these responsibilities at this critical time, and I recommend that all car service functions including the fixing of incentive per diem rates be transferred to the new Department.

SECTION 7 NEEDS CLARIFICATION

Section 7 of this bill is a very knotty one. It directs the new Secretary of Transportation to develop and, from time to time in the light of experience revise, standards and criteria consistent with national transportation policies, for the formulation and economic evaluation of all proposals for the investment of Federal funds in transportation facilities or equipment by Federal agencies both inside and outside of the proposed Department, with certain stated exceptions.

The witnesses for the administration will, I am sure, explain the technicalities of this complex section. Through the exchange of views before this committee, pitfalls can be avoided and the section improved.

I would like to suggest a few matters that could be clarified in this section of S. 3010. The section does not spell out how the new Secretary is to perform his section 7 duties in relation to the Congress.

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The meaning of the words "standards and criteria consistent with national transportation policies" should be defined in these hearings. It would also be useful to make clear the meaning of the words “investment of Federal funds in transportation facilities or equipment.” Most multiresource projects are not in any sense subsidies, but rather make provision for repayment of the benefits derived. The highway trust fund established by the Congress is made up of special taxes paid for by the Nation's highway users, and it literally is a trust fund-it should be.

These taxes are not general revenues to be used for general governmental purposes.

This section should not infringe on the prerogatives of Congress in the establishment of transport policies. If there is any question, this section should be revised to make it perfectly clear that the new Secretary is to only recommend policies to the Congress and assist in the congressional determination of levels and areas of Federal expenditures in transportation.

I know that my colleague Senator Henry Jackson, chairman of the Interior Committee, will be very interested in that part of section 7 providing that the standards and criteria for economic evaluation of the transportation features of multipurpose water resource projects shall be developed by the new Secretary after consultation with the Water Resources Council, and shall be compatible with the standards and criteria for economic evaluation applicable to nontransportation features of such projects. Under the leadership of Senator Jackson, the Congress last year enacted the Water Resources Planning Act. This act established the Water Resources Council composed of the Secretaries of the Interior, Agriculture, Army, and HEW, and the Chairman of the FPC in order to provide for comprehensive river basin development.

ARGUMENTS BETWEEN TRANSPORTATION MODES MUST BE AVOIDED

The use of the word "compatible" leaves some doubt in my mind as to how the new Secretary is to act in conjunction with comprehensive regional and river basin planning. Under the present wording of section 101 of the Water Resources Planning Act, the new Secretary could participate in planning with the named members of the Council. In these hearings, I hope that it will be made clear how the Secretary will coordinate his efforts with Council members in order to avoid a step backwards from the unity achieved last year. We must avoid interjection of arguments between contending transportation modes into the planning for the conservation, development, and utilization of our water and land resources.

Furthermore, section 7 provides that every survey, plan or report of Federal agencies for transport investment shall be formulated in accordance with these proposed standards and criteria, and upon the basis of information furnished by the new Secretary with respect to projected growth of transportation needs and traffic in the affected area, the relative efficiency of various modes of transport, the available transportation services in the area, and the general effect of the proposed investment on existing modes, and on the regional and national economy.