Furthermore, such plan is not correct, because it involves paying the highest rates to the railroad that by reason of physical disabilities or inefficient methods is most expensively operated, and the lowest rates to the railroad whose operations are most efficient and whose service is most satisfactory and valuable to the Post Office Department. Under the plan proposed, a railroad would be penalized for all the capital expenditures made by it for the purpose of decreasing its operating cost, because the more it decreased its operating cost the more it would decrease its mail pay, although by making this improvement in operating cost it would have incurred an additional capital charge upon which it would have to pay dividends or interest. The ascertainment of the cost to a railroad of conducting the mail service is necessarily very largely a matter of judgment and opinion, because a large proportion of the total operating expenses are expenses common to the freight and passenger traffic and can only be approximately apportioned and there are various formulas existing for such apportionment. It would not be right or proper to entrust to the Post Office Department the discretion of selecting the formulas by which to ascertain these costs, because the Post Office Department has an obvious interest at stake, its object always being to reduce the railroad pay to a minimum. The estimated cost of a specific service is not a proper basis for fixing rates for transportation of any commodity. The railroads are entitled to receive a full and fair return for the value of the service performed, and the ascertainment of cost of such service is principally of value as a protection against the establishment of confiscatory rates. _Question 3._--What, in your opinion, is a desirable plan for compensating railroad companies for transporting the mails? _Answer_.--The existing law has been in effect for nearly forty years, and those who have worked under it are more or less familiar with its operations. If it were amended to correct serious inequities, as suggested in the answer to Question 1, and fairly and impartially administered by the Post Office Department, it would be preferable to any untried or theoretical plan that could be proposed. Very respectfully yours, COMMITTEE ON RAILWAY MAIL PAY, By (Signed) RALPH PETERS, _Acting Chairman_. Transcriber's Notes: Words surrounded by _ are italicized. Small capitals are presented as all capitals in this e-text. Apparent printer errors are retained. End of the Project Gutenberg EBook of Mail Carrying Railways Underpaid, by Committee on Railway Mail Pay