Expansion of our intracoastal waterways to effective barge depths is well warranted. We are awaiting the action of Canada upon the St. Lawrence waterway project. HIGHWAYS There are over 3,000,000 miles of legally established highways in the United States, of which about 10 per cent are included in the State highway systems, the remainder being county and other local roads. About 626,000 miles have been improved with some type of surfacing, comprising some 63 per cent of the State highway systems and 16 per cent of the local roads. Of the improved roads about 102,000 miles are hard surfaced, comprising about 22 per cent of the State highway systems and about 8 per cent of the local roads. While proper planning should materially reduce the listed mileage of public roads, particularly in the agricultural districts, and turn these roads back to useful purposes, it is evident that road construction must be a long-continued program. Progress in improvement is about 50,000 miles of all types per annum, of which some 12,000 miles are of the more durable types. The total expenditures of Federal, State, and local governments last year for construction and maintenance assumed the huge total of $1,660,000,000. Federal aid in the construction of the highway systems in conjunction with the States has proved to be beneficial and stimulating. We must ultimately give consideration to the increase of our contribution to these systems, particularly with a view to stimulating the improvement of farm-to-market roads. POST OFFICE Our Post Office deficit has now increased to over $80,000,000 a year, of which perhaps $14,000,000 is due to losses on ocean mail and air mail contracts. The department is making an exhaustive study of the sources of the deficit with view to later recommendation to Congress in respect to it. The Post Office quarters are provided in part by the Federal construction, in part by various forms of rent and lease arrangements. The practice has grown up in recent years of contracting long term leases under which both rent and amortization principal cost of buildings is included. I am advised that fully 40 per cent could be saved from many such rent and lease agreements even after allowing interest on the capital required at the normal Government rate. There are also many objectionable features to some of these practices. The provision of adequate quarters for the Post Office should be put on a sound basis. A revision of air mail rates upon a more systematic and permanent footing is necessary. The subject is under study, and if legislation should prove necessary the subject will be presented to the Congress. In the meantime I recommend that the Congress should consider the desirability of authorizing further expansion of the South American services. COMMERCIAL AVIATION