The President and the Railroads

November 24, 2021

By John Ferrell

As president, Calvin Coolidge staunchly supported limited government and fostered efforts to reduce its size. The government, in Coolidge’s eyes, had “never shown much aptitude for real business.”[1] So committed was Coolidge to restraining federal interference in state affairs that he declined to push for large federal outlays for flood relief after the Mississippi Delta and his home state of Vermont experienced historic flooding in 1927. He extended this stance to private sector regulation, stating clearly in a press interview, “We have got so many regulatory laws already that in general I feel that we would be just as well off if we didn’t have any more.”[2] On the other hand, when it came to the railroads, Coolidge took a different position. In a 1925 press conference, he stated, “It is probable that some of our railroads could have been better off, if we hadn’t had so much railroad legislation. But the general condition warranted it, and apparently it was necessary to impose it.”[3] Using federal measures to bring about mergers of private companies may at first glance appear to be a dramatic about-face on Coolidge’s part; however, the context of the 1920s illuminates his reasoning.

The reduction of freight shipping rates weighed on Coolidge’s mind. Isolated communities relied on small railroad operations that branched off of more prominent lines, but these shorter lines had significantly reduced traffic with disappointing revenues.[4] This meant that federal rate control in one area would likely benefit a large, high-volume operator like the Pennsylvania Railroad but leave smaller branch operations that were vital to small towns—like the tiny Chester Creek Railroad—unable to turn a profit. If railroads consolidated, these disparate companies would be unified to create a more efficient company, passing the cost reductions on to customers.[5] Coolidge wrote in his first annual message to Congress that “Such consolidation will assure . . . better equalization of rates between different classes of traffic so as to relieve undue burdens upon agricultural products and raw materials.”[6]

Consolidating the nation’s railroads was not a fringe or unprecedented idea. The government had nationalized the railroads in 1917 when it assumed control of all railroads so that the increased traffic demanded by America’s entry into World War 1 could take precedence[7] This nationalized system became known as the United States Railroad Administration (USRA) and ensured that the transport of troops, arms, and materiel received priority. After the armistice was signed, there was an immediate call by the railroad and shipping companies to disband the USRA and return control of the railroads back to their owners. The private parties contended that their profits and interests had been neglected for long enough.[8] The 1920 Transportation Act, more popularly known as the Esch-Cummins Act, finally accomplished this return to private ownership and control.

While Esch-Cummins returned control of the infrastructure and equipment to private companies, it also created the very first tools for railroad consolidation. The act empowered the Interstate Commerce Commission (ICC) to investigate and encourage railroad consolidation agreements.[9][10][11] The act went so far as to detail the merger of the railroads into nineteen separate systems that would, in theory, still remain competitive with one another and prevent the rise of new monopolies.[12] This enthusiastic support in the bill was the result of one of the cosponsors: Albert B. Cummins. The Republican senator from Iowa was an unabashed proponent of bringing railroads under increased regulation. The bill’s original language would have even given the lines only seven years to arrange the consolidation process themselves before the government intervened.[13] Through Esch-Cummins, the president now possessed a new roadmap for regulating the country’s railroads.

Coolidge embraced this new congressional movement for railroad consolidation as an alternative to Wilson’s nationalized USRA. In Coolidge’s first annual address to Congress, he argued that “Consolidation appears to be the only feasible method for the maintenance of an adequate system of transportation . . . This should be ordered at once by the Congress.”[14] Railroad consolidation also featured heavily in Coolidge’s third annual message: “[The railroads’] condition would be improved and the public better served by a system of consolidations. I recommend that the Congress authorize such consolidations under the supervision of the Interstate Commerce Commission.”[15] In 1925, while at the Summer White House in Swampscott, Massachusetts, Coolidge met even with Indiana Senator James Watson and expressed support for amending Esch-Cummings to make consolidation compulsory.[16]

Despite Coolidge’s efforts, consolidation failed to materialize. Some of the railroad companies, notably the profitable ones, took exception to the notion of being forced to take in weaker lines and the burden of maintaining them.[17] The ICC, which Coolidge would have relied on to implement the merger plan, also found that it preferred to simply increase regulation rather than encourage consolidation.[18] Furthermore, there was the unavoidable fact that the bill itself had been significantly weakened by the loss of the requirement for consolidation. As a result, neither Congress nor the ICC heeded the President’s calls for railroad consolidation. Coolidge’s frustration with Congress’ persistent inaction was evident in his fifth address to Congress:

“Legislation is needed to simplify the necessary procedure to secure such agreements and arrangements for consolidation, always under the control and with the approval of the Interstate Commerce Commission. Pending this, no adequate or permanent reorganization can be made of the freight-rate structure. Meantime, both agriculture and industry are compelled to wait for   needed relief . . . Delay is holding back the progress of our country.”[19]

No consolidation would happen in Coolidge’s lifetime. In late August of 1929, shortly after Coolidge’s term in the White House ended, the ICC made another effort to convince Congress of consolidation’s benefits. The Ripley Plan, which outlined in detail the creation of twenty-one consolidated rail systems, made the same promises that Coolidge had regarding healthy competition and the reduction of rates.[20] As before, the major railroads rejected consolidation, and Congress also showed little interest.

Throughout the Great Depression that ensued, the railroads languished along with the rest of the country as decreased spending saw freight and passenger traffic diminish considerably. There was a predictable boom during the Second World War, but it became harder and harder for the railroads to compete with the ascendant trucking industry. They eventually began to do out of desperation what Coolidge had advocated for so long ago. These later consolidations had outcomes that ranged from the successful absorption of dying lines into more profitable ones—like the many routes acquired by the Union Pacific—to monumental failures like the Penn Central: one of the largest bankruptcies in American history.[21]

[1]    “Calvin Coolidge Says, January 5, 1931,” Calvin Coolidge Presidential Foundation, accessed October 3, 2021, https://coolidgefoundation.org/resources/calvin-coolidge-says-january-5-1931/.

[2]    “Press Conference, January 6th, 1925,” Calvin Coolidge Presidential Foundation, accessed October 3, 2021,  https://coolidgefoundation.org/resources/press-conference-january-6th-1925/.

[3]    Ibid.

[4]    Martin, A., Railroads Triumphant: The Growth, Rejection and Rebirth of a Vital American Force (Oxford, UK: Oxford University Press, 1992), 274.

[5]    S. D. Fess, “The Proposed Railroad Consolidation Act of 1929,” Proceedings of the Academy of Political Science 13, no. 3 (June 1929): 118.

[6]    “Text of President Coolidge’s Annual Message to Congress.” Washington Post, December 4, 1924.

[7]    Army Appropriations Act of 1916, United States Statutes at Large 39 (1916), 619, https://tile.loc.gov/storage-services/service/ll/llsl//llsl-c64/llsl-c64.pdf.

[8]    W. M. Splawn, Consolidation of Railroads (New York, NY: The Macmillan Company, 1925), 5.

[9]    E. Rich, “The Transportation Act of 1920,” American Economic Review, 10, no. 3 (September 1920): 526.

[10]  Transportation Act, 1920, United States Statutes at Large 41, (1921): 481.

[11]  Ibid, 518.

[12]  Donald McCoy, Calvin Coolidge: The Quiet President (Lawrence, KS: University Press of Kansas, 1988), 199.

[13]  Rich, 518.

[14]  “First Annual Message to the Congress,” Calvin Coolidge Presidential Foundation, accessed October 12, 2021, https://coolidgefoundation.org/resources/first-annual-message-to-the-congress/.

[15]  “Third Annual Message to the Congress,” Calvin Coolidge Presidential Foundation, accessed October 12, 2021, https://coolidgefoundation.org/third-annual-message-to-congress/.

[16]  “Coolidge to Press Railroad Mergers.”  New York Times, September 3, 1925.

[17]  Theodore Keeler, Railroads, Freight, and Public Policy (Washington, D.C: Brookings Institution, 1983), 26.

[18]  Amity Shlaes, Coolidge (New York, NY: HarperCollins Publishers, 2013), 332.

[19]  “Fifth Annual Message,” Calvin Coolidge Presidential Foundation, accessed October 12, 2021 https://coolidgefoundation.org/resources/fifth-annual-message/

[20]  “Railroad Consolidation: Professor Ripley Comments on the Plan, With Special Reference to the Weaker Lines,” New York Times, January 18, 1930.

[21]  “The Biggest Bankruptcy Ever,” TIME, July 6, 1970,

       http://content.time.com/time/subscriber/article/0,33009,878372-1,00.html.

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