108 WESTERN HEMISPHERE IMMIGRATION

Here is the language I wish particularly to call attention to:
at the lowest possible lawful rates compatible with the maintenance of an adequate
transportation service.

The Interstate Commerce Commissionin Grain and Grain Products
122 I. C. C. 235, used the following language which I think you will
agree with me is sufficient to give the railroads some concern
It [referring to the Hoke Smith resolution] “sets no new standard of rates,
but provides in effect that to the extent that there are flexible limits to our
discretion we shall require the maintenance of the lowest rates for them within
those flexible limits.
Nothing particularly alarming there, although it does inject, as
you see, the element of abstraction into the law of rate making, but
listen to this language:
Rates that may be lawfully required, must, in principle, be high enough to
cover all of the costs that may be fairly allocated to the service plus at least some
margin of profit.
Now, the law which particularly governs rate making is that it
must cover the cost plus a reasonable profit; and the Supreme Court
of the United States in various public utility cases has declared, I
think, that the figure of profit there—they have riever declared a set hgure
 as such—but they have approved profits ranging from 6 to 8 per
cent. So, you see, the Interstate Commerce Commission in a more
alarming way has said that the profit contemplated was “at least
some profit’”’ whereas the law heretofore has heen that there must
be a reasonable profit.
The Crairman. Does not the Esch-Cummings Act come in there
with a little something about profits?
Mr. McInnis. I will come to that in just a moment.
This exact language was repeated by the Interstate Commerce
Commission in its recent decision of the California Deciduous Fruit
case (129 I. C. C. 25), and in its decision rendered November 14,
1927, upon reconsideration of the same case (132, I. C. C., 582), there
occurs the following language with reference to a cost study introduced
 by the Interstate carriers—and in this case it takes occasion
to give us a little insight into what the Interstate Commerce Commission
 has in mind—that is, at least some margin of profit.
In other words, even if the cost study were accepted—
Which refers to an exhibit which has been introduced by the carriers
nn that case—

were accepted without a question, it would indicate that the prescribed rates
are slightly above the operating expenses, and would confirm the impression
obtained from comparisons with other rates that the new rates while probably
of less than average profitableness would still leave the traffic attractive to the
carriers.

There we are presented by the Hoke Smith resolution with a condition
 which the railroads of this country can not overlook; and that
condition is emphasized and borne down upon us to a point where we
can not remain quiet in the presence of this committee without
mentioning it. As has been pointed out, we are dependent in the
West for the operating of the agricultural industry in very large
measure on Mexican labor. The traffic, therefore, still is threatened
if the supply of Mexican labor is threatened.