On the Transportation Act of 1920 Summary

During World War I, the US federal government took over the operation of American railroads, although ownership remained private. The Transportation Act of 1920 (also known as the Esch-Cummins Act) returned the railroads to the control of their corporate owners but created some controversy because it allowed railroad shipping rates to rise dramatically. On October 30, 1922, in Des Moines, Iowa, Senator Albert B. Cummins spoke about the Transportation Act of 1920, a piece of legislation that he cosponsored, and tried to allay the concerns about the act held by Iowa farmers and businessmen.

In 1916, Congress passed the Adamson Act, which empowered the federal government to take over the operation of US railroads if deemed necessary in a time of war. During World War I, President Woodrow Wilson took action under the authority of this bill, and in 1918, he created the United States Railway Administration. While railroad corporations continued to own their businesses, the federal government oversaw their operation. When the war ended, Congress passed the Transportation Act of 1920 to facilitate the return of the railroads to private control.

Though Iowa senator Cummins cosponsored the Transportation Act, he did not necessarily agree with everything in it. His version of the bill proposed further restructuring the American railroad system, by requiring some railroad mergers to create greater efficiency. The Transportation Act removed most of these provisions, reconciling the bills put forth by both Cummins and his counterpart in the House, Indiana Republican congressman John J. Esch. Esch essentially wanted to return to the prewar status quo; to a great extent, this is what the Transportation Act did. During the war, the railroads had carried massive amounts of freight for the war effort, meaning at the end of the war, tracks and equipment were generally in bad condition. Also, while the government operated the railroads, wages for railway workers rose significantly. Thus, labor costs were higher than they had been in the prewar era. Therefore, the Transportation Act mandated that the Interstate Commerce Commission (ICC) set reasonable rates that would allow the railroads to recover some of the costs incurred while the government had operated the railroads. These rate increases upset farmers and businessmen who were dependent upon railroad shipping.

As Cummins notes in his speech, in farm states such as Iowa, the Transportation Act was a highly charged political issue. Cummins’s early political career in Iowa had been built largely on the fact that he was an anti-railroad reformer, making it seem strange for him to argue that rates increases were justified. But Cummins indicated that if the government forced the railroads to do business at rates that were not sufficient to cover their operating expenses, such action would essentially be an unconstitutional seizure of private property by the government. Cummins suggested that much of the opposition to the Transportation Act stemmed from a misunderstanding about the content of the bill, and he sought to correct these misconceptions in this speech.

Senator Albert B. Cummins was born in Carmichaels, Pennsylvania, on February 15, 1850. He was a moderate Republican senator from Iowa when he delivered this speech, and he was considered an expert on the railroad industry and railroad regulation. He began working in railroading in the 1870s before practicing law in Illinois. In 1878, he moved to Des Moines, Iowa, and opened a law practice. He was elected to Iowa’s state legislature in 1888 and served as governor of Iowa from 1902 to 1908. As governor, he oversaw the enactment of strong state-level regulation of the railroad industry. In 1908, he resigned the governor’s position when the state legislature elected him to the US Senate, where he served until his death. He coauthored the Transportation Act of 1920. He died in Des Moines on July 30, 1926.

In 1922, during the special-election season in Iowa to fill a vacant seat in the US Senate, the Transportation Act of 1920 became a heated political issue. Cummins had been reelected to his Senate seat in 1920, so he was not a candidate in 1922, but because the contending candidates had made the bill “a prominent part of their respective campaigns,” Cummins believed that, as a cosponsor of the bill, he should present his views to the people of Iowa.

Much of Cummins’s speech is an overview of a complex piece of legislation. An important part of the Transportation Act was a provision that the government was to “return the roads to their owners at the end of Federal Control in as good condition as they were when taken over on the 1st of January, 1918.” Since the railroads were in poor condition after the heavy traffic of the war years, the bill included formulas for figuring how much compensation the government should provide the railroads for damages to their property and equipment. Cummins estimates that these payments would ultimately total more than $220 million. Many critics believed this amount was excessive, so Cummins endeavors to prove it is a reasonable figure.

Critics also charged that the Transportation Act had allowed the ICC to raise railroad rates and fares too much. Cummins counters that the higher rates resulted in “the increased cost of maintaining and operating the railroads” after the war years. The Transportation Act allowed the ICC to set rates that would give the railroads a reasonable return on the total value of their assets. Critics of the bill charged that the valuation of railroad assets used in these calculations were overly generous, but Cummins is confident the ICC could arrive at reasonable figures–even asserting that if people believed the ICC incapable of doing so, then “our whole plan of regulation by the Government is a failure.”

According to Cummins, those who attacked the Transportation Act picture a consumer’s fantasy that could only be accomplished by complete government confiscation of the railroads–even then, the imagined benefits would not materialize. Cummins suggests that the United States could nationalize the railroads if the majority of voters ever came to favor it–but he hopes the country would avoid walking “in the footsteps of unfortunate, ill-fated Russia,” which had just gone through the Bolshevik Revolution and established a Communist regime with government ownership of all major industries.

Because of the demands on industry brought about by World War I, the federal government took over the operation of the American railroads. While the government regulated and sought to direct the efforts of many other industries, it actually ran the railroads. After the war, the Transportation Act of 1920 laid out the terms under which the railroads would be returned to private control. Controversy arose because many shippers believed that the bill allowed the ICC to set rates too high. In this speech, Senator Cummins sought to correct some misconceptions about the act. As any politician might likely do, Cummins wanted to explain and justify his role in passing the legislation being so heavily criticized.

In Cummins’s speech, he seemed to promote the Progressive Era belief in the necessity of a certain level of government regulation of large, powerful industries. Cummins noted that he believed “the regulation of our industries, including railways,” would be the “chief matter for consideration” facing the next session of Congress. Cummins wanted to strengthen the ICC and give it the power to force some railroad mergers, which he believed would produce a more efficient transportation system. If Cummins’s version of the Transportation Act had been adopted without modification, the ICC would have been empowered to complete such mergers. However, the actual bill outlined a plan to investigate and recommend such mergers, but it included no power to force railroad lines to agree to these mergers.

While Cummins had a long political record of backing regulation of the railroads, he also argued in this speech that the railroads should be compensated for both the damage to the railways caused by heavy wartime traffic and the increases in labor costs. Elements of Cummins’s speech represent the pragmatic elements of Progressive Era reform–aimed not at radical measures, such as Socialism or state ownership of major industries but at efficient government regulation.

• Berk, Gerald. Alternative Tracks: The Constitution of American Industrial Order, 1865–1917. Baltimore: Johns Hopkins UP, 1994. Print.
• Saunders, Richard. Merging Lines: American Railroads 1900–1970. Dekalb: Northern Illinois UP, 2001. Print.
• Stover, John F. American Railroads. Chicago: U of Chicago P, 1961. Print.