Interesting old Pennsy Ad

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Interesting old Pennsy Ad
Posted by Miningman on Friday, November 30, 2018 3:09 PM

Ok, 3rd times a charm. Lost 2 completed comments.

So here's a very interesting ad, for several reasons, from the PRR during wartime. First off it's very informative with the cross section going down from the roadbed, and although somewhat simplified it is done well. Secondly their trains are not featured nor talked about, but in the background we have carefully placed people, infrastructure, industry and a train. The message is something else, but the distant items all still remain important. 

Closer examination reveals the locomotive way off in the distance to be a T1, trailing smoke and its distinctive headlight and outline quite visible. The T1's were the stars for a short time only and were featured prominently in ads but only for 3-6 months. They were depicted on the calendars a bit longer but that's different. They quickly fell from advertising as the PRRs progressive and speedy way to the future. 

Finally is the fact that there is a lot of whining going on. The 'poor little PRR' trying desperately to keep things going. If this was a modern day PRR they would have an army of well greased lobbyists and you would expect a ' go fund me page'. Enter it all as an expense as they wish or as would be expected and fight it in court afterward. Keep it to yourself and then let the Wall Street Journal type press go to bat for you.

Fat with wartime profits, they should not be beggars or whiners.

  

 

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Posted by Penny Trains on Friday, November 30, 2018 6:49 PM

That's old school lobbying!  Wink

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Posted by Miningman on Friday, November 30, 2018 7:12 PM
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Posted by Miningman on Friday, November 30, 2018 9:45 PM

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Posted by Firelock76 on Saturday, December 01, 2018 12:43 PM

I had to think about this before posting a response.

I read the ad carefully, and yes, the PRR was pretty flush with profit during the war, but I'd hesitate to call this "whining."

Everything the ad said was certainly true, especially the part about deferred maintanance due to the lack of materials and personnel.  Remember, during the war the Southern Pacific had to bring in guest workers from Mexico to do track maintanance, so many of their own people had gone off to war.

Lack of materials?  The War Production Board was allocating raw materials, there was no free market of the same.  Considering how much steel had to go to war production I'm not suprised the railroads had to make do with what they could get and defer track repairs.  Everyone had to scramble a bit for what they needed.

All this being the case it doesn't surprise me the railroads wanted to put the profits they couldn't spend into kind of a "rainy-day fund" that would be put into immediate use once the war was over.  It was certainly going to be needed.

And the railroads weren't the only ones.  During the war everyone who wanted or needed a job (who wasn't in the service) had one.  All those people were making money and had nothing to spend it on so it went in the bank.  It was all that unspent money that fueled the post-war spending on consumer goods and kept the post-war economic depression so many government officials feared was going to happen from happening.

Look at it this way, this ad is kind of the first "warning flare" of the war the railroads were going to have to fight in the post-war years with airlines and their facilities, road construction, and other forms of taxpayer-funded transportation, a lot of which railroad taxes paid for! 

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Posted by Jones1945 on Saturday, December 01, 2018 12:49 PM

Thank you for the links, Miningman and Mike.

This is a report from Railway Age which I posted in other thread a few months ago, showing the revenues and expenses of different RRs of February 1947. The operating expenses of both NYCentral and PRR were really heavy...(click to enlarge) 

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Posted by Miningman on Saturday, December 01, 2018 1:40 PM

Firelock -- Well maybe I'm too harsh with the old Pennsy. Did we see similiar musings from the Santa Fe or Union Pacific?, the NYC or the C&O? For sure there were shortages in material but you would think without a road bed what's the point? Of course the government has little concern for such things. 

I know the NYC took the Feds to court over being short changed for Postal Services and rates and won, on behalf of everyone I think. 

I like Penny's answer.. "old school lobbying"

Was this unreasonable and unfair demand by government ever settled? 

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Posted by Firelock76 on Saturday, December 01, 2018 3:47 PM

It could be we never saw any such messages from the other 'roads like the NYC because, well, maybe they never thought of it?

"Pennsy's got a good point!  Why didn't WE think of that?"

We'd sure hear screams from all concerned in the post-war era!

On the other hand, it could be the Pennsy's bookkeepers found out they were hemmoraging money somewhere, somehow, and just couldn't put their fingers on where.  Who knows?  Maybe it was an early example of the flip side of "too big to fail,"  that is, "too big to succeed."  Maybe being  "The Standard Railroad Of The World" they couldn't possibly believe they were doing anything wrong?

And I don't know if that demand by government was ever settled.  Probably not.

And I can see othe other side of the question concerning the "excess profits (whatever that's supposed to mean)  tax."  There was a war on and the government had to pay for it somehow.  There's a quote from a 17th Century Italian general name Monteccucoli, and truer words were never spoken...

"For war, you need three things.  1)  Money.  2)  Money.  3)  Money."

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Posted by Jones1945 on Saturday, December 01, 2018 5:21 PM

If Pennsy felt mistreated by the US gov, can't withstand their milking and wanted to raise public awareness to harness the power of the crowd, they had at least 3400 passenger cars to show their complaint letter, including every car of The Congressional. A flagship corporation like Pennsy must had a direct contact to both parties leaders.

There are some reports or records I tried to find but they are not accessible on the web or available in digital form. Some fragments of them could be found in google books and magazine like the Railway Age but definitely not enough to draw any firm conclusion:

I want detailed reports of the revenues and expenses from 1936 to 1946. Balance sheet from 1927 to 1948; To see

  • How much money Pennsy earned from the wartime traffic;
  • How, when and where did they spend the "wartime extra bonus".
  • how much money they owed since the great depression and
  • what made them so broke that they couldn't even pay Raymond Loewy to finish the refurbishment project of Penn Station in 1948. 

Other topics I am interested, but probably never will get the answer:

  • The relationship between PRR's core management, close business partners like Baldwin, Budd, Pullman, the Federal Government and different Political figures from 1929 to 1968.
  • Was there any suspect illegal activity including corruption, insider dealing between Government officials, management of PRR, employees of PRR, Baldwin, Budd, Pullman, Franklin etc.
  • Was there anything PRR tried to hide from the Stockholder and the general public? 

Other trifles like what was Raymond Loewy and other noted industrial designer's thought or comment about the "Standard Railroad of the World", ex-Pennsy employees comments and stories. Detail stories about the power struggles between "Pro-coal burning Party" and "Diesel-Electric Party". 

I am tired of looking all these photos of PRR's awesome massive steam engines and their specs... I think it's time to read and study something even more exciting. But I am afraid that even FBI don't have the stuff I want Confused... So please let me post one more pics of my poor S2 and let me take a nap. MusicAngel  

Source:Railroad museum of Pennsylvania RR Museum

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Posted by Penny Trains on Saturday, December 01, 2018 7:13 PM

Firelock76
It was all that unspent money that fueled the post-war spending on consumer goods and kept the post-war economic depression so many government officials feared was going to happen from happening.

Don't forget the OPA, a lot of that money saved during the war years went for bonds:

And there was a recession in 1949 that was largely staved off by the price fixing of Truman's OPS:

https://en.wikipedia.org/wiki/Recession_of_1949

 

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Posted by Firelock76 on Saturday, December 01, 2018 7:26 PM

Well thanks for that Becky, until a few minutes ago I'd never heard of the recession of 1949.

I've known, and still know, people who lived through the cataclysm of the Great Depression of the 1930's, and none of them ever mentioned the recession of '49.  I get the impression it must have been nothing compared the the Great Depression which spooked those who lived through it the rest of their lives.  Spooks their children too, in one way or another, although not as bad as their parents.

Wayne 

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Posted by Penny Trains on Saturday, December 01, 2018 7:40 PM

Oh, I agree completely.  It was the price fixing and the sale of Korean War bonds that largely seems to be responsible for keeping it from becomming another 1929 style nightmare.  And my mom tells an interresting tale of her grandmother hoarding sugar during WWII and not letting anoyone have any even to bake a VJ Day cake!  Tongue Tied

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Posted by erikem on Sunday, December 02, 2018 2:02 PM

Jones1945

If Pennsy felt mistreated by the US gov

The PRR was being mistreated by the US gov in the sense that the "profits" from deferring maintenance really should have been put in a reserve fund. If a company tried pulling that trick now, there's a fair chance that the management could be indicted or sued for accounting or securities fraud. One likely reason that the western roads weren't complaing is that mnay of them were receiving assisatnce with capacity increases to help support operations in the Pacific theater. In a similar vein, GM certainly wasn't opposed to receiving support for the development of the 567 engine for use by the USN.

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Posted by Miningman on Sunday, December 02, 2018 4:07 PM

erikem-- Do you know the outcome of this? Did they go to court, or did the Feds relent, or did Pennsy suck it up? 

Maybe I should try it after all my house and car and many other things need maintenance in the future, and not easy to do way up here in the sub polar regions so I will withhold taxes to accommodate this. 

Yeah ok good luck with that. ( we actually get a special Northern Living Allowance, a whopping 87 bucks a month and yet another ~3K deduction on the tax form). The only time I want the RCMP at my door is when they collect canned goods for the Food Bank. 

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Posted by Penny Trains on Sunday, December 02, 2018 6:42 PM

Miningman
The only time I want the RCMP at my door is when they collect canned goods for the Food Bank.

Do they at least bring along the CP Holiday Train?  Smile, Wink & Grin

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Posted by Miningman on Sunday, December 02, 2018 7:00 PM

Are you kidding?? Closest to me it comes is Saskatoon which is 5 1/2 hours away. However, I give the RCMP the 'good stuff', not fooling around with them! ( I see them check out the expiry date...Best to get the nod and smile)

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Posted by erikem on Sunday, December 02, 2018 10:44 PM

Miningman

erikem-- Do you know the outcome of this? Did they go to court, or did the Feds relent, or did Pennsy suck it up? 

The PRR effectively sucked it up, but kudos to the PRR to bring it up. A somewhat similar thing for truckers is if they were not allowed to deduct money spent on raod taxes.

Maybe I should try it after all my house and car and many other things need maintenance in the future, and not easy to do way up here in the sub polar regions so I will withhold taxes to accommodate this. 

Not sure about Canadian tax rules, but in the US you can deduct maintenance on houses and cars if you directly derive income from them, but only for the portion being necessary for business (e.g. deductions are allowed for a home office, if and only if the office is used specifically for business).

 - Erik

 

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Posted by Miningman on Sunday, December 02, 2018 11:33 PM

Yes it's exactly the same here if it's a legit business. 

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Posted by Jones1945 on Monday, December 03, 2018 12:08 PM

Excess Profits Tax

Exact from this document about the Excess Profits Tax.

https://library.cqpress.com/cqresearcher/document.php?id=cqresrre1950110300

  • Disadvantageous Economic Effects of Profits Tax

Critics of an excess profits tax argue that it tends to destroy initiative and risk-taking and by the same token encourages monopoly. At a Tax Institute symposium in December 1941, for example, it was asserted that under the provisions of the then recently imposed World War II levy “The strong corporations inevitably will become stronger and the weak ones weaker.”

Corporations that were fortunate enough to make large earnings in the pre-emergency period, or which are over-capitalized, can … earn big profits without paying any excess profits taxes … Thus, for instance, United States Steel, whose profits in the preceding four years had averaged about $46 million, had a net in 1940 of $103 million and did not pay a penny in excess profits taxes. Republic Steel, with a four-year average of $7 million, passed a $21 million net in 1940 and went excess profits tax-free. The railroads, whose profits have enormously increased as a result of the defense program, have to date escaped the excess profits tax almost completely. (???)

On the other hand, many of the smaller companies that are not receiving war orders and that are just getting on their feet find that most of their earnings are considered “excess” in comparison with the poor showings during prior years, and are accordingly heavily taxed. This is a case of taking it from the “butter” and giving it to the “guns” with a vengeance...

 

 

.....................

Background (Wiki):

The first effective American excess profits tax was enacted in 1917, with rates graduated from 20 to 60 percent on the profits of all businesses in excess of prewar earnings but not less than 7 percent or more than 9 percent of invested capital.

In 1918 a national law limited the tax to corporations and increased the rates. Concurrent with this 1918 tax, the federal government imposed, for the year 1918 only, an alternative tax, ranging up to 80 percent, with the taxpayer paying whichever was higher...

The crisis of World War II led Congress to pass four excess profits statutes between 1940 and 1943.

  • The 1940 rates ranged from 25 to 50 percent and the 1941 ones from 35 to 60 percent.
  • In 1942 a flat rate of 90 percent was adopted, with a postwar refund of 10 percent;
  • in 1943 the rate was increased to 95 percent, with a 10 percent refund.

Congress gave corporations two alternative excess profits tax credit choices: either 95 percent of average earnings for 1936–1939 or an invested capital credit, initially 8 percent of capital but later graduated from 5 to 8 percent.In 1945 Congress repealed the tax, effective 1 January 1946.

The Korean War induced Congress to reimpose an excess profits tax, effective from 1 July 1950 to 31 December 1953. The tax rate was 30 percent of excess profits with the top corporate tax rate rising from 45% to 47%, a 70 percent ceiling for the combined corporation and excess profits taxes...

Hmm

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Posted by Miningman on Monday, December 03, 2018 11:21 PM

---President of the Erie RR 1944

Check out these!

 

 
 

 

 

 

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Posted by Jones1945 on Tuesday, December 04, 2018 5:33 AM

Thank you, Miningman. I will need some time to digest them. I am gonna read all of them because I really want to find out how bad was the situation for the Pennsy in the mid-1940s. But just as almost every post I made, I can't resist posting pics, especially for a Pennsy post... Embarrassed

 

PRR S2 #6200 was probably one of the last batches of new steam engine of PRR which was put into revenue service just a few months (March 1945) before Mussolini's execution and Hitler's dead.

 

After almost 10 years of struggle, Pennsy found one of the replacements for their K4s-AF20 (PA1/2). They were originally geared for 100mph. After merely 4 years in service, they were relegated to secondary passenger service in 1952. Two years later they were regeared again from 60:23 to 64:14 for 80mph for dual service in and reclassed AFP20. In 1962, PRR's marriage to ALCO came to an end. That year, John Glenn became the first American to orbit the Earth...

 

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