of nitrogen.  It may be found advantageous to dispose of the right to surplus power separately with such reservations as will allow its gradual withdrawal and application to nitrogen manufacture.  A subcommittee of the Committees on Agriculture should investigate this field and negotiate with prospective purchasers.  If no advantageous offer be made, the development should continue and the plant should be dedicated primarily to the production of materials for the fertilization of the soil.

RAILWAYS

The railways during the past year have made still further progress in recuperation from the war, with large rains in efficiency and ability expeditiously to handle the traffic of the country.  We have now passed through several periods of peak traffic without the car shortages which so frequently in the past have brought havoc to our agriculture and industries.  The condition of many of our great freight terminals is still one of difficulty and results in imposing, large costs on the public for inward-bound freight, and on the railways for outward-bound freight.  Owing to the growth of our large cities and the great increase in the volume of traffic, particularly in perishables, the problem is not only difficult of solution, but in some cases not wholly solvable by railway action alone.

In my message last year I emphasized the necessity for further legislation with a view to expediting the consolidation of our rail ways into larger systems.  The principle of Government control of rates and profits, now thoroughly imbedded in our governmental attitude toward natural monopolies such as the railways, at once eliminates the need of competition by small units as a method of rate adjustment.  Competition must be preserved as a stimulus to service, but this will exist and can be increased tinder enlarged systems.  Consequently the consolidation of the railways into larger units for the purpose of securing the substantial values to the public which will come from larger operation has been the logical conclusion of Congress in its previous enactments, and is also supported by the best opinion in the country.  Such consolidation will assure not only a greater element of competition as to service, but it will afford economy in operation, greater stability in railway earnings, and more economical financing.  It opens large possibilities of better equalization of rates between different classes of traffic so as to relieve undue burdens upon agricultural products and raw materials generally, which are now not possible without ruin to small units owing to the lack of diversity of traffic.  It would also tend to equalize earnings in such fashion as to reduce the importance of section 15A, at which criticism, often misapplied, has been directed.  A smaller number of units would offer less difficulties in labor adjustments and would contribute much to the, solution of terminal difficulties.