Greg,
Evidently somebody replaced or removed the wheels. Lionel, as far as I know, did not use axle washers. When re-installing the wheels, put the gear side wheel on the axle, place into the motor and check to see that the gears line up without 'rubbing' against the compound gear. There should be 10 - 20 thousandths play between the gears. If they are tight up against, then use a washer or two to eliminate possible binding. The plain wheel will install with just about 10 thousandths clearance. Some of the MTH wheel production runs needed washers for spacing.
Harry