Mr. Cox. What do the records show as to the mortgage or bonded indebtedness of the people?

Mr. SMITH. We do not have anything of that kind, because this money does not carry any interest, and there are no bonds. These are all Government irrigation projects.

Mr. MICHENER. They were Government financed in the first instance, without interest. Under the law, the Government furnished the money for starting the projects without interest, and they were to pay the money back at certain specified times, without interest. Now, they are unable to do that, and they are asking for further delay in the payment of those sums which the Government. has advanced.

Mr. Cox. But with that, what is their condition in comparison with that of the farmers in other areas of the country?

Mr. MICHENER. It is the same thing.

Mr. Cox. Do they have no advantage?

Mr. MICHENER. In other areas the farmer finances his own farm. Mr. Cox. And he must receive the same price for his products. that the man on the reclamation project does.

Mr. SMITH. The difference is this: In the case of land, outside of reclamation projects the farmer is at no expense whatever for putting water on the land. There is involved no expense for leveling the land and building laterals to carry water to the land. They do not have to construct laterals to divert water to the different sections of the land. Mr. Cox. We have drainage districts all over the country. Mr. SMITH. Yes; but they are not so expensive to operate.

Mr. MICHENER. This has nothing to do with drainage districts.
Mr. SMITH. No.

Mr. MICHENER. In other words, they are private ventures.
Mr. SMITH. Yes.

Mr. MICHENER. The Smith-Glenn bill provides assistance for those private groups.

Mr. SMITH. Yes.

Mr. MICHENER. This morning we are dealing with a credit which has been set up and financed by the Federal Government.

Mr. Cox. What has been the extension granted heretofore?

Mr. MICHENER. There have been innumerable extensions for vari

ous projects.

Mr. Cox. I mean with respect to this same credit.

Mr. SMITH. We have never heretofore had a general moratorium, but have lengthened the term of repayment by law.

Mr. MICHENER. This is a general moratorium.

Mr. SMITH. Yes.

Mr. MICHENER. They have moratoriums on some existing projects. Mr. SMITH. Yes; on some projects. Because of drought in the Rocky Mountain section and some other areas, they did not have sufficient water to mature their crops. That was true of the Boise project, where the water was exhausted in the reservoir early in July, so they could not raise a full crop.

Mr. GREENWOOD. For what period are you asking a moratorium? Mr. SMITH. This bill simply provides that beginning the first day of December of last year, the time shall be extended until the end of the contract period.

Mr. GREENWOOD. What is the contract period?

Mr. SMITH. On 1 project it will be two years, on other projects 8 years, on others 10 years, on some 15 years, and on some probably 20 years. It will depend entirely on when the project was completed. Mr. GREENWOOD. They make no payment to the Government during that time?

Mr. SMITH. No; they add the 1931 payment at the end of the

contract term.

Mr. TAYLOR. It depends on how many payments they have already made.

Mr. GREENWOOD. Do they allocate this payment among the other payments?

Mr. SMITH. No; it is paid at the end of the contract period.

Mr. MARTIN. Have you estimated how much in payments will be deferred?

Mr. SMITH. About $1,500,000 payments will be deferred this year, and about $3,000,000 for last year.

Mr. PURNELL. What would happen if they did not get this relief? Mr. SMITH. That is where the trouble comes in. The law at the present time provides that if they are in arrears one year they can not have water with which to raise crops.

Mr. BANKHEAD. Is that law enforced against them?

Mr. SMITH. Yes; I think so.

Mr. BANKHEAD. Is there any discretion lodged with the Secretary of the Interior with reference to carrying out that law?

Mr. SMITH. No. In certain instances, when confronted with a situation of that kind, I understand the Secretary accepted a note, in lieu of cash, secured by a chattel mortgage on the crop, machinery, cows, and so forth, simply to meet this provision of the law.

Mr. PURNRLL. Without water, they can not raise anything. Mr. SMITH. NO; they can raise nothing without water, because they have only 8 or 10 inches of rainfall annually.

it?

Mr. MICHENER. It is not a question of water on every project, is Mr. Purnell said that without water, they can not raise crops. Mr. SMITH. Some of the projects can operate this year, but those that can not pay

Mr. TAYLOR (interposing). It amounts to this, that these are arid lands.

Mr. PURNELL. What is the difference between these people and the farmers out in my country who can not pay their taxes?

Mr. SMITH. Out in your country you pay your State taxes and county taxes, but in the irrigated country they have to pay, in addition to the State and county taxes, the construction charges, which run from $2, $5, annually and in some instances to $7.50 per acre. Then they have to pay the operation and maintenance charges every year, and they run from $1 to $3 per acre. They have to pay the construction charge back to the reclamation fund, in addition to the operation and maintenance charges.

Mr. Cox. Do you not have greater production on the projects than they have on other farms?

Mr. SMITH. Yes; we have a larger production, but we are far removed from markets, which practically overcomes that advantage. Mr. BANKHEAD. I want to ask you this question: Is there any difference in principle between your moratorium and the one that we are asking for borrowers from the Federal land banks in the way of an extension of their notes?

Mr. SMITH. No; there is not. I should remark that these farmers. are not able to borrow money from the Federal land banks, because the Government holds the first lien on these irrigated farms.

Mr. BANKHEAD. I am deeply interested in that proposition of extending the notes of borrowers from the Federal land banks. One of the first bills I introduced in the last Congress was for the extension of those loans. If that was sound in principle, I do not see why this is not sound in principle, unless it involves some extraordinary burden on the Treasury.

Mr. SMITH. The only feature of this bill that could in any way be considered a burden on the Treasury is the fact that section 10 provides that the repayments to the Treasury that were to commence at the rate of $2,000,000 a year on the 1st of July, 1933, do not have to be made until July, 1935. That is because the money will not come into the fund to take care of that obligation if we get this moratorium. It delays that money going back into the Treasury two years.

Mr. MICHENER. What becomes of that money? Will it be covered into the Treasury, or will it be held in the reclamation fund?

Mr. SMITH. If this money were to be paid into the reclamation fund, it would be held until July 1 of next year, and then we would commerce to pay back at the rate of $2,000,000 a year on account of the money advanced to the fund.

Mr. MICHENER. The Government advanced that money in the beginning, and you are to pay back, according to the original law, in certain specified sums?

Mr. SMITH. Yes.

Mr. MICHENER. Now, are those sums that are paid into the Treasury of the United States paid into the reclamation fund, or are they covered into the Treasury to take the place of the money that was taken out of it in the beginning? Is it to be covered into the Treasury, or is it to be held there to be used for further developments or for the carrying out of other projects?

Mr. SMITH. No; we are paying it back to the Treasury.

Mr. GREENWOOD. Does that money go into the general fund of the Treasury?

Mr. SMITH. What we owe is paid into the Treasury, and the other is held in the reclamation fund.

Mr. Cox. In this case, what consideration does the individual get who has already made his payment?

Mr. SMITH. In that case, we have a section here which gives him credit for the amount on operation and maintenance for this year. If he has paid for 1931, and many of them have, we give him credit on operation and maintenance charges.

Mr. Cox. He would share equally with the others in the benefits. Mr. SMITH. Yes.

The CHAIRMAN. We are not doing any more for these people than we did for the Germans, are we?

Mr. SMITH. No.

Mr. MARTIN. This money goes into the Reclamation fund, and would be a fund to establish new projects. It never gets back to the Treasury, does it?

Mr. SMITH. Yes; eventually it would.

Mr. MARTIN. If you were establishing new projects, that money would not come out of the Treasury of the United States, but out of the Reclamation fund?

Mr. SMITH. Yes.

Mr. MARTIN. So we never dissolve this fund, but the money is paid back into it, and it keeps on.

Mr. SMITH. We are faithfully carrying out the understanding that we had with Congress that we would not ask for any new projects. Until we finish the old projects, and stabilize the farmers on those projects by legislation of this character, we will not ask for any new funds for projects.

Mr. MICHENER. Pursuing the line of questioning suggested by Judge Cox, as a matter of fact, when you have water, and when your project is in good operating order, you have a sure crop?

Mr. SMITH. Yes.

Mr. MICHENER. You have the climate and the soil, and when you plant you are certain to reap.

Mr. SMITH. Yes.

Mr. MICHENER. That is true of reclamation projects, but all other agricultural lands must take the hazards of nature. Therefore, if we extend relief and keep your project in good working order, you are sure of a crop. Now, if you are sure of your projects or are sure that they are in good working order, you can furnish a large part of the supply of commodities and of produce for the American market. Therefore, the natural farmer meets in the market products with which he can not hope to compete. For illustration, we grow apples and potatoes in Michigan, and at one time we sold them here in Washington. Michigan potatoes and Maine potatoes, as well as Michigan apples, were sold here in this Eastern markets, but to-day in the city of Detroit, in Michigan, we find Idaho potatoes in every store and we find Washington apples which were produced on these Government projects that were financed by Government money. The local farmer is unable to compete with those products. Now, that is the situation that the man coming from a district that is agricultural, other than from a reclamation project district, is confronted with.

Mr. SMITH. That is very true; but in the city of Detroit and in any manufacturing city in the State of Michigan you will find that the records of the factories and wholesale houses show that the people on these projects have bought thousands of automobiles yearly. The records will show that they have bought hundreds of thousands and even millions of dollars worth of furniture annually that was made in the State of Michigan. That money that we spend with you is paid into the factories, and the factory employees pass it on to the farmers who are living in that section and who get a market at home for what they produce.

Mr. MICHENER. That is exactly true, but what happens? You are taking the agricultural industry from one group and placing it in the hands of another. You are creating a market or a purchasing power in one group, but you are destroying that market power in the other group; so that, by reason of the fact that these projects are Government financed, and by reason of the further fact that there is a sure crop, the man in God's country is left out agriculturally. He can not hope to compete with the project farmer. Therefore, if the development of these projects keeps on, there is no question but that our farms must be doomed.

Mr. SMITH. We are about 2,000 miles from the markets in the Eastern country, and the freight rates are terrific. It costs about 78 cents per hundred pounds to ship potatoes from Idaho to Chicago. Therefore, our farmer is at that disadvantage. He is far removed from his market, and a large part of the money he receives for his produce is paid out in freight charges. I am inclined to think that my friend from Michigan must have been reading the Congressional debates when the Homestead law was passed. That was when Congress undertook, instead of selling the public lands, to give them away. Congress passed the Homestead law so that anybody who wanted a farm could take it by simply living on it. All he had to pay was his filing fee, which was only $16 on 160 acres of land. The people in the Eastern part of the country, or in the older agricultural sections of the country, were protesting against Uncle Sam giving away land. Now, what has that policy accomplished for this country? It has built an empire west of the Mississippi River equal to any other section of the country, and that policy has created a market for the manufactured products of the East. But for that policy which was inaugurated then, we would not have the country that we have today. The country was developed because of the fact that Congress in its wisdom spent millions of dollars in opening up the public lands in the West, giving them to the settlers and encouraging people to go out there.

Mr. BANKHEAD. In other words, it is your argument that whenever they exchange commodities with the State of Michigan, the Michigan manufacturers sell more commodities to the irrigation districts, and that they get more out of the irrigation districts than the irrigation districts get out of the State of Michigan.

Mr. SMITH. Absolutely so.

Mr. Cox. Yet, after all, it is a fact that, as a result of the Treasury caring for one particular group in this way, it places every other section competing with them at a tremendous disadvantage.

Mr. SMITH. Let me answer the gentleman from Georgia in this way: On February 25, 1927, Congress passed a law authorizing an appropriation of $8,600,000 for the purchase of seed grain, feed and fertilizer to be supplied to farmers in the crop-failure areas of the United States. On February 25, 1929, $6,000,000 was provided, for the relief of farmers in the storm and flood-stricken areas of Virginia, North Carolina, South Carolina, Georgia, the gentleman's own State, Florida, and Alabama. On January 26, 1928, $500,000 was provided for the purpose of rehabilitating farm lands in the flood areas.

On June 13, 1929, Congress continued during the fiscal year 1930 Federal aid in rehabilitating farm lands and areas devastated by floods in 1927. On March 3, 1930, Congress provided $7,000,000 for the relief of farmers in storm, flood, and drought stricken areas of Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, Ohio, Oklahoma, Indiana, Illinois, Minnesota, North Dakota, Montana, New Mexico, and Missouri. On December 20, 1930, Congress provided $45,000,000 for the relief of farmers in drought and storm stricken areas of the United States, and on February 14, 1931, Congress provided $20,000,000 to make advances or loans to individuals in drought and storm or hail stricken areas of the United States.

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