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The committee does not intend to indicate to the slightest extent that Secretary Brannan would use the broad and unlimited authority given him in the Aiken Act without regard to costs or without careful and sound selection of the commodities. But who knows how long he wishes to serve as Secretary of Agriculture or who his successor will be?
The Aiken Act, in granting this unlimited authority for the use of the payment plan, authorizes the Secretary to establish a support price for a commodity, or any number of commodities, to make no effort to maintain the market price at the support level, to let the market price break to any level established by supply and demand, and then pay the producers the difference between the price they get in the market and the support price. But in granting this authority the Aiken Act does not contain one word as to how these payments shall be determined, limited, and paid. The committee bill attempts to do this in section 302 (1), page 9.
And, it must be added, in granting this unlimited authority to the Secretary to use the payment plan on an unlimited number of commodities, the Aiken Act does not contain one word of assurance to the consumers, to the housewives, to the wage earners, or to all the others who through taxes must provide the payment money, that they will be able to buy their food more cheaply in the market place. The millions or billions for payments could result in only more profits for the middleman, in an even greater spread between the farm and the table. The fact that reduced market prices at the farm level do not necessarily mean lower prices to the consumer is illustrated by the drop in the farm price of wheat by more than one-third since January 1948. In spite of this, the price of bread remains near an all-time high.
Neither does H. R. 5345 contain any assurance in this respect and that is one of the reasons why the committee has limited the use of the payment plan to an experimental basis on three commoditiesthat it may be determined whether, in fact, the consumers, as well as the farmers receive benefits in keeping with the cost and what the cost will be.
(2) Control through bankruptcy:-Secondly, in determining that issue, the Congress must decide whether it wishes to permit a law to go into effect (the Aiken Act) which may be used to control the production of agricultural commodities through the means of bankruptcy.
One theory of the Aiken Act is that you can drive the farmer out of the production of a surplus commodity by reducing his price, to as low as 60 percent of the parity price, which will not cover his cost of production and will force him into bankruptcy should he persist in the production of such commodity.
Another theory of the Aiken Act is that the lower the price the less the farmer will produce. And a third theory is that by reducing the price you can force a shift from the production of a surplus commodity into the production of some other commodity in short supply.
The committee is ready to admit that there is reasonable basis for the first theory, that is, that you can reduce the price of farm products to the point where the return will not cover the cost of production, will not provide the farmer with the funds to support his family and pay bis bills, and will take the farmer out of production by causing him to lose his farm. But the committee submits that this would be a cruel and inhuman way to control production.
The committee considers the second theory as being without merit. The records show that there is no certainty of a decrease in production when prices go down, and this is one of the great fallacies of the "lowprice" policy. Specific examples in the case of potatoes and wheat are cited later in this report.
There is good reason why a farmer cannot reduce production when the price he receives goes down and in fact he is often required to produce even more. He still must meet the payments on his mortgage, support his family, educate his children, pay his doctor, pay his taxes, and meet his operating expenses. If he receives less per bushel or per pound, certainly he must produce more bushels and more pounds to meet the same obligations.
The third theory of the Aiken Act-of forcing shifts in production by the starving-out process-- is also false. Suddenly shifting from one crop to another is impractical, if not impossible. Where is the farmer to get the money to buy a new outfit of planting, cultivating, and harvesting implements and machines? Where is he to get the labor that is trained for the production of a new crop? Where is he to get the land adapted to this new crop, the know-how, the weather, etc.? It was mentioned to the committee that Minnesota shifted out of wheat, but it was recalled that it required 40 years to do so. It is feared that those advancing this theory were influenced by conditions on the farms operated by some of our great agricultural colleges, where they have an ample supply of every kind of farm implement and machine and a full staff of trained experts—where shifts and experiments are routine. The average farmer is not so equipped and his capabilities should not be measured by any such test.
(3) Forward pricing.-Thirdly, in determining the issue the Congress must decide whether producers should be told before planting time what the support level will be or must wait until harvest time to find out.
The committee believes the farmer is entitled to know before he plants whether the commodity will have a support price and what the level of support will be. How otherwise can he plant intelligently?
Under the Aiken Act there is no provision requiring forward pricing or the announcement of the level of support before planting time. Under that act the support price level for the basic commodities is to be determined by the supply of the commodity, to be estimated after the crop is mature and ready for harvest and then—let us repeat-and then, if the total supply shows a surplus, the farmer, by the use of some magic wand, is expected to shift or change the crop in the field ready for harvest, into some other crop which may be in short supply.
The committee feels strongly that if the price of a commodity is to be supported, the producers are entitled to know it and to know at what level the support will be, before they plant or complete their plans.
Producers will have this information under the provisions of H. R. 5345. The support level for the ten commodities listed in section 302 (b), page 4, is fixed by law and producers will know what it is before making their plans, subject only to such slight change as may result from adjustment in the parity index between planting time and the beginning of the inarketing period. Not only will such change be small
, but it will not operate to the disadvantage of the producer, for if the parity price should drop slightly it will mean that the
farmer's cost of producing and living will have gone down cortespondingly.
As to the other commodities, covered by subsections 302 (c) and (d) of H. R. 5345, there is express authority in subsection (g) for advance announcement of the level of price support and a prohibition against any reduction thereof after it is announced.
(4) Limited scope.—The fourth decision the Congress must make in determining this issue is whether only certain groups of producers, only those producing a few selected commodities, are entitled to the benefit of price support.
Section 302 (b) of the Aiken Act provides support prices on a flexible basis, ranging from 60 to 90 percent of parity, on the six basic commodities, except tobacco.
The same section, paragraph 5, provides a support price for tobacco at 90 percent of parity, regardless of the supply, when marketing quotas are in effect. Section 202 (c) provides supports at from 60 to 90 percent of parity for wool and Irish potatoes. That makes a total of eight commodities receiving mandatory price support.
Section 302 (c) authorizes support prices from zero to 90 percent of parity for all the remaining 250 to 300 commodities, the level of support to be determined by the Secretary of Agriculture after giving consideration to eight factors set out in section 302 (a).
Then section 302 (c) states:
The Commodity Credit Corporation shall not carry out any operation to sup. port the price of any nonbasic agricultural commodity (other than Irish potatoes) which is so perishable in nature as not to be reasonably storable without excessive loss or excessive cost.
Three exceptions to this prohibition are authorized, (1) section 32 funds may be used in supporting the price of such perishable commodities in carrying out section 32 programs; (2) the Commodity Credit Corporation may support the price of any nonbasic perishable agricultural commodity by loan, purchase, payment, or other operation undertaken with respect to a storable commodity processed from any such perishable commodity; and, (3) funds in the reserve for postwar price support of agriculture established pursuant to the First Supplemental Appropriation Recession Act of 1946 may be used under certain circumstances.
These exceptions are not too important. There are many demands on uses of section 32 funds, and, in addition, the law now provides that not more than 25 percent of such funds can be expended on any one commodity. Then, trying to support the price of canned or other processed form of a perishable commodity can prove to be most expensive and ineffective. For example, cattle could be supported by supporting the price of the limited quantity of canned beef; possibly cured hams could be bought, probably butter, but not milk.
The real effect of this prohibition is to limit supports to nonperishable storable commodities. This leaves hogs, cattle, dairy products, fruits, vegetables, and many other important commodities, with very little if any support.
(5) Stable economy.-And, finally, the big question the Congress must pass upon in deciding the issue is whether it will try to ensure favorable economic conditions throughout the Nation by maintaining agriculture on a sound, stable, and prosperous basis.
The record shows that agriculture leads the way-up or down. This is due to the great consumer demand of the farm people and their potential buying power. Their income and standard of living on the average is much below that of other segments of the population. They are ready and anxious to buy the products of the manufacturing and industrial plants if they have the income. The American farmers are the greatest market in the world.
The farmers have come to realize the interdependence and community of interest between themselves and the wage earners in the towns and cities. They know that the reason they couldn't sell their commodities in 1932 was because there wasn't anybody in town with money to buy. They understand that the best assurance for prosPerous conditions for themselves is steady, full employment at good wages for the workers in the towns and cities. They have supported and will continue to support the measures needed to maintain those conditions.
But they also understand that those working in manufacturing industries cannot receive good wages nor keep a job very long unless farmers have the money with which to buy after paying their production costs.
The committee shares these views and this understanding, and is convinced that without a prosperous and stable agriculture there cannot be a prosperous nation; that without a stable and prosperous agriculture good jobs and good wages will soon be gone; that without a stable and prosperous agriculture the economic and financial stability of the Nation is in danger; and that a serious break in farm prices will throw the Nation into a serious depression.
The committee is convinced that any farm program put into effect by the Congress should ensure as nearly as possible stable and prosperous conditions on the farms of the Nation.
Being of this belief, the committee feels obligated to report that the Aiken Act does not provide a farm program which will insure prosperous conditions on the farms, but that it will, on the contrary, break farm prices, seriously impair the income of farm people, retard conservation of the soiỉ, endanger the economic welfare and financial security of the Nation, and should not be permitted to go into effect on the first of next January
The bill (H. R. 5345) amends the Agricultural Adjustment Act of 1938, as amended, to provide a new and modern formula for the calculation of parity and to make price supports available to the producers of agricultural commodities. Parity prices are those prices calculated to provide gross cash income from marketings of farm products necessary to make current purchasing power of cash receipts from marketings of farm products equal to the average cash receipts for a recent 10-year period
The bill provides for mandatory support at parity prices for corn, cotton, wheat, rice, peanuts, tobacco, hogs, milk, butterfat and shorn wool (including mohair). It further provides for mandatory price support for the so-called Steagall commodities and cottonseed at not more than the parity price, and gives the Secretary authority to support the price of all other agricultural commodities. It declares the policy of Congress that prices of these other agricultural commodities be supported so as to bring the prices received by producers into a fair and comparable relationship with the prices received by producers of other agricultural commodities, taking into account the availability of funds and other factors.
IMPORTANCE OF A SOUND PRICE-SUPPORT PROGRAM
Agriculture is a vital part of our national economy. Every other element involved in the prosperity of the Nation is affected by what takes place on the farms of this country and in the market places where the products from these farms are sold. A sound agriculture is basic to our system of free enterprise and to our economic
welfare. dependent on agriculture for our very existence. Its products feed the Nation and provide industry with necessary raw materials. Maintenance of a permanently healthy and productive agriculture is in the interests of all the people of this country. This is recognized as established national policy under which price supports have been authorized by the Congress as the main device for helping farmers achieve a reasonably stable income at a level fair both to farmers and nonfarmers. In the absence of a better means by which farmers can accomplish this objective, price supports must remain an integral part of our program for agriculture; otherwise our entire national economy will suffer.
The real function of farm commodity price supports is to maintain the income of farmers at a level below which it is not in their interest or in the interest of other economic groups to permit returns from agricultural production to fall. Time and again this country has seen what happens to our entire economy when there is a collapse in farm income. Whenever the farmer receives a fair return from his labors, he is a good customer for our towns and cities. His readiness to buy means millions of jobs in business and industry throughout the Nation. But when his income drops, the farmer is forced to retrench and the effects of this are immediately reflected in a reduced flow of goods to the Nation's rural communities with resulting unemployment throughout our whole economy. Thus the elements of a major depression are set into motion.
This country cannot afford any unnecessary risk of depression. With the national debt above $250,000,000,000, the Nation has little choice but to maintain high employment and a high level of income. Otherwise, the burden of servicing that debt can become unbearable if not impossible. The Council of Economic Advisers to the President said in its December 31, 1948, report:
A debt of $250,000,000,000 determines some aspects of every economic policy and comes into the analysis of every economic problem
it would be reckless to create uneasiness about the national credit and disorder in financial markets at a time when the Nation must support a vast public debt. The sheer necessity of servicing this debt requires the maintenance of income and employment at a prosperous level
. We cannot overlook the importance of the maintenance of a high level of farm prices and farm income to a proper management of the public debt.
We must cope with the problems now in sight. It is the time for positive action—the kind of action so urgently needed now to prevent any sharp reduction from present high employment and high income levels.
Agricultural prices were the first to move downward from the warborn peak. In June of this year, farm prices were 18 percent lower