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Senator THYE. No.

Senator WILSON. However, when it comes to the set-up on the State level you do not want them to have too much veto power, do you?

Mr. ROOSE. Well, that would not make much difference, as long as we could have a say-so out there in the country to run this program. We must have authorities over us that is certain, but we certainly want to run our own program. We do not want to have an executive secretary or boss which we cannot hire or fire.

We really want to run that program in a democratic way similar to the way our school system is run and everything else.

I would feel very badly to lose the program as it is now. I feel that it has done a wonderful job. I think all you folks know what it did during the days of the war, what we did to sell bonds, to sell Red Cross, to really get the job done out in the country to increase production, not to decrease it, but we have mined our soil to a certain extent during those war years and have since with this all-out production. Something must be done to rebuild that fertility out there.

Senator WILSON. I am quite sure that there is not a member in the committee who is in favor of scrapping the present farm program. Our entire interest and effort is to try to strengthen it, make it more democratic and make it more workable.

Mr. ROOSE. Well, I think if anything can be done to improve it I am very strongly for it; if not, I would certainly hate it. Senator WILSON. You do not need to worry about that.

The CHAIRMAN. Thank you for a most interesting statement. Mr. ROOSE. Thank you, Mr. Chairman, for allowing me to testify. The CHAIRMAN. Now, we have one more witness, Mr. Carl H. Wilken of the Raw Materials National Council, Sioux City, Iowa.

STATEMENT OF CARL H. WILKEN, ECONOMIC ANALYST, RAW MATERIALS NATIONAL COUNCIL, SIOUX CITY, IOWA

The CHAIRMAN. This committee will be most interested, Mr. Wilken, in any suggestions you may have toward helping the farmers of Iowa and the rest of the Nation.

We will welcome any suggestions you can give us.

Mr. WILKEN. I have a prepared statement, Mr. Chairman, but I am going to file it with the committee and I am going to tell you very briefly what this bill will do.

There are only two factors at stake. One is the number of units of farm products. That is taken care of by conservation. If you have good soil conservation, you lay the foundation for producing the units. The other factor is price.

Those two factors multiplied together determine the ultimate income of the United States.

Now, then, in drafting this bill I do not think the committee has thoroughly made a study of the importance of the parity equation. At the present time, 1 percent of parity means $2,000,000,000 of national income. Now the bill as it is written, in my opinion, would not give the farmer over 73 percent of parity. That is what it averages under the schedules in the bill. That means a depression.

Now, then, I do not think the committee wants a depression but I want to say to you frankly that you do not dare have a support price on your basic farm products below 90 percent.

If you do, you are going to have a depression. Under the schedules you have in this bill you would operate from 70-cent production with a 90-percent support price which would give you 63 percent of income if you multiplied them out.

Senator THYE. Mr. Wilken, would you mind if I interrupted and asked a question?

Assume that we had 90 percent of parity on some of the basic commodities and with continuously good crops, we had a carry-over of possibly six or seven hundred million bushels of wheat, then the following crop year we were again assured 90 percent of the parity and again we had another exceedingly good crop and came along with maybe two or three or four hundred million bushels in excess of what the domestic use would be in that year plus our carry-over. What could we do with that volume of wheat that we would find on our hands at that time?

Mr. WILKEN. Well, I think that the operation of your economy during the war answers that question, Senator.

Senator THYE. But, Mr. Wilken, the economy or the change in our general economy brought on by war created an abnormal demand for such a commodity as wheat for war purposes. Normally you would not have a domestic market for that volume.

Mr. WILKEN. Let us examine the situation as a whole. Let us go back to 1935-39. We had an average of a little over 80 percent of parity. As I pointed out to you, 1 percent of parity for agriculture means in reality 1 percent of the national income. It means 1 percent employment.

Senator THYE. That I realize, but have you an answer on how we could dispose of or utilize that surplus? That is the big question that all economists are asking.

Mr. WILKEN. I will get that. With that situation, any time you have 10 percent below parity for agriculture you are going to have 10 percent unemployment and 10 percent underconsumption, that is the situation.

In 1941 farm prices got back up to parity. At the present time and during the past 2 or 3 years we have actually marketed 40 percent more farm products than we had in 1935 and 1939. What became of them?

Because of the increased farm income and the resulting increase in national income the increase in population in 1946, we consumed 20 percent more food per capita than we did in 1935 to 1939, and with the increase in population we used it.

Now, then, at the present time we are producing about 40 percent more farm products than we did in 1935 to 1939. You do not dare produce under 140 percent or you are going to have a depression and unemployment because you will not have materials for the people to work with. Seventy percent of your entire economy of production, processing, distribution, and employment depends on agriculture. If you go back to 120 percent or 20 percent more production than 1935 to 1939, you have not enough materials to employ your labor, and you will have unemployment because of lack of production. If you maintain this price and get the surpluses you are thinking of, you translate it into higher standards of living, but if you permit the additional production to force the price backward you will force yourselves in a depression.

The thing I want this committee to remember is that 1 percent of farm parity means $2,000,000,000 of national income and this bill that

you have before you today is more important than all legislation before Congress at the present time because it is going to determine whether we have a depression or whether we win the peace or another war if it comes. Surely, if you have less than parity for agriculture you are going to have a depression.

The records are available in the Department of Commerce and if you make a thorough study of them you will find that you have a direct correlation between this initial farm income, which is nothing more than unit times price, and every segment of your economy, the total wages paid out, your expenditures for food.

This bill is conceived with the idea that to reduce the price will increase consumption. That is not true. The percent of income spent for food remains a practical constant.

For example, in 1930 to 1939, 10 years, the American public spent 24.28 percent of national income for food. In 1946 they spent 24.1 percent. That percent remains practically constant and to reduce the price of food does not change that percent.

Also, the real cost of living in 1946 and 1947 instead of being high, as put out by newspaper columnists, has been the lowest that we have had in the history of the United States on the basis of units of goods obtained for the percent of income spent.

Senator THYE. Then you can see no danger of an overproduction in some of the basic crops at any one time regardless of what the price of that commodity might be?

Mr. WILKEN. No. You might have

Mr. WILKEN. No. You might, for example, have some good crop years and you might have 1,500,000,000 bushels in your storage; then you will level it off with several lesser crops.

Senator THYE. If the lesser crops did not come, what would be the problem with the 1,500,000,000 bushels as a carry-over in wheat?

Mr. WILKEN. If you maintain the price, Senator, it will generate more farm income, more purchasing power, generate more production through your whole cycle and the only place you can go is a higher standard of living.

Your record clearly proves that.

Senator THYE. Would there be any danger if there were a fixed positive price established on some commodity that is just a mechanical operation, you might say, so that it is an easy operation? Would there be any danger that you might have a constant crowding and shifting in that direction in general so that you would increase the acreage in the commodity regardless of what the carry-over was?

Mr. WILKEN. For example, supposing you were to take seven of the basic farm crops; you automatically have 85 percent of all the crop acreage in those crops. If you keep those prices in balance, in other words, use your parity equation, and your wheat, corn, oats, and barley are in balance, you are not going to have any amount of shifting. Then the only crop that you have to think of is in terms of wheat.

Now wheat is a semiarid crop relatively. Most of our wheat is produced on areas that are subject to dry weather. You may have an excess acreage of that, breaking up land that should probably stay in grass, but I would not worry about two or three or four hundred million bushels of wheat in surplus production because we can use it for livestock, if necessary. The thing that I am particularly concerned about this present year, if we have a good crop year and we have a

good crop year in Europe and with quite a drop in our livestock production because of the heavy shipments of grain abroad that have curtailed livestock, we are not going to have the market livestock that you should have in producing the meat that our people have proved they can eat.

So that unless you are sure you have a definite stopgap this fall, a good crop here an a good crop in Europe can send that grain price down to the 60-percent floor if that bill is passed; and, if that does that, there will be a depression.

I believe that concludes my remarks, Mr. Chairman. If necessary, I would like to come back before the committee tomorrow and go through some of the details in my statement because frankly this bill, if it is passed, will legislate a depression.

The CHAIRMAN. We will place your statement in the record at this point and if you wish to come back tomorrow to make a further statement, you may do so.

Mr. WILKEN. You have an important piece of legislation here and I do not want to see this country getting into a depression.

The CHAIRMAN. You have some good ideas. I have been looking your statement over and it is all right.

Mr. WILKEN. If you wish me to come back tomorrow, I shall be glad to do so.

The CHAIRMAN. Yes; if you would like to come back tomorrow, we will start the hearing at 10 o'clock.

Mr. WILKEN. O. K., I will be here.

The CHAIRMAN. Your statement will be inserted in the record at this point.

(The statement referred to is as follows:)

STATEMENT FILED BY CARL H. WILKEN, ECONOMIC ANALYST, RAW MATERIALS NATIONAL COUNCIL, SIOUX CITY, IOWA

Mr. Chairman, members of the Committee, my name is Carl H. Wilken, economic analyst for the Raw Materials National Council of Sioux City, Iowa. During the past 11 years, I have devoted full time to an impartial study of the effect of farm prices upon the economic welfare of the American people.

My purpose in appearing before this committee is to give you the benefit of our studies in connection with a permanent farm program. Any criticism which I may make is entirely the result of factual studies and I have no personal interest, political or otherwise.

In 1938, I appeared before a subcommittee of the Senate Committee on Agriculture and pointed out specifically that the answer to our so-called farm problem, which is in reality our national economic problem, was an average of 100 percent parity for our annual farm production. My reason for that statement was a study of the record which reveals that for each $1 of gross farm income we will have $7 of national income. This turn of gross farm income is in reality an efficiency ratio and the 7 times turn has been a practical constant for 25 years. Since that time I have repeatedly pointed out this ratio to committees of Congress with the hope that same committee would take the time to check it for accuracy. I believe that if this committee had made such a study, the approach would have been entirely different than S. 2318.

In commenting on the bill which you have before you, I want to point out that our farm production at the present time at the parity level assures a national income of $200,000,000,000. This means that each 1 percent of parity for agriculture means $2,000,000,000 of national income. In addition each 1 percent of parity means 1 percent of employment in our nonagricultural industries and 1 percent consumption of goods.

In other words, legistlation which results in only 90 percent of parity will mean a loss of $20,000,000,000 in national income, 10 percent unemployment in nonagricultural industries, and a drop of 10 percent in over-all consumption of

goods produced. I feel therefore that this legislation is the most important of any legislation before Congress. Whether we pay the farmer an average of 100 percent parity is going to determine whether we remain a solvent and prosperous nation as a foundation for a more prosperous and peaceful world.

PARITY EQUATION

My first step is to analyze the parity equation. The true equation of parity is the simple and direct relationship between prices paid by the farmer and the prices he receives. Any other additions will tend to dislocate the equation and bring about inaccuracy in computing parity prices.

For example, in the Agricultural Situation, published by the Bureau of Agricultural Economics for February 1948, they list the price the farmer paid as 263 percent of the 1910-14 level the base period now being used. They give the price the farmer receiver during the same period as 279 percent. Dividing the prices paid into prices received, true parity on a basis of relative prices was 106 percent. Under the present method of computing parity, taxes and interest are included. Using this index the farmer paid 248 percent of the 1910-14 period and received 279 percent. Using this formula the parity in February was 112 percent. The thing I wish to point out that the inclusion of interest and taxes are short-changing the farmer 6 percent in the calculation for parity which is now being used.

There has been some agitation to include labor in figuring farm parity. The record would indicate that the inclusion of interest, taxes, and labor in a parity formula are unnecessary and tend to confuse and disrupt its accuracy. I can readily understand how this demand has come about. The Department of Agriculture in testimony before some of the committees has made the point that the farmer is receiving much less than the industrial worker. It is evident that they haven't considered all the factors.

Again, for example, in the Agricultural Situation, in December 1947, they list industrial wages at 469 percent of the 1910-14 level. If this is compared with 301 percent the price the farmer received in December it appears at first glance that the farmer is receiving too low a price. But, the efficiency of labor is included in the wages received. To obtain a comparative wage for the farmer, the units of gross farm production have to be multiplied by price. In 1910-14 the gross farm production was worth approximately 7.1 billion dollars. In 1947, deducting Government payments and rentals, the gross farm income was approximately $32,000,000,000 or 450 percent of the 1910-14 income. If this in turn is corrected to apply to a smaller number of farmers producing farm products at the present time, wages for men in industry and agriculture are in approximate balance.

In calculating parity with the use of the direct price relationship, wages, interest, taxes, management, capital overhead, and a normal profit are automatically included in the price of finished goods the farmer buys. If farm prices are adjusted to a direct relationship with the price he pays, these factors are automatically included, and are always quite current.

I would like to call attention of the committee that we have in reality two parity equations. One, the monetary parity, and the other the commodity parity. After a period of price stability they should be the same. For example, in 1925-29 the price of gold was $20.67 per ounce and commodities had a certain relationship to an ounce of gold. At the present time the price of gold as a result of the Bretton Woods agreement is $35 per ounce. Therefore true parity in terms of our monetary unit is 169 percent of the 1925-29 price level for all commodities. The prices paid by the farmer in February were an index of 263. Translating the gold parity to a comparative 1910-14 index the result would be 261.95 percent. You will note that in February the prices paid by the farmer were at parity with the monetary measuring stick and in terms of commodities. If the prices received in February had been 262 percent of 1910-14, his percent of parity would have been 100.

In passing I would like to point out that our present price level is not particularly inflationary. We have moved into a new price level approximately 210 percent above the 1935-39 average. This need not cause any great alarm. We have had similar happenings in the past. During the 1925-29 period, in order to maintain full employment and prosperity, we had a price level 155 percent above the 1910-14 period.

With a much larger public debt resulting from World War II than from World War I, we will require our present farm price level which is generating approxi

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