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of the raw product is never reflected in the price the consumer pays for the processed and manufactured article.
Senator McNARY. I am not worrying myself as far as raising the commodity price affecting the consumer is concerned; what I am worrying about is as to whether or not this bill will raise the price to the farmer.
Mr. SIMPSON. It might to a degree, but not to any great extent. Mrs. Donnelly is right in one thing, if you would pass that on to the consumer, that price, they will probably consume less, unless something is done to put more people to work and increase general commodity prices.
Senator McNary. But the trouble with her argument is, of course, that if you raise the price, if you succeed in raising the price of the cotton and of the wheat in this bill by a tax method or by any other method, the proportion or what it would cost in tax upon the consumer would be infinitesimal.
Mr. SIMPSON. Oh, yes. Now, I want to get some figures into the record here that is in a letter addressed to me from the Interstate Commerce Commission, dated March 24, 1933, so these are up-todate figures, and I asked for a comparison of freight rates on wheat from certain points in Kansas that prevailed in 1914 as compared with present prices, present freight rates, and I want to observe that when you go into this bill with a parity price base you are not taking into consideration the increase in taxes nor the increase in freight rates nor the increase in the annual interest debt of the average farmer.
Senator WHEELER. Do you not think, Mr. Simpson, that the average interest rate at the present time I mean as far as Montana is concerned—the average interest rate in Montana, I think, is lower today than it was in 1908 and 1914, when they were paying out, for instance, in my State, as high or 10 or 12 percent interest; today they are not paying that.
Mr. SIMPSON. But the annual interest debt is much higher in Montana today than it was in 1914. In other words, there is a much bigger indebtedness, mortgage indebtedness, of all kinds.
Senator WHEELER. Yes.
Mr. SIMPSON. And that is what I spoke of. Now, here is Scott City, Kans. The freight rate on wheat in 1914 to the ports of Galveston, New Orleans, Mobile was 2772 cents a hundred; the present freight rates from the same town in Kansas to those ports is 46 cents per hundred. You will observe in all of these nearly 90 percent increase in freight rates. From Concordia, Kans., in 1914 the rate was 2772 cents.
Senator NORRIS. To what place?
Mr. SIMPSON. To Galveston, New Orleans, and Mobile. It is all to those ports.
Senator NORRIS. You do not have the Great Lakes and Chicago?
Mr. SIMPSON. No; I have it for export. It was 277 cents in 1914 from Concordia, and the present rate is 47 cents. From Topeka it was 2574 in 1914; now it is 4272. From Wichita it was 25 in 1914 and now is 44 cents. From Arkansas City it was 2472 in 1914; the present rate is 43. From Lenora, Kans., in 1914 the rate was 32 cents a hundred; the present rate is 48 cents.
Those are the freight rates for export purposes. There are different rates prevailing for domestic delivery to the same towns. Scott City for domestic in 1914 was 3472 cents; at the present time, 5574.
Senator McGill. From Scott City to what points? Mr. SIMPSON. New Orleans and Mobile. But not to be exported. It is the higher rate, you see, when it is not to be exported. From Concordia it was 32 in 1914; 5542 at present. Topeka, 27 and 50; Wichita, 3072 and 50. There is a lot of discrimination in towns there, too.
Senator McGill. I do not understand why it would be more from Topeka to New Orleans than it is from Wichita to New Orleans. It is not as far. Mr. SIMPSON. I say there is discrimination. Senator MCGILL. New Orelans is about 185 or 200 miles further.
Mr. SIMPSON. From Lenora, another town I gave you a while ago, 3342 in 1914 and 5772 at present. Arkansas City, 3072 and 50 at the present time.
Senator NORRIS. Now, Mr. Simpson, are you through with those figures? Mr. SIMPSON. Yes.
Senator NORRIS. What reason is given for charging a higher rate to send wheat-or a less rate when wheat is exported than when it is sent to the same place if it is not to be exported?
Mr. SIMPSON. In this letter they give me no reason.
Senator McNary. The reason that they assign, generally—I have had it up with the Departmentthe reason they generally assign is so that the exporter can compete with foreign countries in the sale of wheat. That is the reason they give.
Mr. SIMPSON. It is to promote and encourage exportation, I take it. Now, I want to call your attention to some banking conditions that have to do with prices of farm products.
Senator McNary. Before you get on that subject I would like to ask you a question: Under your plan of simply fixing the price that they have to pay, how would you dispose of the surplus? I mean you would get-suppose you fixed the price, we will say, at $1 for the consumption here in the United States, and the part that was not consumed in the United States, say, you fix that at 50 cents—I presume that would be about what you would have to fix it for export at the present time-probably less than that-you would figure out the percentage that was going to be exported and then you would pay the farmer for all of his wheat on the basis of the price that is arrived at by computing the two together. Now, what would you do with that surplus? I mean, you would have to dump it upon the world market, would you not? What is your plan with reference to that?
Mr. SIMPSON. The buyer of that wheat is a private individualistic institution or corporation, as it may be, and they do with that just what they do with it now. They buy it now and pay the farmer right at his unloading place, and they would do with that just as they do now, sell it to the best advantage they can for export, the part that is exportable surplus.
Senator NORRIS. Would they be allowed to sell it in this country? Mr. SIMPSON. Except as it went through bonded mills and elevators to be exported. My first impression of the suggestion that was made here, that we just average that up, take 4 bushels of wheat and say that the home consumption part would be 3 bushels, three fourths of that 4 bushels, and that it was a dollar a bushel and that that would be $3, and that the other bushel was 60 cents, the exportable surplus, and add the price of the two together and make it $3.60, divided by 4 would be 90 cents they would pay the farmer for the whole business.
There is but one difficulty in that when I got to thinking it over, and that is your home consumption price would be one fixed price for the year, because that is cost of production. It does not change. The other price is a fluctuating price every day, a different price, and it would be a little hard to fix.
Senator McNARY. That is what I was going to get at. That would be a little bit difficult, because the world price would be a changing price.
Mr. SIMPSON. Changing up and down. You might have some big fluctuations.
Senator McNARY. How would you remedy that situation?
Mr. SIMPSON. I just said that with the segregation, the licensed mill or elevator must pay the farmer for that one fourth that is exportable surplus the world price that day in that town.
Senator FRAZIER. Should not the farmer have the privilege of keeping that surplus on his farm if he wants to?
Mr. SIMPSON. Then, Senator, you involve supervising the farmer to see whether he bootlegs it around somewhere.
Senator McNARY. You could not do that very well.
Mr. SIMPSON. I do not want to have to supervise the farmer. I want to keep him pure in heart and honest. Laughter.]
Senator McNary. Let me ask you this: The difficulty, it seems to me, is that we are faced with a practical proposition of probably not being able to get the legislation that you would prefer.
Mr. SIMPSON. I am not so sure about that. I think we ought to get it. It is right.
Senator McNARY. I understand that, but it is not a question of what we ought to get, many times; it is a question of the practical situation of what we can get. Now, if this legislation would, as a matter of fact, raise the price of farm commodities to the level of 1914 that, of course, would be much better for the farmer than toI mean if it would do what the advocates of the bill think it would do—I am not sure at all that it will—but if it would do what the advocates of the bill think it would do, you would much prefer to see something done than to see nothing done, would you not?
Mr. SIMPSON. I think that as a beggar I would say anything you can drop in the hat will be appreciated.
Senator McNary. Then that seems to be more or less a practical situation with which we are confronted.
Mr. SIMPSON. Now, I want to impress upon the committee the fact that on January 1, 1920, there were 32,000 banks operating in the United States; today there are just 15,000. Seventeen thousand banks have closed their doors; hundreds of thousands of small business institutions have taken bankruptcy.
Senator NORRIS. Mr. Simpson, an idea just occurred to me,I hope you will pardon this interruption, because it is out of the ordinaryI want to ask if you will not give us the date of that letter from the Interstate Commeree Commission concerning the figures on freight rates, and I want to ask the reporter if he will not put that date in at
the place where Mr. Simpson testified, so that we will not have to look it up if anyone wants to find it.
Mr. SIMPSON. I gave the date when I mentioned the letter, March 24, 1933.
Senator NORRIS. Why not put the letter into the record, Mr. Simpson?
Mr. SIMPSON. Well, I want to send this letter to a party that asked for this information which I have received.
Senator NORRIS. The reporter will not keep the letter; he will copy it in. Mr. SIMPSON. All right, I will do that. (The letter referred to follows:)
INTERSTATE COMMERCE COMMISSION,
Washington, March 24, 1933. John A. SIMPSON,
Washington, D.C.: Commodity rates on wheat, in carloads, for the years 1914, 1917, 1918, and present
(Rates in cents per 100 pounds)
Scott City, Kans............
Scott City, Kans........
1 Bee footnotes at end of table.
Commodity rates on wheat, in carloads, for the years 1914, 1917, 1918, and present,
1 Effective Jan. 1 to Mar. 11, 1917, inclusive.
Rates are subject to minimum weight of marked capacity of cars, but not less than 40,000 pounds. The present rates are not subject to any emergency charge.
G. M. CROSLAND,
Chief, Section Tariffs.
The CHAIRMAN. Mr. Simpson, you will have to hurry along, because we are limited in time.
Mr. SIMPSON. Now, the cause for the closing of 17,000 banks, more than half of them in the United States, in the last 13 years was the low price of farm products. That is the cause, 10-cent corn to the farmer, about 7-cent oats, and less than 30-cent wheat out in Senator Wheeler's country. I had a letter the other day that their highpriced wheat was bringing 20 cents, some of the rest down as low as 13 cents. Those prices will close every bank in the United States inside of two years, bankrupt every institution. The condition today, and I get it from the records and I get it from hearing these economists give the figures before the banking committees and so forthare that we have got over 200 billion of indebtedness in the United States today, and if all the property in the United States was put under the hammer it would not bring that much. In other words, a privileged few now hold the obligations of the great mass of the people to the extent that any time they want to foreclose they can make about 120,000,000 of us propertyless. You have got one way to remedy that thing, and that is to make the dollar cheap enough so that the farmer, the little business man, the professional man, everybody, can pay their debts.