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to the dairy industry, there is no surplus, no exportable surplus, and so far as we know there is no market in any part of the world for butter from this country if you did have a surplus. We have succeeded in maintaining the consumer demand through these hard times we have had. In fact, some of our products, especially butter, have increased. In 1931 and 1932 we had the biggest per capita consumption that we have ever had at any time. In studying this proposed bill, we cannot see where acreage reduction or the taxable feature enters into our product. There is a clause in this bill, the agreement clause, that if we came under the bill at all (we are listed in the bill) and if anything was undertaken in connection with our commodity, it would be under that agreement part, under the possibility of making trade agreements. We don't know whether that would accomplish anything or not. We are not opposing the bill and we are not advocating the bill.
There is one clause in the bill that we would like to see changed. It is a very slight change, on page 10, section 10, subdivision b, line 10. Under that subsection b, the Secretary of Agriculture would have authority to appoint State and local committees to help along the proper functioning of the purpose of the bill. Then it provides that rental or benefit payments may be distributed by cooperative associations of producers. We feel that that privilege should also be granted to processors, and therefore if you will permit me, I will read this short section that we have prepared, the only change being two or three words.
We propose this substitute:
The Secretary of Agriculture is authorized to establish for the more effective administration of the functions vested in him by this act, State and local committees and associations of producers, and to permit processors and cooperative associations of producers, when in bis judgment they are qualified to do so, to act as agents of their members and patrons in connection with the distribution of rental or benefit payments.
We have two main reasons for asking this: First, there should be no discrimination at all in favor of one form of business in a measure of this kind, which is distinctly a marketing bill and for the purpose of helping all the farmers.
Senator FRAZIER. Do you have any cooperative creameries in your organization?
. Mr. JENSEN. We have some, Senator Frazier. Not over 4 or 5 percent of our membership are cooperative, but 80 percent of all butter made in these United States is made in privately owned creameries. Now, our theory is this, if anything is done under this agreement clause, it would lead to the setting up of local and State committees, and when that is done, and if there is any distribution of rental or benefit payments, those committees would be the proper ones to do it. So the bill should not be limited to cooperatives only.
We merely suggest that. We think that part of the bill will be more practicable and it would certainly avoid in a case of that kind a lot of expense. If there are any rental or benefit payments, they would not necessarily have to pass through the United States Treasury. They could be collected and expended by these local and State committees.
The CHAIRMAN. That is the only criticism you have to make of the bill?
Mr. JENSEN. That is all.
Senator FRAZIER. As I understand, your organization is making no fight against this bill, or particularly for it?
Mr. JENSEN. Yes.
Senator Frazier. If the bill is put into operation, will your organization cooperate and try to make it a success, do you think?
Mr. JENSEN. We will give it our wholehearted support.
The Chairman. Much obliged to you, Mr. Jensen.
TURE OF THE STATE OF TEXAS, AUSTIN, TEX. The CHAIRMAN. Mr. McDonald, please state your name, address, and occupation.
Mr. McDONALD. J. E. McDonald, native Texan, farmer and commissioner of agriculture of the State of Texas, Austin, Tex. Mr. Chairman and gentlemen, in order to conserve your time, I have written out the remarks that I desire to make, and I will read them to you and then I will be glad to answer any questions that I may.
The CHAIRMAN. I think it will conserve time if we will allow those who can to read or give what they are prepared to give and then have the committee ask questions.
Mr. McDonald. Texas is the largest producer of agricultural crops and livestock and I am interested in the passage by Congress of H.R. 3835 in amended form. This measure is generally referred to as the farm bill. It is in fact an economy measure and with proper amendments its enactment would benefit industry, commerce, manufacture, and transportation even more than agriculture and would largely solve the unemployment problem. Agriculture being basic, the lifting of prices of agricultural crops to such levels as would give the producer full purchasing power is imperative, if industry is to be saved from further bankruptcy. The low prices paid for agricultural crops the past several years has been unjustified and has jeopardized the solvency of our financial institutions and has caused the morale of our people to languish.
If society decrees to give to the man who creates new wealth a mere pittance for his product, he in turn can put into the channels of trade a mere pittance. Purchasing power must be returned to the farmer. This can be done by the Congress enacting statutes which will guarantee the producer full prices for that proportion of his products needed for domestic consumption and without attempting to regulate production.
There are two methods which may be used to restore prices: One by requiring first the processor of certain agricultural products to pay into the United States Treasury a processing tax as provided for in the bill before the Congress, such tax to be paid on all of certain commodities processed for domestic consumption. The other method is by way of marketing control, such as provided for in the Clair plan, which plan is flexible and simple of operation and yet positive in obtaining desired results.
May I say there that for the last five months myself and the people that I go to to consult on agricultural matters in the State of Texas and many of the Southern States have agreed that this plan worked
out by this economic expert is practical, workable and will get the job done, and I commend it to your serious consideration.
Senator POPE. That is the Clair plan?
Mr. McDonald. Yes, sir. The first mentioned plan would tend to place agriculture on the basis of domestic production, whereas the latter plan would assure profitable prices for that portion going into domestic markets and at the same time permit us to retain and further develop our foreign markets at world prices. Cotton is and must remain king. Cotton has never failed to maintain trade balance and as commissioner of agriculture of the great State of of Texas, which has in a single year exported more than $2,000,000,000 worth of products to the world markets, I contend that it is economically unsound for us to contemplate a system of acreage control that would cause us to lose in this transitory period the markets of the world which our forebears struggled to build up.
Under the market-control plan no taxes would be needed, and the question of marginal lands resolves itself into men who cultivate lowproduction lands, growing for domestic consumption, while men who have heavy-production land and low-cost land could produce for both domestic and foreign markets. The potent reason for the drastic decline in land values and consequent foreign foreclosures is due to the fact that no investment is worth more than its productive value. See that the farmer is paid full price for that portion of his product needed for domestic consumption and there will be an enhancement in land values and refinancing can be had in open-money markets without further aid or subsidy from the Government, and the agricultural problem will be solved effectively.
The advisability of Government classification of farm lands and the payment of rental on acreage taken out of production is controversial. Prices should not be based on pre-war levels but should be based on current prices of industrial products and with due consideration being given price levels obtaining when the farmers' outstanding obligations were incurred. The act should make it mandatory on the President and Secretary of Agriculture to immediately employ such means as are necessary to guarantee full and equitable prices for nonperishable products, such as wheat, cotton, corn, rice, oats, barley, wool, tobacco, and to include such other agricultural products when it is evident that the producers so desire to have their product so included, and further provide equitable means of proration of products and equitable distribution of benefits of domestic markets. The present supply of wheat, cotton, wool, and rice should be proclaimed, prorated, and designated, and such prorated portions marked for domestic consumption and for foreign consumption. It should thereafter be unlawful to sell or offer for sale any wheat, cotton, wool, or rice at a price below the minimum price established by the properly constituted authorities.
The cost of raw materials going into most commodities is so immaterial that prices may be advanced in some instances 300 percent without necessarily advancing prices to consumers. Prices of $1.50 per bushel for wheat, 20 cents per pound for cotton and 40 cents per pound for wool would not place a burden on consumer or curtail consumption of these products of agriculture, but the realization of such prices would put fires under the boilers of every essential factory in America. It would take the factory employees who are now in bread lines out of the bread lines and put dinner pails in their hands and fill this Nation of ours with confidence, prosperity and happiness.
Records disclose the fact that America has never in any one year exported any more than 15 percent of her total products, therefore, we are not so dependent on foreign trade and we should realize that the latent buying affords fertile fields for commerce and transportation. I am most happy to observe the splendid thought that this committee is directing to our great agricultural problem and I am glad to be able to tell you that my people in Texas appreciate your work in their behalf.
I realize fully that every line of endeavor is passing through a period of transition and the Congress cannot foresee and prescribe in detail the essentials necessary for agricultural restoration, and it is my thought that this act should be passed in such form as will give the President, the Secretary of Agriculture, the Farm Board (if it is to be maintained) broad powers and flexible enough to enable them to use such means as will accomplish the purposes of this act.
I think that commodity prices should be raised to a parity with the gold dollar. It is price and not theory that we need today. High prices will benefit every essential industry and every laborer in America. Farmers have been patient and are looking for this Congress to not administer a palliative but to perform a major operation, and I know you won't disappoint the farmers of America.
The CHAIRMAN. Mr. McDonald, you are advocating the Clair plan?
Mr. McDONALD. I am advocating proration of production and the fixing of a minimum price. Such a plan is outlined in the Clair plan.
Senator FRAZIER. What do you base your price on?
The CHAIRMAN. As Mr. Clair is here and these two seem to have gotten together, I think we could conserve time by calling Mr. Clair and letting him explain his plan. If that is agreeable to you, we will have Mr. Clair take the witness stand.
STATEMENT OF FRANCIS J. CLAIR, PRESIDENT OF THE NATIONAL
LEAGUE FOR ECONOMIC STABILIZATION, CHICAGO, ILL.
The CHAIRMAN. Mr. Clair, please state your name and address and occupation.
Mr. CLAIR. Francis J. Clair; engineer; president of the National League for Economic Stabilization, Merchandise Mart, Chicago.
The CHAIRMAN. Now, Mr. Clair, you may proceed in your own way to discuss this bill or your plan as a substitute for the bill, or your plan as a plan to relieve the situation.
Mr. CLAIR. Mr. Chairman, let me say that the National League for Economic Stabilization is a group of manufacturers, merchants and business men organized in the city of Chicago who today realize that there can be no restoration of their business to a normal prosperity until the 53,000,000 people engaged in agriculture and its allied industries are paid a decent price for farm products. They are very selfishly actuated and conscious of the fact that the Nation today is economically divided into two great groups, first, we of the industrial East who mine and mill and manufacture dispensable products, and secondly, they of the agricultural West and South, who produce indispensable fat, food, and fiber. We feel that the greatest market on the face of the earth is open for the American manufacturers, that market being constituted of the 30,000,000 people on the farms and their 21,000,000 people dependent upon them.
We feel that the bill now before your committee is something calculated in honesty and decency to restore the purchasing power of these American farmers, but addressing myself to the title of the bill, an act to relieve the existing national economic emergency by increasing agricultural purchasing power, I would submit to you, sir, that it is not a farm bill, that it is a great national economic problem that is before this committee today.
Along that line, let me say that in section 1 of the bill, so far as the cotton control is concerned, the National League accepts that as a temporary solution of the cotton problem. Passing on to the leasing of lands, we don't feel that the leasing of any land in the United States by the Department of Agriculture is going to obtain the results desired, to wit, raising the price of agricultural products to a level needful and necessary to restore purchasing power.
I submit to you further, sir, that when my government goes into any rural section today and undertakes to lease any particular piece of land and stigmatizes that as being a marginal farm or marginal acreage, that you are immediately and permanently going to reflect on the value of that land for all times to come, and if that were adopted as a national policy, I fear, sir, that you are going to depress agriculture in its land values even below the levels which we find them today.
With reference to a processing tax, I don't believe that that is needful or necessary to accomplish the result that this committee has before it, to wit, to raise the purchasing power of the farmer. With reference to raising that power to a parity of the period obtaining from 1909 to 1914, we don't believe that that parity would return such purchasing power as would enable the American farmers to so enter our domestic markets as to take the unemployed and idle people off our streets. That is based on this premise, that in 1909 we enjoyed great foreign markets which purchased our surplus agricultural commodities of those days and that purchase of agricultural commodities tended to raise the domestic price. Today we are without foreign markets for our commodities and under this parity plan, we would not get the benefit of the foreign markets obtained in the period designated in the bill.
Secondly, in the period from 1909 to 1914 our railroad rates were approximately 55 percent lower than they are today, so that parity of 1909 would not compensate the farmer for the increase in freight rates. I would again submit to you, sir, that in the period prior to 1914, we did not have the great automobile industry in America that we have today. The radio was unknown in that day. Motion pictures and sound pictures were unknown in that day.
We didn't have the great transcontinental telephone system then as now, and if we are to restore the motor industry in Detroit, if we are to make it possible for a farmer to buy a new radio tube or a new battery, in fixing the parity of prices today you will have to base it on a gold-dollar basis made use of in industry. Therefore, I submit to you that what should be done with reference to parity would be to take the index value on approximately 1,500 articles of manufacture made in this country on today's standard, take the index value