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Senator McNARY. That $800,000,000, then, that would be allowed as benefit payments must come out of this processing tax on the producer, which the consumer must pay the processors ultimately, of course?
Secretary WALLACE. Yes.
Secretary WALLACE. If the full tax were put on right from the start on all commodities, but the bill directs that the tax be applied only gradually, to the extent which conditions can stand.
Senator MCNARY. How much are you going to take out of him?
Secretary WALLACE. Well, that is a matter that we have been discussing. We have discussed that at some length under (b) on page 8.
Senator BANKHEAD. Does it not also depend on whether you put the allotment plan on all the land ?
Secretary WALLACE. Yes; but he asked for that assumption.
Senator BANKHEAD. In this discussion you are figuring on all commodities being put under the allotment plan?
Secretary WALLACE. Yes.
Senator McNARY. You are figuring on the employment of the allotment plan as to the basic commodities, seven in number, named in this bill, plus the retirement plan?
Secretary WALLACE. I do not think you can apply the allotment plan to all the commodities. I am against applying it to a number of those commodities.
Senator McNARY. Are you against applying it to hogs?
Secretary WALLACE. There is a very real question mark involved there. That is a thing we have got to go over very carefully with the interested parties.
Senator WHEELER. As I take it, Mr. Wallace, what you want to do is to have this power as an emergency proposition so that you can take it up with these persons who are technically qualified ?
Secretary WALLACE. I do not say that any expert I have got, though, is fully technically qualified. I do not think any of us in this room are fully technically qualified.
Senator WHEELER. It is something that you have got to discuss with the different groups, and you feel that if you are given power you can sit down and take it up with the different groups and work out a plan, and that is your idea?
Secretary WALLACE. Yes.
Senator McNARY. Is it not true also that you have got two distinct forces here that are in conflict? If you employ your allotment plan it is upon the theory that it will raise the price level of commodities. Is not that true? Secretary WALLACE. Yes.
Senator McNARY. And then if you go and enter into contracts for reduction and then by rental retire that land, the land will then command a very much higher rental by reason of the increased elevation in the commodity price? Secretary WALLACE. Right.
Senator McNARY. Well, is that a consistent feature? This brings wheat up to 94 cents as against 42 cents now at the primary market; then you come around and want to retire 50 acres of my land, and
my price will be considerably higher by reason of the elevated price level, will it not, due to the allotment plan benefits?
Secretary WALLACE. Well, you are assuming that the allotment plan and the rental plan are being employed simultaneously on wheat.
Senator McNARY. Yes; certainly.
Secretary WALLACE. It seems to me it would not be a very feasible method of operation. It does not seem to me that the wheat folks themselves would agree to it.
Senator MoGILL. Senator Smith spoke about the small cotton farmer, the tenant farmer. How do you propose, as to wheat or cotton, either one, to deal with the tenant farmer? Are you going to take wheat in the sense of the tenant becoming the landlord ?
Secretary WALLACE. That is a matter of regulation. Under the old allotment plan bill you had it set out as a joint undertaking.
Senator McGILL. Suppose you deal with the wheat farmer by leasing the land and having the land lie idle; are you going to deal with the tenant in that way? Most of the farmers are tenants.
Senator BANKHEAD. Would you not necessarily deal with the landlord and tenant, whichever had control!
Senator McGill. That is what I am trying to find out.
Senator NORRIS. You have got to deal with both of them. Even if the tenant had it leased, the landlord would require him to put it all into crops. Why could you not divide up the lease in proportion to the way the crop is divided ? Suppose the tenant gave two thirds or had two thirds and the landlord one third, would not that be a fair division ?
Secretary WALLACE. That is the way it was set forth in the allotment plan bill in the last session.
Senator McGILL. The tenant has the same advantages under this act as the landlord.
Secretary WALLACE. Of course, that is a matter of regulation.
Senator MoNARY. Mr. Secretary, following that matter up, I can not bring myself to the decision that these two can work consistently at the same time on the same crop.
Secretary WALLACE. I can not either.
Senator McNary. Is there not 59,000,000 acres devoted to raising wheat ?
Secretary WALLACE. Not quite that much.
Senator McNary. All right; I do not care about a few million acres. Then, if you start on wheat, you have either got to go clear through by the retirement of excess wheat acreage, or you have got to go through with your allotment plan by increasing the price level on a parity between the fair exchange value and the commodity value. Is not that true?
Secretary WALLACE. It would seem to me that you would probably employ one or the other.
Senator McNary. And not both ?
Senator McNARY. The thing that occurs to me is, Can we apply the two remedies here? So far as I am concerned, I would rather go through with the domestic-allotment plan as reported out of the Senate, but that is just an expression of opinion; but with this large acreage will the farmer want you to apply—the wheat grower I am speaking of now—the allotment plan, which places, values his product today at about 94 cents a bushel, we will say, or will he appeal to you to retire excess acreage? You can not work them both. The minute you try the allotment plan to a portion of the crop, the acreage that you retire is so profitable to the farmer from the production standpoint that his rentals will be ridiculously high, and we know he will want the allotment plan.
Secretary WALLACE. As the representative of a wheat area, you yourself would vote for applying the allotment plan rather than rental to wheat.
Senator McNARY. I do not know. You are the dictator.
Senator McNARY. But the point I want to make is that you cannot apply the two simultaneously. They will not work that way.
Senator BANKHEAD. Did not the allotment plan as it passed the House apply to both of them?
Senator McNARY. No; we had no rental terms there.
Senator BANKHEAD. It provided for a reduction by agreement in acreage in order to get the benefits of allotment. We can provide for it, and it was provided for in the House bill.
Senator McNARY. We cut it out for the very reasons I am now discussing. Do you think you could apply the two remedies to wheat?
Senator BANKHEAD. Why can you not?
Senator BANKHEAD. You do not have to provide payments in order to get a reduction in acreage if you apply allotment, because the payment is covered by the benefits. Under allotment, if a man gets allotment for so much wheat he does it as provided by the bill recently passed, by agreeing to reduce his acreage; therefore you have got the reduction in acreage without leasing, and the reduction is paid for by the benefits under the allotment plan. So it is not inconsistent at all.
Senator MoNaRy. This is a rental benefit which he did not have in the other at all. If I surrender a large acreage now producing wheat, one of the basic commodities specified here, the Secretary in agreement will compensate me in the way of rental benefits for the retirement of production of that particular acreage.
Senator BANKHEAD. He would not lease the land always.
Senator WHEELER. I think we are working to different purposes. As I understand the Senator, what he means is this: You would not want to say to a farmer, “We are going to rent so much of your land and pay you for so much land," and then at the same time have the allotment plan by which you are going to reduce the acreage. Those two would be inconsistent.
Senator BANKHEAD. But you will not get a reduction in acreage.
Secretary WALLACE. I would like to call attention to the wording of the bill in that respect, page 6, part 1, "to provide for rental or benefit payments."
Senator WHEELER. I mean you do not need to work them all at the same time.
Senator McGILL. Not apply the two plans to wheat or the two plans to any product.
Secretary WALLACE. Reading the bill, it is not clear in that respect. Senator WHEELER. You could not do both and be consistent.
The CHAIRMAN. Mr. Secretary, carrying out the idea that Senator McNary has advanced, would it not be a good idea to apply just the rental feature to this bill, without any idea as to the allotment, looking toward a reduction in acreage, so reducing the production that there would be a consequent rise in price; fix your tax on the process to get, or lease, the land necessary, even raising your tax to where you would have a fair rental amount to make a fair proposition to the farmer, and try that out?
Secretary WALLACE. There is considerable difference of opinion on that point. I think most processors favor the rental approach. On the face of it the rental approach seems cheaper.
Senator WHEELER. Simpler.
Secretary WALLACE. And it is also, incidentally, much easier to explain. It does not get as much money into the hands of the farmer during the next year and does not cost the processor as much.
The CHAIRMAN. I am impressed with the argument that Senator McNary has made. If you apply the allotment plan simultaneously with your rental plan, you automatically increase the value of the land that you want to rent.
Senator WHEELER. But, Senator Smith, no sane man would attempt a thing of that kind. That would be perfectly asinine if any. body attempted it.
The CHAIRMAN. Then you would not have any reduction of acreage.
Senator WHEELER. Of course, you have reduction of acreage. You have a reduction of acreage under the allotment plan.
Secretary WALLACE. In order to get the benefits you must agree to reduce acreage.
The CHAIRMAN. I know.
Senator WHEELER. Now, Mr. Secretary, with reference to the rental plan, I think the rental plan would be much simpler if it could be worked out satisfactorily. I think it would be much more satisfactory, but this situation arises, for instance, in my State: There are a great many—there are a lot of acres out there in Montana that farmers will not plant to wheat even if you did not rent it, providing, of course, prices stay down, but the minute they saw the prices were going up there are a lot of side hills of those mountains out there that they will immediately start in planting if you rent; for instance, you take in eastern Montana, say you rented half of the acreage in eastern Montana and a great many people saw that by reason of the fact that you had rented half of the acreage in Montana they get the idea that by reason of that fact wheat was going up, then a tremendous lot of people would go in and plant large areas in the foothills of the mountains out there where they can raise wheat, and they would put in a large acreage of wheat there, in my judgment, or on the Indian reservations and on lands that are now used for pasture, side hills, and so forth. That is something, it seems to me, that you have to take into consideration when you are talking about renting. Now, when you go into a State, for instance, like Kansas you do not run into that.
Secretary WALLACE. You mean the allotment plan would more effectively hold down that situation?
Senator WHEELER. Yes.
Senator WHEELER. Of course, in Kansas you would not be met with that, but in Colorado you would.
Secretary WALLACE. You would suggest that the regulation might be a mistake if we should apply the rental plan to one area and allotment to another?
Senator LONG. That is it; yes.
Senator BANKHEAD. You could apply both, even in the same county.
Senator McGILL. You would have all sorts of confusion then. Senator BANKHEAD. He could have his option.
Senator WHEELER. It would never work out in that way, in my judgment.
The CHAIRMAN. My idea is that if you attempt to operate both you will have applications from every section to get the benefit of both, if it is possible, and it seems to me we ought to decide which one of the two plans would be the most feasible and have the most direct results.
Senator WHEELER. The difficulty with that, it seems to me, Senator, is this—we might just as well face it—the Secretary of Agriculture after he goes into this matter ought to be in a better position to decide that question for himself with reference to these sections than a committee of Congress or Congress itself, because it is impossible for us to get all of the facts here before this committee affecting each one of these sections. Now, what he is asking forand it seems to me perfectly proper—is that he be put in a position, if he wants it-frankly, if I was Secretary I would not want it, because I think he is assuming a burden that is going to be an extremely difficult one to carry out, but if they want to try it and they want to assume that obligation or that duty, then, it seems to me, that if they feel they can work it out we ought to give them that power and let them decide which one they should follow in each case.
Senator LONG. In one case you would not want it, and in another case you would.
Senator WHEELER. I think so. I think both should be in there. In Kansas, for instance, one plan might work out much better than the other plan would, and it might be the other way in Montana.
Senator LONG. In southern Louisiana you will need one plan, and in northern Louisiana you will use another. The situations are entirely different.
The CHAIRMAN. Mr. Secretary, you have gotten down to section 10 now?
Senator NORRIS. He has been on section 10. He is down to subsection (c) on page 10.