|July 6, 1962
By Morris K. Udall
THE FARM PROBLEM - SWEPT UNDER THE RUG AGAIN
One always hopes that great debates in the Congress will resolve important national problems. The House debate and vote on the Administration's 1962 Farm Bill left me with a feeling of frustration. Nothing was resolved; the farm problem is still with us; the pattern of overproduction, huge farm surpluses and more billions for farm subsidies will likely continue for at least another year. Faced with a choice of farm policies the House in effect decided to have no policy.
In past months I have tried to absorb all the background facts on this intricate problem; before the vote I listened to 3 days of heated debate. This is my report, and here are some conclusions.
AMERICA'S FARM DILEMMA
America's farm problem is largely a result of an astounding technical revolution brought about by a combination of farm research, mechanical advances, and the ingenuity and hard work of our farmers. While the "industrial revolution" rapidly transformed our factories and now confronts us with the problem of automation, there has been a somewhat slower revolution on our farms. By the 1940's farm productivity began to soar and American agriculture has now reached a stage where it can produce huge quantities of food and fiber at low costs with relatively few workers and much less land.
To cope with the problems of this revolution
we have gradually built a patchwork program of federal farm laws. Some
commodities have price supports; others do not. Some are strictly controlled;
others have no controls. There are all kinds of direct and indirect subsidies.
The over-all result is tremendously costly for the taxpayer and frustrating
for the farmer. Let us take a look at some of the basic facts.
The surplus stocks of grain and wheat hang menacingly over the market, threatening a collapse of farm income and a depression of prices for grain, cattle, hogs and land values as well. If Congress does not correct this situation, we will continue to amass costly surpluses; chaos will result. Few farmers defend the existing policies, but strong vested interests in the Midwest reap billions of dollars from the price-support and storage bonanza. Only a small part of the billions spent for our farm programs goes to help the farmer; much of the money ends up in the hands of the grain dealers and storagemen.
THE CRAZY QUILT OF FARM PROGRAMS
Let's take a quick look at federal farm laws
and programs as they apply to different crops and different situations.
We find a strange mixture of good, bad and mediocre:
* * *
From this brief rundown it is apparent that no consistent pattern or philosophy has been followed for different crops. Each program was prescribed as an aid to a specific problem or commodity -- as though one tried to build a house a room at a time with different plans and architects.
Another thing to note is this: of Arizona's major crops, only cotton and grain sorghums are under systems of production controls with price supports. Although the programs for these two crops have this much in common, other features differ.
WHY WHEAT AND FEED GRAIN PROGRAMS HAVE FAILED
Why has the wheat-corn program failed when
we have had reasonable success with cotton, tobacco, rice and other crops?
The answer is found in the foolish "open-end" supports given producers.
Here's how it works for a hypothetical Farmer Brown of Keokuk, Iowa.
BACKGROUND: HOW WE GOT INTO TROUBLE
During and immediately after World War II, the federal government needed huge quantities of additional food for our soldiers, our devastated allies and the conquered nations. The wheat-corn price support program was devised, not to limit production as it is now used, but to increase it. Farmers were urged to plant every available acre; in return the government guaranteed to buy every bushel they could produce at a set minimum price. Thus the farmer could plant without fear of encountering a falling market; normal risks of the marketplace were removed.
Instead of ending this program when the war emergency was over, we mistakenly continued it. When our reduced foreign markets, and our expanded acreage combined with our improved technical skills, things quickly got out of hand.
THE TRUMAN YEARS -- 1946-1952
In hindsight it is apparent that price supports should have been terminated in the late 1940's when they were relatively inexpensive and no large surpluses were being accumulated. Spokesmen for many specific crops were afraid of changing the pattern and the path of least resistance was followed. The Republicans must share part of the blame, for they controlled Congress in 1947-48 without ending the subsidies.
THE EISENHOWER-BENSON YEARS -- 1952-1960
When President Eisenhower took office in 1953, he named Ezra Benson to be Secretary of Agriculture. This sincere man wanted badly to end supports and subsidies. For 8 years he tried to turn the tide, but the
|huge surpluses now overflowing our warehouses
were largely accumulated during his administration. In all fairness one
cannot place the whole blame on Benson. The Democrats controlled Congress
for 6 of his 8 years.
The original Benson Plan was simple - it looked like it ought to work:
(a) Benson's first premise was that price supports must be terminated, but gradually. He had inherited Democratic price supports of 90% to 100% of parity.
(b) Second, he reasoned, we must adapt the law of supply and demand in order to reduce production to the level of consumption -- at which point price supports could stop. In an open-market, he reasoned, an oversupply results in lower price; producers faced with lower prices reduce production because it is not profitable.
(c) Thus, concluded Benson, the way to cut farm production is to gradually cut the level of price supports on commodities overproduced, and to keep high supports for commodities in balanced supply. Thus farmers would have a carrot and a stick incentive for cutting their production to levels of need.
The only trouble with Benson's plan was that
it simply didn't work. The law of supply and demand always works on free
market prices, but it did not work on artificial price supports.
Here is how a typical farmer reacted to Benson's new plan:
In addition, farmers were caught in a cost-price squeeze. Prices of machinery, labor, fertilizer, etc., all went up in post-war years; the prices he received for farm commodities stayed level or went down. Thus he needed even more bushels for the same standard of living.
When it became apparent that the Benson plan would not work, the Democratic Congress and President Eisenhower compounded an already difficult situation by a "compromise": it took the worst part of Benson's program (open-end purchases of wheat and corn) and combined it with the worst part of Truman's program (high, rigid price support levels). Production ran wild, giving us the bulging storage bins we have today.
THE 1961 EMERGENCY PROGRAM
The Kennedy Administration came to power in 1961, determined to solve the problem. As a temporary stop-gap measure it proposed that Congress adopt a crash corn program in 1961 to prevent further surpluses. It has been extended to wheat for the 1962 crops. It's a voluntary program; if farmers want to participate they must retire 10% of their land and may retire as much as 40%. In return they were paid a total of $782 million in 1961. This is a high price for idle land.
The program has some redeeming features, however. Nineteen million acres were taken out of production, cutting corn production 550 million bushels below what was expected under the old program. This not only prevented a surplus; for the first time in 8 years the government actually reduced existing surplus stocks. To acquire, store, and pay interest on this extra grain would have cost the government $1.4 billion over the next nine years. Thus the program saved the country about $600 million.
These figures indicate the program's partial success:
CORN SURPLUSES IN GOVERNMENT STORAGE
If this program really reduced the surplus, why did the Administration want to discontinue it? First of all, to get more farmers participating the government would have to make still higher payments. To get enough farmers in so the surplus would be reduced to a reasonable level would cost almost as much as the previous program. Secondly, no one can really be happy with a program which will pay farmers $900 million in 1962 for doing nothing.
A WORD ABOUT THE "FAMILY FARM"
Our technological revolution inevitably means that fewer and fewer farmers will be needed to produce our food. The past century has seen a steady exodus from the farm until our rural population is down to 10% of the total.
In a free enterprise system the least efficient producers are eliminated. In agriculture (as in business) large, highly mechanized operations can usually produce cheaper and better products than non-mechanized farms.
Under free market conditions most of the farmers eliminated from the competition would be the small, or "family farm" operators. This produces a good deal of political fallout, for the "family farm" occupies a place in American politics just below motherhood and the flag. I have worked on family farms and will always respect the tremendous contributions of this life to our national character. But unpleasant facts should be faced.
Price supports have never been restricted to "family farmers." The big and little are treated alike. Thus in recent years we have seen programs designed to "save the family farm," paying huge sums of money not only to million-dollar farm corporations, but to such unlikely "farmers" as Ford Motor Company, the City of St. Louis, Louisiana State Penitentiary, Reynolds Metals Company, and Northern Trust Company, the largest bank in Illinois. Each of these organizations operates farm properties and qualifies for substantial price support loans.
To "save the family farm" price supports have been deliberately set in past years at levels which would permit the relatively inefficient small units to break even. But this price support level means a real bonanza to the larger and more efficient operators who participate on the same terms. Large wheat and corn producers have received price support "loans" of as much as $300,000 per year. Some have received support for as many as 4 different crops. These subsidies have further increased the efficiency of the larger farmers, so that they have forced the family farm out of existence even more rapidly than under normal competitive conditions. When government programs miss their objectives so completely as this one has done, some basic changes should be considered.
The time for stop-gap measures has passed. The country and the Congress should get down to basic principles and chart a new course. Nature will not wait for legislation; harvest time is approaching for most crops, and 1963 planting is only a few months away. Farmers have a right to know what farm laws will govern them in future years.
As I see the situation we are faced with four
THE "FREEDOM ROUTE"
Most farmers and politicians like to give speeches about the need to get "government out of farming." When they are put to the test about actually voting for freedom for their specific crops, however, many of them find special reasons why price-supports, subsidies, marketing agreements, or other controls are justified -- at least "temporarily." My mail bag is heavy with letters from Arizonans (including farmers, I am pleased to say) who favor an end to price supports and government acreage and production controls.
I share this sentiment and believe Congress
ought to seriously consider whether the time has not come to discard the
whole jerry-built structure of supports and controls. I am a little troubled,
however, by the views of the most-respected congressmen who specialize
in farm problems. They all fear the consequences of such a drastic change,
and make these arguments:
I believe that small farms will continue to have a place in America, though perhaps on a reduced scale. Small farms will always be able to produce a few specialized commodities on competitive terms, but there is no question that the major crops like wheat, corn, and cotton can be grown more efficiently on large farms requiring much machinery and capital.
The "freedom route" would almost surely bring about a trend to "bigness" in agriculture in the fashion we have seen develop in industry.
Perhaps this is inevitable. In any event such a serious decision should not be made without serious debate and consideration.
Technological change has always had its victims in America, and yet our country has usually found new and useful places for them. When the automobile came along we did not buy and store the products of harness and buggy makers, we absorbed them into industry. This process of adjustment is painful for those directly involved, but it always accompanies social and economic change.
I was surprised during the farm debate to find that for all the bold campaign speeches, not a single member of the House actually offered an amendment to "get the government out of farming" here and now. I'd be surprised if a bill of this kind could get more than a handful of votes. Yet, after looking at all the arguments against it, I still believe that maybe this is the course to take, and that all the predictions of disaster would not be borne out.
THE 1962 KENNEDY-FREEMAN PROGRAM
The only intelligent choices, in my judgment,
are between complete "freedom" and the Kennedy-Freeman bill. Mr. Freeman
proceeds from two basic assumptions:
It is obvious to everyone by now that you cannot control bushels produced just by controlling acresplanted, especially when Congress limits the extent to which acreage can be cut. The farmers will fool you every time. It is as though the government said to General Motors: "We have a surplus of autos and must
|limit production. You have 6 factories. Close
2 of them and we will buy every car you can produce in the other 4." The
way to control the number of cars produced is to control the number of
cars produced, not the number of factories.
This basic principle Freeman would apply to
wheat and feed grains. He would not control merely the number of
planted; he would give the farmer high supports only for a given
number of bushels. This plan has worked for rice and
tobacco; Freemen would merely extend it to wheat and feed grains. Here
is how it would operate:
OBJECTIONS TO THE KENNEDY-FREEMAN PROPOSAL
My mail from Arizona farmers has largely opposed Freeman's plans; many good arguments were advanced against it. However, there was also a good deal of misunderstanding about the bill and its effect on Arizona. These points should be understood:
(1) The bill would have little effect on Arizona. Cotton, already under production controls, and livestock, not under control, would not be affected. None of our other major crops would be affected. The bill was aimed primarily at wheat and corn surpluses; these are not important Arizona products. In 1961 Arizona had about 1/2000 of the total wheat acreage in the U.S. and even less for corn.
(2) The bill is not simply a grab for new
power by the Administration. I think we should keep these facts in
(3) This bill would not regiment farmers. The referenda would provide farmers with a clear opportunity for a democratic secret ballot choice. Two-thirds must endorse the Administration plan or it will not go into effect. Any regimentation would be by voluntary choice of farmers each and every year.
(4) The Freeman bill would not ruin Arizona's
cattle industry. Arizona cattle growers have voiced real fears about
the effects of the Administration plan; many believe that reduced production
would create greater demand for the crops which would in turn push prices
up. In order to avoid any possibility of higher prices for Arizona cattlemen
I voted for an amendment which would have made "deficit" areas (those which
consume more than they produce) free from production cutbacks. In any event,
I don't think cattle prices would rise. Here are my reasons:
Many sincere cattlemen have also expressed fear that "if they control corn, they'll soon control cattle." In the whole of Congress no one suggests production controls or price supports for cattle. I would fight any such idea. We need more commodities out from under these programs. The cattle industry, to its everlasting credit, has gone it alone. I want to keep it that way.
The more our government extricates itself
from farm price support and subsidy programs the better our farm economy
will operate. This is, and has been my basic premise. But I faced a dilemma
when the final roll call came last week:
In this situation I voted against killing the bill. My choice was not between "freedom" and "controls," but between "Benson Controls" and "Freeman Controls".
The Benson program is a proven failure; Mr. Freeman's program might work. Since Congress will not go the "freedom route," Mr. Freeman's program seemed worth a try. I felt it would reduce surpluses, cut taxpayer costs. I felt it would not have resulted in increased consumer prices, nor have damaged the established Arizona farm and livestock producers. I looked upon the Freeman proposal not as a permanent solution, but as a likely transition phase on the road to a free farm economy.
The House voted 215-205 to bury the bill. It appears dead for this year. But this action only postpones the day of reckoning. Sooner or later farm production will be reduced to levels of demand, by (a) effective supply controls, or (b) the law of supply and demand working in a free market. I favor the freedom route.
Until that route is opened by an aroused public opinion, I will continue to vote for that alternative which is least expensive to the taxpayer, and promises some eventual solution.
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