146 GENERAL FARM PROGRAM 



parity income. But actually, the average net income of farm people 

 from all sources was only $909 per capita, including the value of home- 

 produced food and income from nonfarm sources, compared with the 

 nonfarm average of $1,569. This puts the average farmer's income at 

 less than 60 percent of his urban brother's income. Such a definition 

 of parity seems to me indefensible. 



The new definition in the Agricultural Act of 1948 defines parity 

 income as that income which will provide farm people with standards 

 of living afforded persons in other gainful occupations. This is 

 undoubtedly valid as a concept and as a long-range objective which 

 we accept as such. 



In developing an income-support standard which can be translated 

 into a price schedule, I start from the firm conviction that the particu- 

 lar formula or formulas should be based on recent experience and not 

 related or changed back to some distant base period. Any such formula 

 should reflect as far as possible the advancements in agricultural 

 knowledge, facilities, and skills. 



It is recommended that the income-support standard for any year 

 be defined as that level of cash returns from farm products which is 

 equivalent in purchasing power to the average annual purchasing 

 power of cash receipts from farm marketings during the 10 calendar 

 years 1939 tlu^ough 1948. 



As formulas go, this is quite simple. As the starting base, it takes the 

 average annual purchasing power of cash receipts for the years 1939 

 tlu'ough 1948, which figures we already have. This purchasing power 

 is determined by dividing cash receipts for each year by the same 

 year's index of prices paid by farmers for goods and services, including 

 allow^ances for interest and taxes — that is, the "parity index" as we 

 now know it. In terms of average 1939-48 farm purchasing power 

 dollars, this base is $18,218,000,000. 



To calculate the income-support standard, this base is multiplied 

 by the current parity index. For Qxample, parity as of March 15 

 was equal to an index of 144 — base 1939-48 equals 100. Such an 

 index would indicate an income-support standard of $26,234,000,000 — 

 18,218,000,000 times 1.44. 



Before going on to a discussion of the corresponding price-support 

 standard, let me say a word about this income measure. It is not a 

 parity-income figure, but rather what I believe to be a minimum level 

 which we should do our best to hold, with the expectation that actual 

 income would usually run higher. It is a level of income which I 

 believe we can all agree should be in the interest of farm people, but 

 equally in the interest of all our people. It is calculated from a recent 

 and fair base. True, 1939-48 does include some high-income years, 

 but it also includes some low-income years starting with the very low 

 year 1939. Furthermore, farm purchasing power has been above this 

 suggested support level for six successive years. 



Some people may object on the ground that this formula relates to 

 cash receipts rather than to net farm income. However, this has two 

 advantages. The first is simplicity. As you will soon see, it is a very 

 simple step from cash farm receipts to the support -price standard. 

 Secondly, both the farmer and the American businessman are inter- 

 ested in the farmer's total purchasing power. Farm marketings must 

 return enough to cover not only the farm-family items but production 

 expenses as well. 



