434 GENERAL FARM PROGRAM 



supports, we must recognize that we are dealing with a fundamental 

 issue, not only of economics, but — ^^probably more importantly — of 

 philosophy of government. Our price-support policy is a powerful 

 force — one which can be designed to strengthen, to weaken, or even 

 to destroy individual initiative and responsibility as the prime moving 

 force in our economy. 



During the course of the evolution of the permanent provisions 

 of the Agricultural Act of 1948, much hard and thoughtful work 

 was done. I should like to call the committee's attention to a state- 

 ment which was made on April 21, 1947, by Clinton P. Anderson, 

 who was then United States Secretary of Agricuhure. in his recom- 

 mendation to the House Committee on Agriculture, which was hold- 

 ing hearings on long-range agricultural policies and programs at that 

 time. 



We need to develop a long-range system of commodity price floors to protect 

 producers against excessive or abnormal declines during the market season and 

 to generally cushion declines in farm prices and incomes in the event of business 

 recessions. We should make sure, hovpever, that we do not establish a rigid 

 system of price relationships. We will do well to heed the warning of the House 

 Special Committee on Postwar Economic Policy and Planning. It spoke of the 

 danger of pricing our commodities out of the markets ; it said the needed long-run 

 adjustments in agriculture are "not necessarily accomplished by present support 

 programs together with .systems of production quotas" ; it spoke of the need to 

 meet producers' problems by expanding both markets and production. Prices 

 are, and should be, an effective means of encouraging changes in production as 

 the conditions of production and demand change. 



On October 7, 1947, Carl C. Farrington, then cliairman of the 

 Department of Agriculture's Committee on Price Policy and Pro- 

 duction Adjustment, and Assistant Administrator of the Depart- 

 ment's Production and Marketing Administration, testihed before 

 the House Committee on Agriculture and a subcommittee of the 

 Senate Committee on Agriculture and Forestry. Included in his testi- 

 mony are the following recommendations : 



Our committee spent a great deal of time studying this question in light of 

 our past experience and arrived at several general principles wliich we believe 

 should characterize futui;p price-support programs. 



First, a high degree of flexibility, botli as to support, levels and methods, is 

 essential in view of difl'erences between commodities and constantly changing 

 conditions tliat cannot be foreseen. 



Second, mandatory loan and purchase operations probably should be limited 

 generally to storable commodities. iNIandatory loan and purchase operations 

 on perishable commodities inevital>]y lead to dumping and waste. 



Third, the minimum support level should be considerably below the general 

 level of prices sought to be achieved over a period of years. This would allow 

 price to influence the allocation of resources among different commodities and 

 bring about basic shifts in the pattern of production. However, there should 

 be discretionary power to e.'^tablish price supports of any commodity above the 

 mandatory level in order to encourage needed production shifts and better 

 meet tlie basic food needs of oiu- people. 



We have given nuxch thougbt to the percentage of modernized parity which 

 might be used as a minimum price floor. Our studies indicate that 50 percent 

 of parity, for example, might not be high enough to act as an effective stop-loss 

 mech^ulisnl and 90 percent might force us' into a completely managed agri- 

 cultural economy. 



On JSIay 14, 1948, President Truman sent a letter to the Congress of 

 the United States, asking for the development of a flexible price sup- 

 port program. In his letter he said : 



Now we must look ahead to a farm price support policy geared to our im- 

 proved farm economy. Many shifts in production will have to be made, and 



