GENERAL FARM PROGRAM 1125 



The question arises, how policies can be written for 5 years or longer when 

 they depend upon annual appropriations. Obviously, there must be an escape 

 clause. As in all types of programs, the guaranty is conditional upon availability 

 of funds and approval of individual applications beyond the current crop year. 



8. Producer's applications for policies or policy amendments may be used as 

 a ba«is for "individual farm plans," when and if such may be found convenient 

 or necessary in connection with desired production-consumption adjustments or 

 unavoidable production and marketing controls. 



9. The suggestion of a special form of Federal income-tax return for farmers 

 could be adopted to replace the report of actual marketable production required 

 under this plan. 



10. As experience under the plan becomes more routine, it may well be possible 

 to turn over to private insurance agencies the writing of policies and handling 

 of claims under general inspection, supervision, and auditing by the Federal 

 Farm Insurance Corporation. 



11. The plan as here outlined requires the Secretary of Agriculture to announce 

 the "absolute insurance price" for each included commodity. In writing the 

 statute the Congress can at its option grant this administrative discretion, or it 

 can set up certain criteria to be used by the Secretary in making his determination, 

 or the Congress itself can fix the price rigidly at a percentage of parity. 



We realize that this matter of price level is the main point at issue between 

 various factions within and outside the Congress. It seems that the question 

 of support level must be decided, first, upon the basis of cost and how the cost 

 can be financed; and, second, upon the controls that will be accepted by farmers 

 and that are appropriate in a democratic society. 



We should like to discuss these two considerations as briefly as possible. 



COST OF PROGRAMS 



In speaking of the "cost" of a price- or income-support program, we may be 

 too inclined to think only of cost to the Government. This, obviously, is not the 

 total cost. Total cost must include anything extra paid by purchasers of agri- 

 cultural commodities and products by reason of governmental price maintenance 

 above equilibrium levels. 



In the Brannan "production payment" method, the total cost falls upon Gov- 

 ernment. This is a courageous proposal on the Secretary's part because full 

 public knowledge of cost cannot be avoided. It must be paid directly by Govern- 

 ment under appropriations from the Congress. It is clear that the number of 

 commodities so supported, and their support levels, will depend entirely upon the 

 appropriations that the Congress is willing to vote. This will be the exact maxi- 

 mum cost of the program. 



It is our guess that the size of the appropriation will be established empirically. 

 This may or may not have to cover CCC losses under loan and purchase agreement 

 operations, in addition to production payments. In any case, administrative 

 officials will be faced with the same situation that prevailed in respect to "parity 

 payments" under the triple A act. They will simply have to count the money 

 and spread it around as best they can among the various commodities. It is 

 not realistic to argue about the level at which they will be supported. 



The cost estimates that we have seen for the Brannan proposal are more or 

 less meaningless. It should be possible, however, to apph' his formula to past 

 statistics and compare costs for basic commodities with the cost of the prewar 

 programs that were then in effect. 



Similarly, the estimate of 27,500 million dollars cash receipts for 1949, given in 

 exhibit A of the Secretary's statement, can be applied in the formula (using the 

 March 1.5, 1949 parity index of 1.44) and one gets in column (3) an "Average 

 purchasing power of cash receipts" for 1940-49 equal to 19,048 million dollars, as 

 compared with 18,218 million dollars for 1939-48. 



This means that unless the parity index for March 1.5, 1950, falls sharply (to 

 below 1.38), the income support standard will be higher for 1951 than for 1950. 

 But the paritv index is a retail index which lags considerably because it includes 

 slow-moving items such as interest, taxes, heavy goods, autos, trucks, fuel oil, and 

 feed components whose prices are supported. 



It is possible, therefore, that for 3 or 4 years, the 26,234 million dollar income 

 support standard may continue to go up, even if the bottom falls out of everything 

 else. 



If one assumes the 1950 parity index to be 1.38 and the 1950 cash receipts to be 

 24,000 million dollars, the adjustment factor to calculate individual commodity 

 support prices for 1951 will be 1.164 as compared with 1.25 for 1950. On the 



